[G.R. No. 170087. August 31, 2006.

ANGELINA FRANCISCO, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION, KASEI
CORPORATION, SEIICHIRO TAKAHASHI,
TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, respondents.

D E CI S IO N

YNARES-SANTIAGO, J : p

This petition for review on certiorari under Rule 45 of the

Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29,
2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No.
78515 dismissing the complaint for constructive dismissal filed
by herein petitioner Angelina Francisco. The appellate court
reversed and set aside the Decision of
the National Labor Relations Commission (NLRC) dated April
15, 2003, 3 in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002, 4 in NLRC-NCR Case No.
30-10-0-489-01, finding that private respondents were
liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its

incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the
accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation
of the company. 5

Although she was designated as Corporate Secretary, she was

not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so. She never
prepared any legal document and never represented the
company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the
company. 6

In 1996, petitioner was designated Acting Manager. The

corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to
handle recruitment of all employees and perform management
administration functions; represent the company in all dealings
with government agencies, especially with the Bureau of
Internal Revenue (BIR), Social Security System (SSS) and in the
city government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned
and operated by Kasei Corporation. 7

For five years, petitioner performed the duties of Acting

Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10%
share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as
Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured
that she would still be connected with Kasei Corporation.
Timoteo Acedo, the designated Treasurer, convened a meeting
of all employees of Kasei Corporation and announced that
nothing had changed and that petitioner was still connected
with Kasei Corporation as Technical Assistant to Seiji Kamura
and in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by

P2,500.00 a month beginning January up to September 2001
for a total reduction of P22,500.00 as of September 2001.
Petitioner was not paid her mid-year bonus allegedly because
the company was not earning well. On October 2001,
petitioner did not receive her salary from the company. She
made repeated follow-ups with the company cashier but she
was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from

Acedo and the rest of the officers but she was informed that she
is no longer connected with the company. 11

Since she was no longer paid her salary, petitioner did not
report for work and filed an action for constructive dismissal
before the labor arbiter. EHASaD

Private respondents averred that petitioner is not an employee

of Kasei Corporation. They alleged that petitioner was hired in
1995 as one of its technical consultants on accounting matters
and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own
discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office
any time she wanted. The company never interfered with her
work except that from time to time, the management would
ask her opinion on matters relating to her profession. Petitioner
did not go through the usual procedure of selection of
employees, but her services were engaged through a Board
Resolution designating her as technical consultant. The money
received by petitioner from the corporation was her
professional fee subject to the 10% expanded withholding tax
on professionals, and that she was not one of those reported to
the BIR or SSS as one of the company's employees. 12

Petitioner's designation as technical consultant depended solely

upon the will of management. As such, her consultancy may be
terminated any time considering that her services were only
temporary in nature and dependent on the needs of the
corporation.

To prove that petitioner was not an employee of the

corporation, private respondents submitted a list of employees
for the years 1999 and 2000 duly received by the BIR showing
that petitioner was not among the employees reported to the
BIR, as well as a list of payees subject to expanded withholding
tax which included petitioner. SSS records were also submitted
showing that petitioner's latest employer was Seiji
Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed,
thus:

WHEREFORE, premises considered, judgment is hereby

rendered as follows:

1. finding complainant an employee of respondent

corporation;

2. declaring complainant's dismissal as illegal;

3. ordering respondents to reinstate complainant to

her former position without loss of seniority rights and
jointly and severally pay complainant her money
claims in accordance with the following computation:

a. Backwages 10/2001 —
07/2002 275,000.00
(27,500 x 10 mos.)

b. Salary Differentials (01/2001 —

09/2001) 22,500.00

c. Housing Allowance (01/2001 —

07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney's fees 87,076.50

P957,742.50
 If reinstatement is no longer feasible, respondents are
ordered to pay complainant separation pay with
additional backwages that would accrue up to actual
payment of separation pay.

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the

Decision of the Labor Arbiter, the dispositive portion of which
reads:

PREMISES CONSIDERED, the Decision of July 31,

2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant

separation pay computed at one month per year of
service in addition to full backwages from October
2001 to July 31, 2002;

2) The awards representing moral and exemplary

damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are
deleted;

3) The award of 10% attorney's fees shall be based on

salary differential award only;

4) The awards representing salary differentials,

housing allowance, mid year bonus and 13th month
pay are AFFIRMED.

SO ORDERED. 15

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

thus:
 WHEREFORE, the instant petition is hereby GRANTED.
The decision of
the National Labor Relations Commissions dated April
15, 2003 is hereby REVERSED and SET ASIDE and a
new one is hereby rendered dismissing the complaint
filed by private respondent against Kasei Corporation,
et al. for constructive dismissal.

SO ORDERED. 16

The appellate court denied petitioner's motion for

reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there
was an employer-employee relationship between petitioner and
private respondent Kasei Corporation; and if in the affirmative,
(2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and

the National Labor Relations Commission on one hand, and the
Court of Appeals on the other, there is a need to reexamine the
records to determine which of the propositions espoused by the
contending parties is supported by substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction,

there has been no uniform test to determine the existence of an
employer-employee relation. Generally, courts have relied on
the so-called right of control test where the person for whom
the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of
right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the
payrolls, can help in determining the existence of an
employer-employee relationship.

However, in certain cases the control test is not sufficient to

give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances
when, aside from the employer's power to control the employee
with respect to the means and methods by which the work is to
be accomplished, economic realities of the
employment relations help provide a comprehensive analysis of
the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other
capacity. caIEAD

The better approach would therefore be to adopt a two-tiered

test involving: (1) the putative employer's power to control the
employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.

This two-tiered test would provide us with a framework of

analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to
base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities
given to the worker over the period of the latter's employment.

The control test initially found application in the case of Viaña

v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of
Appeals, 20 where we held that there is an employer-employee
relationship when the person for whom the services are
performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that
end.

In Sevilla v. Court of Appeals, 21 we observed the need to

consider the existing economic conditions prevailing between
the parties, in addition to the standard of right-of-control like
the inclusion of the employee in the payrolls, to give a clearer
picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic
circumstances of the worker.

Thus, the determination of the relationship between employer

and employee depends upon the circumstances of the whole
economic activity, 22 such as: (1) the extent to which the
services performed are an integral part of the employer's
business; (2) the extent of the worker's investment in
equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the worker's opportunity for
profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent
enterprise; (6) the permanency and duration of the
relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his
continued employment in that line of business. 23

The proper standard of economic dependence is whether the

worker is dependent on the alleged employer for his continued
employment in that line of business. 24 In the United States,
the touchstone of economic reality in analyzing possible
employment relationships for purposes of the
Federal Labor Standards Act is dependency. 25By analogy, the
benchmark of economic reality in analyzing possible
employment relationships for purposes of the Labor Code ought
to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is

an employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the
corporation's Technical Consultant. She reported for work
regularly and served in various capacities as Accountant,
Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions,
that is, rendering accounting and tax services to the company
and performing functions necessary and desirable for the
proper operation of the corporation such as securing business
permits and other licenses over an indefinite period of
engagement.

Under the broader economic reality test, the petitioner can

likewise be said to be an employee of respondent corporation
because she had served the company for six years before her
dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18,
2000. 26 When petitioner was designated General Manager,
respondent corporation made a report to the SSS signed by
Irene Ballesteros. Petitioner's membership in the SSS as
manifested by a copy of the SSS specimen signature card which
was signed by the President of Kasei Corporation and the
inclusion of her name in the on-line inquiry system of the SSS
evinces the existence of an employer-employee relationship
between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically

dependent on respondent corporation for her continued
employment in the latter's line of business.

In Domasig v. National Labor Relations Commission, 28 we held

that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify
the holder thereof as a bona fide employee of the firm that
issues it. Together with the cash vouchers covering petitioner's
salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that
petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who

registers its workers with the SSS is proof that the latter were
the former's employees. The coverage of Social Security Law is
predicated on the existence of an employer-employee
relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5,
2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only
for convenience. The actual nature of petitioner's job was as
Kamura's direct assistant with the duty of acting as Liaison
Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by
government agencies. Petitioner was never entrusted with
corporate documents of the company, nor required to attend
the meeting of the corporation. She was never privy to the
preparation of any document for the corporation, although
once in a while she was required to sign prepared
documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which

repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the
case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that
petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated

the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been
secured by considerations other than to tell the truth and
would make solemn trials a mockery and place the
investigation of the truth at the mercy of unscrupulous
witnesses. 32 A recantation does not necessarily cancel an
earlier declaration, but like any other testimony the same is
subject to the test of credibility and should be received with
caution. 33

Based on the foregoing, there can be no other conclusion that

petitioner is an employee of respondent Kasei Corporation. She
was selected and engaged by the company for compensation,
and is economically dependent upon respondent for her
continued employment in that line of business. Her main job
function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite
period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss
her for cause. More importantly, respondent corporation had
the power to control petitioner with the means and methods
by which the work is to be accomplished. aHTEIA

The corporation constructively dismissed petitioner when it

reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of
employment, where the petitioner is entitled to full backwages.
Since the position of petitioner as accountant is one of trust
and confidence, and under the principle of strained relations,
petitioner is further entitled to separation pay, in lieu of
reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts

to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted
to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility
or disdain by an employer becomes unbearable to an
employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we
ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable
situation arises which creates an adverse working environment
rendering it impossible for such employee to continue working
for her employer. Hence, her severance from the company was
not of her own making and therefore amounted to an illegal
termination of employment.

In affording full protection to labor, this Court must ensure

equal work opportunities regardless of sex, race or creed. Even
as we, in every case, attempt to carefully balance the fragile
relationship between employees and employers, we are mindful
of the fact that the policy of the law is to apply the Labor Code
to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the
constitutional mandate giving maximum aid and protection
to labor, promoting their welfare and reaffirming it as a
primary social economic force in furtherance of social justice
and national development.

WHEREFORE, the petition is GRANTED. The Decision and

Resolution of the Court of Appeals dated October 29, 2004
and October 7, 2005, respectively, in CA-G.R. SP No. 78515
are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15,
2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation
of petitioner Angelina Francisco's full backwages from the time
she was illegally terminated until the date of finality of this
decision, and separation pay representing one-half month pay
for every year of service, where a fraction of at least six months
shall be considered as one whole year.

||| (Francisco v. National Labor Relations Commission, G.R. No.

170087, [August 31, 2006], 532 PHIL 399-413)

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

JOSE
Y. SONZA, petitioner, vs. ABS-CBN BROADCASTI
NG CORPORATION, respondent.

D E CI S IO N

CARPIO, J : p

The Case

Before this Court is a petition for review

on certiorari 1 assailing the 26 March 1999 Decision 2 of the
Court of Appeals in CA-G.R. SP No. 49190 dismissing the
petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals
affirmed the findings of the National Labor Relations
Commission ("NLRC"), which affirmed the Labor Arbiter's
dismissal of the case for lack of jurisdiction.
 The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation

("ABS-CBN") signed an Agreement ("Agreement") with the Mel
and Jay Management and Development Corporation
("MJMDC"). ABS-CBN was represented by its corporate officers
while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco ("TIANGCO"), as EVP
and Treasurer. Referred to in the Agreement as "AGENT,"
MJMDC agreed to provide SONZA's services exclusively
to ABS-CBN as talent for radio and television. The Agreement
listed the services SONZA would render to ABS-CBN, as
follows:

a. Co-host for Mel & Jay radio program, 8:00 to

10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to

7:00 p.m., Sundays. 3

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. ABS-CBNwould pay
the talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN's

President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement

dated May 1994 entered into by your goodself on
 behalf of ABS-CBN with our company relative to our
talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned

in view of recent events concerning his programs and
career. We consider these acts of the station violative of
the Agreement and the station as in breach thereof. In
this connection, we hereby serve notice of rescission of
said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and

renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but
reserves the right to seek recovery of the other benefits
under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.) JOSE Y. SONZA

President and Gen. Manager 4

On 30 April 1996, SONZA filed a complaint

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

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the

ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZA's monthly

talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBNopened a new
account with the same bank
where ABS-CBN deposited SONZA's talent fees and other
payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor

Arbiter 5 denied the motion to dismiss and directed the parties
to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a

claim that he was an employee of respondent company
until April 15, 1996 and that he was not paid certain
claims, it is sufficient enough as to confer jurisdiction
over the instant case in this Office. And as to whether
or not such claim would entitle complainant to recover
upon the causes of action asserted is a matter to be
resolved only after and as a result of a hearing. Thus,
the respondent's plea of lack of employer-employee
relationship may be pleaded only as a matter of defense.
It behooves upon it the duty to prove that there really
is no employer-employee relationship between it and
the complainant.

The Labor Arbiter then considered the case submitted for

resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent's
Position Paper with Motion to Expunge Respondent's Annex 4
and Annex 5 from the Records. Annexes 4 and 5 are affidavits
of ABS-CBN's witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing
practice in the television and broadcast industry is to treat
talents like SONZA as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997

dismissing the complaint for lack of jurisdiction. 6 The pertinent
parts of the decision read as follows:

xxx xxx xxx

While Philippine jurisprudence has not yet, with

certainty, touched on the "true nature of the contract
of a talent," it stands to reason that a "talent" as
above-described cannot be considered as an employee
by reason of the peculiar circumstances surrounding
the engagement of his services.

It must be noted that complainant was engaged by

respondent by reason of his peculiar skills and talent as
a TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he
undertook to render in accordance with his own style.
The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than
those generally given to employees. For one,
complainant Sonza's monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a
talent was covered by a specific contract. Likewise, he
was not bound to render eight (8) hours of work per
day as he worked only for such number of hours as may
be necessary.

The fact that per the May 1994 Agreement

complainant was accorded some benefits normally
given to an employee is inconsequential. Whatever
benefits complainant enjoyed arose from specific
agreement by the parties and not by reason of
employer-employee relationship. As correctly put by
the respondent, "All these benefits are merely talent
fees and other contractual benefits and should not be
deemed as 'salaries, wages and/or other remuneration'
accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to
this is the rule that the term or nomenclature given to
a stipulated benefit is not controlling, but the intent of
the parties to the Agreement conferring such benefit."

The fact that complainant was made subject to

respondent's Rules and Regulations, likewise, does not
detract from the absence of employer-employee
relationship. As held by the Supreme Court, "The line
should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually
desired result without dictating the means or methods
to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party
hired to the use of such means. The first, which aim
only to promote the result, create no
employer-employee relationship unlike the second,
 which address both the result and the means to achieve
it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al.,
G.R. No. 84484, November 15, 1989).

xxx xxx xxx (Emphasis supplied) 7

SONZA appealed to the NLRC. On 24 February 1998, the

NLRC rendered a Decision affirming the Labor Arbiter's
decision. SONZA filed a motion for reconsideration, which the
NLRC denied in its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action

for certiorari before the Court of Appeals assailing the decision
and resolution of the NLRC. On 26 March 1999, the Court of
Appeals rendered a Decision dismissing the case. 8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC's finding that no

employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRC's decision,
the appellate court quoted the following findings of the NLRC:

. . . the May 1994 Agreement will readily reveal that

MJMDC entered into the contract merely as an agent
of complainant Sonza, the principal. By all indication
and as the law puts it, the act of the agent is the act of
the principal itself. This fact is made particularly true
in this case, as admittedly MJMDC 'is a management
company devoted exclusively to managing the careers
of Mr. Sonza and his broadcast partner, Mrs. Carmela
C. Tiangco.' (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only
accrues between complainant Sonza and MJMDC, and
not between ABS-CBN and MJMDC. This is clear from
the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the 'AGENT'. As a
matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC
which issued the notice of rescission in behalf of
Mr. Sonza, who himself signed the same in his capacity
as President.

Moreover, previous contracts between

Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements
are ABS-CBN and Mr. Sonza. And it is only in the May
1994 Agreement, which is the latest Agreement
executed between ABS-CBN and Mr. Sonza, that
MJMDC figured in the said Agreement as the agent of
Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere

'labor-only' contractor of ABS-CBN such that there
exist[s] employer-employee relationship between the
latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN,
but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994
Agreement.

It may not be amiss to state that jurisdiction over the

instant controversy indeed belongs to the regular
courts, the same being in the nature of an action for
alleged breach of contractual obligation on the part of
respondent-appellee. As squarely apparent from
complainant-appellant's Position Paper, his claims for
compensation for services, '13th month pay', signing
bonus and travel allowance against
respondent-appellee are not based on the Labor Code
but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock
Purchase Agreement are based on the latter. A portion
of the Position Paper of complainant-appellant bears
perusal:

'Under [the May 1994 Agreement] with

respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus
consisting of shares of stocks . . . with FIVE
HUNDRED THOUSAND PESOS (P500,000.00).

Similarly, complainant is also entitled to be paid

13th month pay based on an amount not lower
than the amount he was receiving prior to
effectivity of (the) Agreement'.

Under paragraph 9 of (the May 1994

Agreement), complainant is entitled to a
commutable travel benefit amounting to at least
One Hundred Fifty Thousand Pesos
(P150,000.00) per year.'

Thus, it is precisely because of complainant-appellant's

own recognition of the fact that his contractual
 relations with ABS-CBN are founded on the New Civil
Code, rather than the Labor Code, that instead of
merely resigning from ABS-CBN,
complainant-appellant served upon the latter a 'notice
of rescission' of Agreement with the station, per his
letter dated April 1, 1996, which asserted that
instead of referring to unpaid employee benefits, 'he is
waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement
but reserves the right to such recovery of the other
benefits under said Agreement.' (Annex 3 of the
respondentABS-CBN's Motion to Dismiss dated July
10, 1996).

Evidently, it is precisely by reason of the alleged

violation of the May 1994 Agreement and/or the
Stock Purchase Agreement by respondent-appellee
that complainant-appellant filed his complaint.
Complainant-appellant's claims being anchored on the
alleged breach of contract on the part of
respondent-appellee, the same can be resolved by
reference to civil law and not to labor law.
Consequently, they are within the realm of civil law
and, thus, lie with the regular courts. As held in the
case ofDai-Chi Electronics Manufacturing vs. Villarama,
238 SCRA 267, 21 November 1994, an action for
breach of contractual obligation is intrinsically a civil
dispute. 9(Emphasis supplied)

The Court of Appeals ruled that the existence of an

employer-employee relationship
between SONZA and ABS-CBN is a factual question that is
within the jurisdiction of the NLRC to resolve. 10 A special civil
action for certiorari extends only to issues of want or excess of
jurisdiction of the NLRC. 11 Such action cannot cover an inquiry
into the correctness of the evaluation of the evidence which
served as basis of the NLRC's conclusion. 12 The Court of Appeals
added that it could not re-examine the parties' evidence and
substitute the factual findings of the NLRC with its own. 13

The Issue

In assailing the decision of the Court of

Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN

AFFIRMING THE NLRC'S DECISION AND REFUSING
TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE
AND EVIDENCE TO SUPPORT SUCH A FINDING. 14

The Court's Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the

decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiter's dismissal of the case for lack
of jurisdiction.

The present controversy is one of first impression. Although

Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship
between a television and radio station and one of its "talents."
There is no case law stating that a radio and television program
host is an employee of the broadcast station.

The instant case involves big names in the broadcast industry,

namely Jose "Jay" Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and
radio networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over

the case because he was an employee of ABS-CBN. On the
other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a

question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also
finality when supported by substantial evidence. 15 Substantial
evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion. 16 A party
cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct
or circumstantial. The Court does not substitute its own
judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an
employer-employee relationship are present in this case. Case
law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the
employee on the means and methods by which the work is
accomplished. 18 The last element, the so-called "control test",
is the most important element. 19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA's services to co-host its television

and radio programs because of SONZA's peculiar skills, talent
and celebrity status. SONZA contends that the "discretion used
by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and
qualification as complainant belies respondent's claim of
independent contractorship."

Independent contractors often present themselves to possess

unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring
of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent
and celebrity status, ABS-CBN would not have entered into
the Agreement withSONZA but would have hired him through
its personnel department just like any other employee.
In any event, the method of selecting and
engaging SONZA does not conclusively determine his status. We
must consider all the circumstances of the relationship, with
the control test being the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no

part of his fees going to MJMDC. SONZA asserts that this mode
of fee payment shows that he was an employee
of ABS-CBN. SONZA also points out that ABS-CBN granted
him benefits and privileges "which he would not have enjoyed if
he were truly the subject of a valid job contract." CHcTIA

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. 22

SONZA's talent fees, amounting to P317,000 monthly in the

second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship
rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent
fees precisely because of SONZA's unique skills, talent and
celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining
power to demand and receive such huge talent fees for his
services. The power to bargain talent fees way above the salary
scales of ordinary employees is a circumstance indicative, but
not conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to

MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such
mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party

may terminate their relationship. SONZA failed to show
that ABS-CBN could terminate his services on grounds other
than breach of contract, such as retrenchment to prevent losses
as provided under labor laws. 23

During the life of the Agreement, ABS-CBN agreed to

pay SONZA's talent fees as long as "AGENT and Jay Sonza shall
faithfully and completely perform each condition of this
Agreement." 24 Even if it suffered severe business
losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to
pay SONZA's talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship
between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting
his programs, ABS-CBN still paid him his talent fees.
Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZA's talent fees during the
remaining life of the Agreement even
if ABS-CBN cancelled SONZA's programs through no fault
of SONZA.25

SONZA assails the Labor Arbiter's interpretation of his

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

D. Power of Control

Since there is no local precedent on whether a radio and

television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vélez v. Corporación De Puerto Rico
Para La Difusión Pública ("WIPR") 27 that a television program
host is an independent contractor. We quote the following
findings of the U.S. court:

Several factors favor classifying Alberty as an

independent contractor. First, a television actress is a
skilled position requiring talent and training not
available on-the-job. . . . In this regard, Alberty
possesses a master's degree in public communications
and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the
University of Puerto Rico; and acted in several theater
and television productions prior to her affiliation with
"Desde Mi Pueblo." Second, Alberty provided the "tools
and instrumentalities" necessary for her to perform.
Specifically, she provided, or obtained sponsors to
provide, the costumes, jewelry, and other
image-related supplies and services necessary for her
appearance. Alberty disputes that this factor favors
independent contractor status because WIPR provided
the "equipment necessary to tape the show." Alberty's
argument is misplaced. The equipment necessary for
Alberty to conduct her job as host of "Desde Mi Pueblo"
related to her appearance on the show. Others
provided equipment for filming and producing the
show, but these were not the primary tools that
Alberty used to perform her particular function. If we
accepted this argument, independent contractors could
never work on collaborative projects because other
individuals often provide the equipment required for
different aspects of the collaboration. . . .
 Third, WIPR could not assign Alberty work in addition
to filming "Desde Mi Pueblo." Alberty's contracts with
WIPR specifically provided that WIPR hired her
"professional services as Hostess for the Program Desde
Mi Pueblo." There is no evidence that WIPR assigned
Alberty tasks in addition to work related to these
tapings. . . . 28(Emphasis supplied)

Applying the control test to the present case, we find

that SONZA is not an employee but an independent contractor.
The control test is the most important test our courts apply in
distinguishing an employee from an independent
contractor. 29 This test is based on the extent of control the
hirer exercises over a worker. The greater the supervision and
control the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true as well — the less
control the hirer exercises, the more likely the worker is
considered an independent contractor. 30

First, SONZA contends that ABS-CBN exercised control over

the means and methods of his work.

SONZA's argument is misplaced. 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. 31 ABS-CBN could not dictate the contents
of SONZA's script. However, the Agreement
prohibited SONZA from criticizing in his shows ABS-CBN or
its interests. 32 The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did not
attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual

performance that produced the finished product of SONZA's
work. 33 ABS-CBN did not instruct SONZA how to perform
his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective
programming." 34 ABS-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.

SONZA claims that ABS-CBN's power not to broadcast his

shows proves ABS-CBN's power over the means and methods
of the performance of his work. Although ABS-CBN did have
the option not to broadcast SONZA's show, ABS-CBN was still
obligated to pay SONZA's talent fees. Thus, even
if ABS-CBN was completely dissatisfied with the means and
methods of SONZA's performance of his work, or even with the
quality or product of his work, ABS-CBN could not dismiss or
even discipline SONZA. All that ABS-CBN could do is not to
broadcast SONZA's show but ABS-CBN must still pay his
talent fees in full. 35
Clearly, ABS-CBN's right not to broadcast SONZA's show,
burdened as it was by the obligation to continue paying in
full SONZA's talent fees, did not amount to control over the
means and methods of the performance of SONZA's
work. ABS-CBN could not terminate or discipline SONZA even
if the means and methods of performance of his work — how
he delivered his lines and appeared on television — did not
meet ABS-CBN's approval. This proves that ABS-CBN's control
was limited only to the result of SONZA's work, whether to
broadcast the final product or not. In either
case, ABS-CBN must still pay SONZA's talent fees in full until
the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al., 36 the United States Circuit

Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved
the right to delete objectionable features in their shows. Since
the management did not have control over the manner of
performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features. 37

SONZA further contends that ABS-CBN exercised control over

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

A radio broadcast specialist who works under minimal

supervision is an independent contractor. 40 SONZA's work as
television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not
show that ABS-CBN exercised any supervision and control over
how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBN's

employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this
indicates ABS-CBN's control "not only [over] his manner of
work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the

rules and standards of performance "covering
talents" 41 of ABS-CBN. The Agreement does not
requireSONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code
of conduct imposed on SONZA under the Agreement refers to
the "Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the
COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code
applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio
and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable
to talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the
former. 43 In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have
ruled that:

Further, not every form of control that a party

reserves to himself over the conduct of the other party
in relation to the services being rendered may be
accorded the effect of establishing an
employer-employee relationship. The facts of this case
fall squarely with the case of Insular Life Assurance Co.,
Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules

that merely serve as guidelines towards the
achievement of the mutually desired result
without dictating the means or methods to be
employed in attaining it, and those that control
or fix the methodology and bind or restrict the
party hired to the use of such means. The first,
which aim only to promote the result, create no
employer-employee relationship unlike the
 second, which address both the result and the
means used to achieve it. 44

The Vaughan case also held that one could still be an

independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The
hirer, however, must not deprive the one hired from
performing his services according to his own initiative. 45

Lastly, SONZA insists that the "exclusivity clause" in the

Agreement is the most extreme form of control
which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by

itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted

practice in the entertainment industry. 46 This practice is not
designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial
amounts of money, time and effort "in building up its talents as
well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate
period of time." 47 Normally, a much higher fee is paid to
talents who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter's finding that he is a talent

of MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not
an employee of ABS-CBN. SONZA insists that MJMDC is a
"labor-only" contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1)

the "labor-only" contractor; (2) the employee who is ostensibly
under the employ of the "labor-only" contractor; and (3) the
principal who is deemed the real employer. Under this
scheme, the "labor-only" contractor is the agent of the
principal. The law makes the principal responsible to the
employees of the "labor-only contractor" as if the principal
itself directly hired or employed the employees. 48 These
circumstances are not present in this case.

There are essentially only two parties involved under the

Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZA's agent. The Agreement expressly states that
MJMDC acted as the "AGENT" of SONZA. The records do not
show that MJMDC acted as ABS-CBN's agent. MJMDC, which
stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned
by SONZA and TIANGCO. The President and General Manager
of MJMDC is SONZA himself. It is absurd to hold that MJMDC,
which is owned, controlled, headed and managed by SONZA,
acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That
would make MJMDC the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company

devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any
other business, not even job contracting. MJMDC does not have
any other function apart from acting as agent of SONZA or
TIANGCO to promote their careers in the broadcast and
television industry. 49

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then

Minister of Labor Blas Ople on 8 January 1979 finally settled
the status of workers in the broadcast industry. Under this
policy, the types of employees in the broadcast industry are the
station and program employees.

Policy Instruction No. 40 is a mere executive issuance which

does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40
determines SONZA's status. A mere executive issuance cannot
exclude independent contractors from the class of service
providers to the broadcast industry. The classification of
workers in the broadcast industry into only two groups under
Policy Instruction No. 40 is not binding on this Court, especially
when the classification has no basis either in law or in fact.

Affidavits of ABS-CBN's Witnesses

SONZA also faults the Labor Arbiter for admitting the
affidavits of Socorro Vidanes and Rolando Cruz without giving
his counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent to
attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBN's witnesses, he

was never prevented from denying or refuting the allegations in
the affidavits. The Labor Arbiter has the discretion whether to
conduct a formal (trial-type) hearing after the submission of
the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx xxx xxx

These verified position papers shall cover only those

claims and causes of action raised in the complaint
excluding those that may have been amicably settled,
and shall be accompanied by all supporting documents
including the affidavits of their respective witnesses
which shall take the place of the latter's direct
testimony. . . .

Section 4. Determination of Necessity of Hearing. —

Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter
shallmotu propio determine whether there is need for a
formal trial or hearing. At this stage, he may, at his
discretion and for the purpose of making such
 determination, ask clarificatory questions to further
elicit facts or information, including but not limited to
the subpoena of relevant documentary evidence, if any
from any party or witness. 50

The Labor Arbiter can decide a case based solely on the position
papers and the supporting documents without a formal
trial. 51 The holding of a formal hearing or trial is something
that the parties cannot demand as a matter of right. 52 If the
Labor Arbiter is confident that he can rely on the documents
before him, he cannot be faulted for not conducting a formal
trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the
rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the

broadcast and entertainment industries to treat talents
like SONZA as independent contractors. SONZAargues that if
such practice exists, it is void for violating the right of labor to
security of tenure.

The right of labor to security of tenure as guaranteed in the

Constitution 53 arises only if there is an employer-employee
relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee
is an employee — to give meaning to the security of tenure
clause — will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the

freedom to offer their services as independent contractors. The
right to life and livelihood guarantees this freedom to contract
as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with
special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent
has a right to render his services without any one controlling
the means and methods by which he performs his art or craft.
This Court will not interpret the right of labor to security of
tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can
render their services only as employees, the station owners and
managers can dictate to the radio and television hosts what
they say in their shows. This is not conducive to freedom of the
press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC") 54 in relation

to Republic Act No. 7716, 55 as amended by Republic Act No.
8241, 56 treats talents, television and radio broadcasters
differently. Under the NIRC,these professionals are subject to
the 10% value-added tax ("VAT") on services they render.
Exempted from the VAT are those under an
employer-employee relationship. 57 This different tax
treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all
the basic elements of a contractual relationship are present as
in this case.

Nature of SONZA's Claims

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. 58

WHEREFORE, we DENY the petition. The assailed Decision of

the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

||| (Sonza v. ABS-CBN Broadcasting Corp., G.R. No. 138051,

[June 10, 2004])

G.R. No. 192558. February 15, 2012.]

 BITOY JAVIER (DANILO
P. JAVIER), petitioner, vs. FLY ACE CORPORATIO
N/FLORDELYN CASTILLO, respondents.

DECISION

MENDOZA, J : p

This is a petition under Rule 45 of the Rules of Civil

Procedure assailing the March 18, 2010 Decision 1 of the
Court of Appeals (CA) and its June 7, 2010 Resolution, 2 in
CA-G.R. SP No. 109975, which reversed the May 28, 2009
Decision 3 of the National Labor Relations
Commission (NLRC) in the case
entitled Bitoy Javier v. FlyAce/Flordelyn Castillo, 4 holding
that petitioner Bitoy Javier (Javier) was illegally dismissed
from employment and
ordering Fly Ace Corporation (Fly Ace) to pay backwages and
separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC

for underpayment of salaries and other labor standard benefits.
He alleged that he was an employee of FlyAce since September
2007, performing various tasks at the respondent's warehouse
such as cleaning and arranging the canned items before their
delivery to certain locations, except in instances when he would
be ordered to accompany the company's delivery vehicles,
as pahinante; that he reported for work from Monday to
Saturday from 7:00 o'clock in the morning to 5:00 o'clock in
the afternoon; that during his employment, he was not issued
an identification card and payslips by the company; that on
May 6, 2008, he reported for work but he was no longer
allowed to enter the company premises by the security guard
upon the instruction of Ruben Ong (Mr. Ong), his
superior; 5 that after several minutes of begging to the guard to
allow him to enter, he saw Ong whom he approached and
asked why he was being barred from entering the premises;
that Ong replied by saying, "Tanungin mo anak mo;" 6 that he
then went home and discussed the matter with his family; that
he discovered that Ong had been courting his daughter Annalyn
after the two met at a fiesta celebration in Malabon City; that
Annalyn tried to talk to Ong and convince him to spare her
father from trouble but he refused to accede; that
thereafter, Javier was terminated from his employment
without notice; and that he was neither given the opportunity
to refute the cause/s of his dismissal from work. IASCTD

To support his allegations, Javier presented an affidavit of one

Bengie Valenzuela who alleged that Javier was a stevedore
or pahinante of Fly Ace from September 2007 to January
2008. The said affidavit was subscribed before the Labor
Arbiter (LA). 7

For its part, Fly Ace averred that it was engaged in the
business of importation and sales of groceries. Sometime in
December 2007, Javier was contracted by its employee, Mr.
Ong, as extra helper on a pakyaw basis at an agreed rate of
P300.00 per trip, which was later increased to P325.00 in
January 2008. Mr. Ong contractedJavier roughly 5 to 6 times
only in a month whenever the vehicle of its contracted hauler,
Milmar Hauling Services, was not available. On April 30,
2008, Fly Ace no longer needed the services of Javier. Denying
that he was their employee, Fly Ace insisted that there was no
illegal dismissal. 8 Fly Ace submitted a copy of its agreement
with Milmar Hauling Services and copies of acknowledgment
receipts evidencing payment to Javier for his contracted
services bearing the words, "daily manpower(pakyaw/piece
rate pay)" and the latter's signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for

lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his

employment with the Respondent nor any document
showing that he received the benefits accorded to
regular employees of the Respondents. His contention
that Respondent failed to give him said ID and payslips
implies that indeed he was not a regular employee
of Fly Aceconsidering that complainant was a helper
and that Respondent company has contracted a
regular trucking for the delivery of its products.

Respondent Fly Ace is not engaged in trucking business

but in the importation and sales of groceries. Since
there is a regular hauler to deliver its products, we give
 credence to Respondents' claim that complainant was
contracted on "pakiao" basis.

As to the claim for underpayment of salaries, the

payroll presented by the Respondents showing salaries
of workers on "pakiao" basis has evidentiary weight
because although the signature of the complainant
appearing thereon are not uniform, they appeared to
be his true signature.

xxx xxx xxx

Hence, as complainant received the rightful salary as

shown by the above described payrolls, Respondents are
not liable for salary differentials. 9 AEDcIH

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the
LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed to
present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of
employer-employee relationship. "Payment by result . . . is a
method of compensation and does not define the essence of the
relation. It is a mere method of computing compensation, not a
basis for determining the existence or absence of an
employer-employee relationship." 10 The NLRC further averred
that it did not follow that a worker was a job contractor and
not an employee, just because the work he was doing was not
directly related to the employer's trade or business or the work
may be considered as "extra" helper as in this case; and that the
relationship of an employer and an employee was determined
by law and the same would prevail whatever the parties may
call it. In this case, the NLRC held that substantial evidence was
sufficient basis for judgment on the existence of the
employer-employee relationship. Javier was a regular
employee of Fly Ace because there was reasonable connection
between the particular activity performed by the employee (as
a 'pahinante') in relation to the usual business or trade of the
employer (importation, sales and delivery of groceries). He may
not be considered as an independent contractor because he
could not exercise any judgment in the delivery of company
products. He was only engaged as a "helper."

Finding Javier to be a regular employee, the NLRC ruled that

he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, FlyAce was found to
be liable for illegal dismissal of Javier who was likewise entitled
to backwages and separation pay in lieu of reinstatement. The
NLRC thus ordered:

WHEREFORE, premises considered, complainant's

appeal is partially GRANTED. The assailed Decision of
the labor arbiter is VACATED and a new one is hereby
entered holding respondent FLY ACE CORPORATION
guilty of illegal dismissal and non-payment of 13th
month pay. Consequently, it is hereby ordered to pay
complainant DANILO "Bitoy" JAVIER the following:

1. Backwages - P45,770.83
 Separation pay, in lieu of
2. - 8,450.00
reinstatement

Unpaid 13th month pay

3. - 5,633.33
(proportionate)

–––––––––

TOTAL - P59,854.16

=========

All other claims are dismissed for lack of merit.

SO ORDERED. 11

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings

that Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javier's complaint as ordered by the
LA. The CA exercised its authority to make its own factual
determination anent the issue of the existence of an
employer-employee relationship between the parties.
According to the CA:

xxx xxx xxx

 In an illegal dismissal case the onus probandi rests on
the employer to prove that its dismissal was for a valid
cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first
be established. . . . it is incumbent upon private
respondent to prove the employee-employer
relationship by substantial evidence.

xxx xxx xxx

It is incumbent upon private respondent to prove, by

substantial evidence, that he is an employee of
petitioners, but he failed to discharge his burden. The
non-issuance of a company-issued identification card
to private respondent supports petitioners' contention
that private respondent was not its employee. 12

The CA likewise added that Javier's failure to present salary

vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was
not an employee of Fly Ace. Further, it found that Javier's
work was not necessary and desirable to the business or trade
of the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver,
that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged
by Javier did not pass the "control test." He contracted work
outside the company premises; he was not required to observe
definite hours of work; he was not required to report daily; and
he was free to accept other work elsewhere as there was no
exclusivity of his contracted service to the company, the same
being co-terminous with the trip only. 13 Since no substantial
evidence was presented to establish an employer-employee
relationship, the case for illegal dismissal could not prosper. IDEHCa

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.

WHETHER THE HONORABLE COURT OF APPEALS

ERRED IN HOLDING THAT THE PETITIONER WAS
NOT A REGULAR EMPLOYEE OF FLY ACE.

II.

WHETHER THE HONORABLE COURT OF APPEALS

ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS. 14

The petitioner contends that other than its bare allegations and
self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javierwas engaged on
a pakyaw basis. Assuming that Javier was indeed hired on
a pakyaw basis, it does not preclude his regular employment
with the company. Even the acknowledgment receipts bearing
his signature and the confirming receipt of his salaries will not
show the true nature of his employment as they do not reflect
the necessary details of the commissioned task. Besides, Javier's
tasks as pahinante are related, necessary and desirable to the
line of business by Fly Ace which is engaged in the importation
and sale of grocery items. "On days when there were no
scheduled deliveries, he worked in petitioners' warehouse,
arranging and cleaning the stored cans for delivery to
clients." 15 More importantly, Javier was subject to the control
and supervision of the company, as he was made to report to
the office from Monday to Saturday, from 7:00 o'clock in the
morning until 5:00 o'clock in the afternoon. The list of
deliverable goods, together with the corresponding clients and
their respective purchases and addresses, would necessarily
have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards
working hours, delivery schedule and output, and his other
duties in the warehouse. 16 aCSEcA

The petitioner chiefly relied on Chavez v. NLRC, 17 where the

Court ruled that payment to a worker on a per trip basis is not
significant because "this is merely a method of computing
compensation and not a basis for determining the existence of
employer-employee relationship." Javier likewise invokes the
rule that, "in controversies between a laborer and his
master, . . . doubts reasonably arising from the evidence should
be resolved in the former's favour. The policy is reflected is no
less than the Constitution, Labor Code and Civil Code." 18

Claiming to be an employee of Fly Ace, petitioner asserts that

he was illegally dismissed by the latter's failure to observe
substantive and procedural due process. Since his dismissal was
not based on any of the causes recognized by law, and was
implemented without notice, Javier is entitled to separation
pay and backwages.
In its Comment, 19 Fly Ace insists that there was no substantial
evidence to prove employer-employee relationship. Having a
service contract with Milmar Hauling Services for the purpose
of transporting and delivering company products to
customers, Fly Ace contracted Javier as an extra helper
or pahinante on a mere "per trip basis." Javier, who was
actually a loiterer in the area, only accompanied and assisted
the company driver when Milmar could not deliver or when the
exigency of extra deliveries arises for roughly five to six times a
month. Before making a delivery, Fly Ace would turn over to
the driver and Javier the delivery vehicle with its loaded
company products. With the vehicle and products in their
custody, the driver and Javier "would leave the company
premises using their own means, method, best judgment and
discretion on how to deliver, time to deliver, where and [when]
to start, and manner of delivering the products." 20

Fly Ace dismisses Javier's claims of employment as baseless

assertions. Aside from his bare allegations, he presented nothing
to substantiate his status as an employee. "It is a basic rule of
evidence that each party must prove his affirmative allegation.
If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own
evidence and not upon the weakness of his
opponent." 21 Invoking the case of Lopez v. Bodega
City, 22 Fly Ace insists that in an illegal dismissal case, the
burden of proof is upon the complainant who claims to be an
employee. It is essential that an employer-employee
relationship be proved by substantial evidence. Thus, it cites: DaEATc

In an illegal dismissal case, the onus probandi rests on

the employer to prove that its dismissal of an employee
was for a valid cause. However, before a case for illegal
dismissal can prosper, an employer-employee
relationship must first be established.

Fly Ace points out that Javier merely offers factual assertions
that he was an employee of Fly Ace, "which are unfortunately
not supported by proof, documentary or
otherwise." 23 Javier simply assumed that he was an employee
of Fly Ace, absent any competent or relevant evidence to
support it. "He performed his contracted work outside the
premises of the respondent; he was not even required to report
to work at regular hours; he was not made to register his time
in and time out every time he was contracted to work; he was
not subjected to any disciplinary sanction imposed to other
employees for company violations; he was not issued a company
I.D.; he was not accorded the same benefits given to other
employees; he was not registered with the Social Security
System (SSS) as petitioner's employee; and, he was free to
leave, accept and engage in other means of livelihood as there is
no exclusivity of his contracted services with the petitioner, his
services being co-terminus with the trip only. All these lead to
the conclusion that petitioner is not an employee of the
respondents." 24
Moreover, Fly Ace claims that it had "no right to control the
result, means, manner and methods by which Javier would
perform his work or by which the same is to be
accomplished." 25 In other words, Javier and the company
driver were given a free hand as to how they would perform
their contracted services and neither were they subjected to
definite hours or condition of work.

Fly Ace likewise claims that Javier's function as

a pahinante was not directly related or necessary to its
principal business of importation and sales of groceries. Even
without Javier, the business could operate its usual course as it
did not involve the business of inland transportation. Lastly, the
acknowledgment receipts bearingJavier's signature and
words "pakiao rate," referring to his earned salaries on a per
trip basis, have evidentiary weight that the LA correctly
considered in arriving at the conclusion that Javier was not an
employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javier's alleged illegal

dismissal is anchored on the existence of an employer-employee
relationship between him and Fly Ace. This is essentially a
question of fact. Generally, the Court does not review errors
that raise factual questions. However, when there is conflict
among the factual findings of the antecedent deciding bodies
like the LA, the NLRC and the CA, "it is proper, in the exercise
of Our equity jurisdiction, to review and re-evaluate the factual
issues and to look into the records of the case and re-examine
the questioned findings." 26 In dealing with factual issues in
labor cases, "substantial evidence — that amount of relevant
evidence which a reasonable mind might accept as adequate to
justify a conclusion — is sufficient." 27

As the records bear out, the LA and the CA found Javier's claim
of employment with Fly Ace as wanting and deficient. The
Court is constrained to agree. Although Section 10, Rule VII of
the New Rules of Procedure of the NLRC 28 allows a relaxation
of the rules of procedure and evidence in labor cases, this rule of
liberality does not mean a complete dispensation of proof.
Labor officials are enjoined to use reasonable means to ascertain
the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they
provided a license to completely discount evidence, or the lack
of it. The quantum of proof required, however, must still be
satisfied. Hence, "when confronted with conflicting versions on
factual matters, it is for them in the exercise of discretion to
determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their
decision must be supported by substantial
evidence." 29 Accordingly, the petitioner needs to show by
substantial evidence that he was indeed an employee of the
company against which he claims illegal dismissal.

Expectedly, opposing parties would stand poles apart and

proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the
party on whom the burden to prove lies was able to hurdle the
same. "No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted. Hence, while no particular form of evidence is
required, a finding that such relationship exists must still rest
on some substantial evidence. Moreover, the substantiality of
the evidence depends on its quantitative as well as
itsqualitative aspects." 30 Although substantial evidence is not a
function of quantity but rather of quality, the . . . circumstances
of the instant case demand that something more should have
been proffered. Had there been other proofs of employment,
such as . . . inclusion in petitioner's payroll, or a clear exercise of
control, the Court would have affirmed the finding of
employer-employee relationship." 31 EaTCSA

In sum, the rule of thumb remains: the onus probandi falls on

petitioner to establish or substantiate such claim by the
requisite quantum of evidence. 32 "Whoever claims entitlement
to the benefits provided by law should establish his or her right
thereto . . . ." 33 Sadly, Javier failed to adduce substantial
evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded

that Javier failed to establish his employment with Fly Ace. By
way of evidence on this point, all that Javier presented were
his self-serving statements purportedly showing his activities as
an employee of Fly Ace. Clearly, Javier failed to pass the
substantiality requirement to support his claim. Hence, the
Court sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed
stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to
fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javier's cause. In
said document, all Valenzuela attested to was that he would
frequently see Javier at the workplace where the latter was
also hired as stevedore. 34 Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable
conclusion that his mere presence at the workplace falls short in
proving employment therein. The supporting affidavit could
have, to an extent, bolstered Javier's claim of being tasked to
clean grocery items when there were no scheduled delivery
trips, but no information was offered in this subject simply
because the witness had no personal knowledge of Javier's
employment status in the company. Verily, the Court cannot
accept Javier's statements, hook, line and sinker.

The Court is of the considerable view that on Javier lies the

burden to pass the well-settled tests to determine the existence
of an employer-employee relationship, viz.: (1) the selection
and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the
employee's conduct. Of these elements, the most important
criterion is whether the employer controls or has reserved the
right to control the employee not only as to the result of the
work but also as to the means and methods by which the result
is to be accomplished. 35

In this case, Javier was not able to persuade the Court that the
above elements exist in his case. He could not submit competent
proof that Fly Ace engaged his services as a regular employee;
that Fly Ace paid his wages as an employee, or
that Fly Ace could dictate what his conduct should be while at
work. In other words, Javier's allegations did not establish that
his relationship with Fly Ace had the attributes of an
employer-employee relationship on the basis of the
above-mentioned four-fold test. Worse, Javier was not able to
refute Fly Ace's assertion that it had an agreement with a
hauling company to undertake the delivery of its goods. It was
also baffling to realize that Javier did not dispute Fly Ace's
denial of his services' exclusivity to the company. In short, all
that Javier laid down were bare allegations without
corroborative proof. IECAaD

Fly Ace does not dispute having contracted Javier and paid
him on a "per trip" rate as a stevedore, albeit on
a pakyaw basis. The Court cannot fail to note
that Fly Acepresented documentary proof that Javier was
indeed paid on a pakyaw basis per the acknowledgment
receipts admitted as competent evidence by the LA.
Unfortunately for Javier, his mere denial of the signatures
affixed therein cannot automatically sway us to ignore the
documents because "forgery cannot be presumed and must be
proved by clear, positive and convincing evidence and the
burden of proof lies on the party alleging forgery." 36

Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.

One final note. The Court's decision does not contradict the
settled rule that "payment by the piece is just a method of
compensation and does not define the essence of the
relation." 37 Payment on a piece-rate basis does not negate
regular employment. "The term 'wage' is broadly defined in
Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and
does not define the essence of the relations. Nor does the fact
that the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining
whether the relationship is that of employer and employee or
one of an independent contractor, each case must be
determined on its own facts and all the features of the
relationship are to be considered." 38 Unfortunately for Javier,
the attendant facts and circumstances of the instant case do
not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social

justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided
in favor of labor. Management also has its rights which are
entitled to respect and enforcement in the interest of simple
fair play. Out of its concern for the less privileged in life, the
Court has inclined, more often than not, toward the worker
and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and
doctrine. 39

WHEREFORE, the petition is DENIED. The March 18, 2010

Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are
herebyAFFIRMED. aEIADT

SO ORDERED.

||| (Javier v. Fly Ace Corp., G.R. No. 192558, [February 15,
2012], 682 PHIL 359-376)

[G.R. No. 87700. June 13, 1990.]

SAN MIGUEL CORPORATION EMPLOYEES

UNION-PTGWO, DANIEL S.L. BORBON II,
HERMINIA REYES, MARCELA PURIFICACION, ET
AL., petitioners, vs.HON. JESUS G. BERSAMIRA,
IN HIS CAPACITY AS PRESIDING JUDGE OF
BRANCH 166, RTC, PASIG, and SAN MIGUEL
CORPORATION, respondents.

Romeo C. Lagman for petitioners.

Jardeleza, Sobrelviñas, Diaz, Mayudini & Bodegon for
respondents.

D E CI S IO N

MELENCIO-HERRERA, J : p

Respondent Judge of the Regional Trial Court of Pasig, Branch

166, is taken to task by petitioners in this special civil action
for Certiorari and Prohibition for having issued the challenged
Writ of Preliminary Injunction on 29 March 1989 in Civil Case
No. 57055 of his Court entitled "San Miguel Corporation vs.
SMCEU-PTGWO, et al."

Petitioners' plea is that said Writ was issued without or in

excess of jurisdiction and with grave abuse of discretion, a labor
dispute being involved. Private respondent San Miguel
Corporation (SanMig. for short), for its part, defends the Writ
on the ground of absence of any employer-employee
relationship between it and the contractual workers employed
by the companies Lipercon Services, Inc. (Lipercon) and D'Rite
Service Enterprises (D'Rite), besides the fact that the Union is
bereft of personality to represent said workers for purposes of
collective bargaining. The Solicitor General agrees with the
position of SanMig.

The antecedents of the controversy reveal that:

Sometime in 1983 and 1984, SanMig entered into contracts

for merchandising services with Lipercon and D'Rite (Annexes K
and I, SanMig's Comment, respectively). These companies are
independent contractors duly licensed by the Department of
Labor and Employment (DOLE). SanMig entered into those
contracts to maintain its competitive position and in keeping
with the imperatives of efficiency, business expansion and
diversity of its operation. In said contracts, it was expressly
understood and agreed that the workers employed by the
contractors were to be paid by the latter and that none of
them were to be deemed employees or agents of SanMig. There
was to be no employer-employee relation between the
contractors and/or its workers, on the one hand, and SanMig
on the other.

Petitioner San Miguel Corporation Employees Union-PTWGO

(the Union, for brevity) is the duly authorized representative of
the monthly paid rank-and-file employees of SanMig with
whom the latter executed a Collective Bargaining Agreement
(CBA) effective 1 July 1986 to 30 June 1989 (Annex A,
SanMig's Comment). Section 1 of their CBA specifically provides
that "temporary, probationary, or contract employees and
workers are excluded from the bargaining unit and, therefore,
outside the scope of this Agreement."

In a letter, dated 20 November 1988 (Annex C, Petition), the

Union advised SanMig that some Lipercon and D'Rite workers
had signed up for union membership and sought the
regularization of their employment with SMC. The Union
alleged that this group of employees, while appearing to be
contractual workers of supposedly independent contractors,
have been continuously working for SanMig for a period
ranging from six (6) months to fifteen (15) years and that
their work is neither casual nor seasonal as they are performing
work or activities necessary or desirable in the usual business or
trade of SanMig. Thus, it was contended that there exists a
"labor-only" contracting situation. It was then demanded that
the employment status of these workers be regularized.

On 12 January 1989, on the ground that it had failed to

receive any favorable response from SanMig, the Union filed a
notice of strike for unfair labor practice, CBA violations, and
union busting (Annex D, Petition).

On 30 January 1989, the Union again filed a second notice of

strike for unfair labor practice (Annex F, Petition).

As in the first notice of strike. Conciliatory meetings were held

on the second notice. Subsequently, the two (2) notices of strike
were consolidated and several conciliation conferences were
held to settle the dispute before the National Conciliation and
Mediation Board (NCMB) of DOLE (Annex G, Petition).

Beginning 14 February 1989 until 2 March 1989, series of

pickets were staged by Lipercon and D'Rite workers in various
SMC plants and offices.

On 6 March 1989, SMC filed a verified Complaint for

Injunction and Damages before respondent Court to enjoin the
Union from:
a. representing and or acting for and in behalf of the
employees of LIPERCON and or D'RITE for the purposes
of collective bargaining;

b. calling for and holding a strike vote to compel

plaintiff to hire the employees or workers of LIPERCON
and D'RITE;

c. inciting, instigating and/or inducing the employees

or workers of LIPERCON and D'RITE to demonstrate
and or picket at the plants and offices of plaintiff
within the bargaining unit referred to in the CBA, . . .;

d. staging a strike to compel plaintiff to hire the

employees or workers of LIPERCON and D'RITE;

e. using the employees or workers of LIPERCON AND

D'RITE to man the strike area and/or picket lines
and/or barricades which the defendants may set up at
the plants and offices of plaintiff within the bargaining
unit referred to in the CBA . . .;

f. intimidating, threatening with bodily harm and or

molesting the other employees and/or contract
workers of plaintiff, as well as those persons lawfully
transacting business with plaintiff at the work places
within the bargaining unit referred to in the CBA, . . .,
to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE;

g. blocking, preventing, prohibiting, obstructing and/or

impeding the free ingress to, and egress from, the work
places within the bargaining unit referred to in the
 CBA . . ., to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;

h. preventing and/or disrupting the peaceful and

normal operation of plaintiff at the work places within
the bargaining unit referred to in the CBA, Annex "C"
hereof, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE. (Annex H, Petition).

Respondent Court found the Complaint sufficient in form and

substance and issued a Temporary Restraining Order for the
purpose of maintaining the status quo, and set the application
for Injunction for hearing.

In the meantime, on 13 March 1989, the Union filed a Motion

to Dismiss SanMig's Complaint on the ground of lack of
jurisdiction over the case/nature of the action, which motion
was opposed by SanMig. That Motion was denied by respondent
Judge in an Order dated 11 April 1989.

After several hearings on SanMig's application for injunctive

relief, where the parties presented both testimonial and
documentary evidence on 25 March 1989, respondent Court
issued the questioned Order (Annex A, Petition) granting the
application and enjoining the Union from Committing the acts
complained of, supra. Accordingly, on 29 March 1989,
respondent Court issued the corresponding Writ of Preliminary
Injunction after SanMig had posted the required bond of
P100,000.00 to answer for whatever damages petitioners
may sustain by reason thereof.

In issuing the Injunction, respondent Court rationalized:

 The absence of employer-employee relationship negates
the existence of labor dispute. Verily, this court has
jurisdiction to take cognizance of plaintiff's grievance.

The evidence so far presented indicates that plaintiff

has contracts for services with Lipercon and D'Rite. The
application and contract for employment of the
defendants' witnesses are either with Lipercon or
D'Rite. What could be discerned is that there is no
employer-employee relationship between plaintiff and
the contractual workers employed by Lipercon and
D'Rite. This, however, does not mean that a final
determination regarding the question of the existence
of employer-employee relationship has already been
made. To finally resolve this dispute, the court must
extensively consider and delve into the manner of
selection and engagement of the putative employee; the
mode of payment of wages; the presence or absence of
a power of dismissal; and the presence or absence of a
power to control the putative employee's conduct This
necessitates a full-blown trial. If the acts complained of
are not restrained, plaintiff would, undoubtedly, suffer
irreparable damages. Upon the other hand, a writ of
injunction does not necessarily expose defendants to
irreparable damages.

Evidently, plaintiff has established its right to the relief

demanded. (p. 21, Rollo).

Anchored on grave abuse of discretion, petitioners are now

before us seeking nullification of the challenged Writ. On 24
April 1989, we issued a Temporary Restraining Order
adjoining the implementation of the Injunction issued by
respondent Court. The Union construed this to mean that "we
can now strike," which it superimposed on the Order and
widely circulated to entice the Union membership to go on
strike. Upon being apprised thereof, in a Resolution of 24 May
1989, we required the parties to "RESTORE the status quo
antedeclaration of strike" (p. 262 Rollo).

In the meantime, however, or on 2 May 1989, the Union went

on strike. Apparently, some of the contractual workers of
Lipercon and D'Rite had been laid off. The strike adversely
affected thirteen (13) of the latter's plants and offices.

On 3 May 1989, the National Conciliation and Mediation

Board (NCMB) called the parties to conciliation. The Union
stated that it would lift the strike if the thirty (30) Lipercon
and D'Rite employees were recalled, and discussion on their
other demands, such as wage distortion and appointment of
coordinators, were made. Effected eventually was a
Memorandum of Agreement between SanMig and the Union
that "without prejudice to the outcome of G.R. No. 87700 (this
case) and Civil Case No. 57055(the case below),the laid-off
individuals . . . shall be recalled effective 8 May 1989 to their
former jobs or equivalent positions under the same terms and
conditions prior to lay-off ' (Annex 15, SanMig Comment). In
turn, the Union would immediately lift the pickets and return
to work.
After an exchange of pleadings, this Court, on 12 October
1989, gave due course to the Petition and required the parties
to submit their memoranda simultaneously, the last of which
was filed on 9 January 1990.

The focal issue for determination is whether or not respondent

Court correctly assumed jurisdiction over the present
controversy and properly issued the Writ of Preliminary
Injunction. Crucial to the resolution of that question, is the
matter of whether or not the case at bar involves, or is in
connection with, or relates to a labor dispute. An affirmative
answer would bring the case within the original and exclusive
jurisdiction of labor tribunals to the exclusion of the regular
Courts.

Petitioners take the position that "it is beyond dispute that the
controversy in the court a quo involves or arose out of a labor
dispute and is directly connected or interwoven with the cases
pending with the NCMB-DOLE, and is thus beyond the ambit
of the public respondent's jurisdiction. That the acts complained
of (i.e., the mass concerted action of picketing and the reliefs
prayed for by the private respondent) are within the
competence of labor tribunals, is beyond question" (pp. 6-7,
Petitioners' Memo).

On the other hand, SanMig denies the existence of any

employer-employee relationship and consequently of any labor
dispute between itself and the Union. SanMig submits, in
particular, that "respondent Court is vested with jurisdiction
and judicial competence to enjoin the specific type of strike
staged by petitioner union and its officers herein complained
of," for the reasons that:

A. The exclusive bargaining representative of an

employer unit cannot strike to compel the employer to
hire and thereby create en employment relationship
with contractual workers, especially were the
contractual workers were recognized by the union,
under the governing collective bargaining agreement,
as excluded from, and therefore strangers to, the
bargaining unit.

B. A strike is a coercive economic weapon granted the

bargaining representative only in the event of a
deadlock in a labor dispute over 'wages, hours of work
and all other terms and conditions of the employment'
of the employees in the unit. The union leaders cannot
instigate a strike to compel the employer, especially on
the eve of certification elections, to hire strangers or
workers outside the unit, in the hope the latter will
help re-elect them.

C. Civil courts have the jurisdiction to enjoin the above

strike because this specie of strike does not arise out of
a labor dispute, is an abuse of right, and violates the
employer's constitutional liberty to hire or not to hire.
(SanMig's Memorandum, pp. 475-476, Rollo).

We find the Petition of a meritorious character.

A "labor dispute" as defined in Article 212 (1) of the Labor

Code includes "any controversy or matter concerning terms
and conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining,
changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the
proximate relation of employer and employee."

While it is SanMig's submission that no employer-employee

relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite on the other, a
labor dispute can nevertheless exist "regardless of whether the
disputants stand in the proximate relationship of employer and
employee" (Article 212 [1], Labor Code, supra) provided the
controversy concerns, among others, the terms and conditions
of employment or a "change" or "arrangement" thereof (ibid).
Put differently, and as defined by law, the existence of a labor
dispute is not negatived by the fact that the plaintiffs and
defendants do not stand in the proximate relation of employer
and employee.

That a labor dispute, as defined by the law, does exist herein is

evident. At bottom, what the Union seeks is to regularize the
status of the employees contracted by Lipercon and D'Rite and,
in effect, that they be absorbed into the working unit of SanMig.
This matter definitely dwells on the working relationship
between said employees vis-a-vis SanMig. Terms, tenure and
conditions of their employment and the arrangement of those
terms are thus involved bringing the matter within the purview
of a labor dispute. Further, the Union also seeks to represent
those workers, who have signed up for Union membership, for
the purpose of collective bargaining. SanMig, for its part, resists
that Union demand on the ground that there is no
employer-employee relationship between it and those workers
and because the demand violates the terms of their CBA.
Obvious then is that representation and association, for the
purpose of negotiating the conditions of employment are also
involved. In fact, the injunction sought by SanMig was precisely
also to prevent such representation. Again, the matter of
representation falls within the scope of a labor dispute. Neither
can it be denied that the controversy below is directly
connected with the labor dispute already taken cognizance of
by the NCMB-DOLE (NCMB-NCR-NS-O1-021-89; NCMB
NCR NS-01-093-83).

Whether or not the Union demands are valid; whether or not

SanMig's contracts with Lipercon and D'Rite constitute
"labor-only" contracting and, therefore, a regular
employer-employee relationship may, in fact, be said to exist;
whether or not the Union can lawfully represent the workers of
Lipercon and D'Rite in their demands against SanMig in the
light of the existing CBA; whether or not the notice of strike
was valid and the strike itself legal when it was allegedly
instigated to compel the employer to hire strangers outside the
working unit; — those are issues the resolution of which call for
the application of labor laws, and SanMig's cause/s of action in
the Court below are inextricably linked with those issues.

The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30

April 1965, 13 SCRA 738) relied upon by SanMig is not
controlling as in that case there was no controversy over terms,
tenure or conditions, of employment or the representation of
employees that called for the application of labor laws. In that
case, what the petitioning union demanded was not a change in
working terms and conditions, or the representation of the
employees, but that its members be hired as stevedores in the
place of the members of a rival union, which petitioners wanted
discharged notwithstanding the existing contract of the
arrastre company with the latter union. Hence, the ruling
therein, on the basis of those facts unique to that case, that
such a demand could hardly be considered a labor dispute.

As the case is indisputably linked with a labor dispute,

jurisdiction belongs to the labor tribunals. As explicitly provided
for in Article 217 of the Labor Code, prior to its amendment
by R.A. No. 6715 on 21 March 1989, since the suit below was
instituted on 6 March 1989, Labor Arbiters have original and
exclusive jurisdiction to hear and decide the following cases
involving all workers including "1. unfair labor practice cases; 2.
those that workers may file involving wages, hours of work and
other terms and conditions of employment; . . . and 5. cases
arising from any violation of Article 265 of this Code, including
questions involving the legality of striker and lockouts . . ."
Article 217 lays down the plain command of the law.

The claim of SanMig that the action below is for damages under
Articles 19, 20 and 21 of the Civil Code would not suffice to
keep the case within the jurisdictional boundaries of regular
Courts. That claim for damages is interwoven with a labor
dispute existing between the parties and would have to be
ventilated before the administrative machinery established for
the expeditious settlement of those disputes. To allow the action
filed below to prosper would bring about "split jurisdiction"
which is obnoxious to the orderly administration of justice
(Philippine Communications, Electronics and Electricity
Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968,
24 SCRA 321).

We recognize the proprietary right of SanMig to exercise an

inherent management prerogative and its best business
judgment to determine whether it should contract out the
performance of some of its work to independent contractors.
However, the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law
(Section 3, Article XIII, 1987 Constitution) equally call for
recognition and protection. Those contending interests must be
placed in proper perspective and equilibrium.

WHEREFORE, the Writ of Certiorari is GRANTED and the

Orders of respondent Judge of 25 March 1989 and 29 March
1989 are SET ASIDE. The Writ of Prohibition is GRANTED and
respondent Judge is enjoined from taking any further action in
Civil Case No. 57055 except for the purpose of dismissing it.
The status quo antedeclaration of strike ordered by the Court
on 24 May 1989 shall be observed pending the proceedings in
the National Conciliation Mediation Board-Department of
Labor and Employment, docketed as
NCMB-NCR-NS-01-021-89 and
NCMB-NCR-NS-01-093-83. No costs.

SO ORDERED.

||| (San Miguel Corp. Employees Union v. Bersamira, G.R. No.

87700, [June 13, 1990], 264 PHIL 875-885)

G.R. No. 185251. October 2, 2009.]

RAUL G. LOCSIN and EDDIE B.

TOMAQUIN, petitioners, vs. PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY, respondent.

DECISION

VELASCO, JR., J : p

The Case

This Petition for Review on Certiorari under Rule 45

seeks the reversal of the May 6, 2008 Decision 1 and
November 4, 2008 Resolution 2 of the Court of Appeals (CA)
in CA-G.R. SP No. 97398, entitled Philippine Long Distance
Telephone Company v. National Labor Relations Commission,
Raul G. Locsin and Eddie B. Tomaquin.The assailed decision
set aside the Resolutions of the National Labor Relations
Commission (NLRC) dated October 28, 2005 and August
28, 2006 which in turn affirmed the Decision dated
February 13, 2004 of the Labor Arbiter. The assailed
resolution, on the other hand, denied petitioners' motion for
reconsideration of the assailed decision.

The Facts

On November 1, 1990, respondent Philippine Long

Distance Telephone Company (PLDT) and the Security and
Safety Corporation of the Philippines (SSCP) entered into a
Security Services Agreement 3 (Agreement) whereby SSCP
would provide armed security guards to PLDT to be assigned
to its various offices.

Pursuant to such agreement, petitioners

Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.

On August 30, 2001, respondent issued a Letter dated

August 30, 2001 terminating the Agreement effective
October 1, 2001. 4

Despite the termination of the Agreement, however,

petitioners continued to secure the premises of their assigned
office. They were allegedly directed to remain at their post
by representatives of respondent. In support of their
contention, petitioners provided the Labor Arbiter with
copies of petitioner Locsin's pay slips for the period of
January to September 2002. 5 TCHEDA

Then, on September 30, 2002, petitioners' services

were terminated.
 Thus, petitioners filed a complaint before the Labor
Arbiter for illegal dismissal and recovery of money claims
such as overtime pay, holiday pay, premium pay for holiday
and rest day, service incentive leave pay, Emergency Cost of
Living Allowance, and moral and exemplary damages
against PLDT.

The Labor Arbiter rendered a Decision finding PLDT

liable for illegal dismissal. It was explained in the Decision
that petitioners were found to be employees of PLDT and
not of SSCP. Such conclusion was arrived at with the factual
finding that petitioners continued to serve as guards of
PLDT's offices. As such employees, petitioners were entitled
to substantive and procedural due process before
termination of employment. The Labor Arbiter held that
respondent failed to observe such due process requirements.
The dispositive portion of the Labor Arbiter's Decision reads:

WHEREFORE, premises considered, judgment is hereby

rendered ordering respondent Philippine Long
Distance and Telephone Company (PLDT) to pay
complainants Raul E. Locsin and Eddie Tomaquin their
separation pay and back wages computed as follows:

NAME SEPARATION PAY BACKWAGES

1. Raul E. Locsin P127,500.00 P240,954.67

2. Eddie B. P127,500.00 P240,954.67

Tomaquin
 ——————————

P736,909.34

=========

All other claims are DISMISSED for want of factual

basis.

Let the computation made by the Computation and

Examination Unit form part of this decision.

SO ORDERED.

PLDT appealed the above Decision to the NLRC which

rendered a Resolution affirming in toto the Arbiter's
Decision.

Thus, PLDT filed a Motion for Reconsideration of the

NLRC's Resolution which was also denied. CADacT

Consequently, PLDT filed a Petition for Certiorari with

the CA asking for the nullification of the Resolution issued by
the NLRC as well as the Labor Arbiter's Decision. The CA
rendered the assailed decision granting PLDT's petition and
dismissing petitioners' complaint. The dispositive portion of
the CA Decision provides:

WHEREFORE, the instant Petition for Certiorari is

GRANTED. The Resolutions dated October 28, 2005
and August 28, 2006 of the National Labor Relations
Commission are ANNULLED and SET ASIDE. Private
respondents' complaint against Philippine Long
Distance Telephone Company is DISMISSED.

SO ORDERED.
 The CA applied the four-fold test in order to
determine the existence of an employer-employee
relationship between the parties but did not find such
relationship. It determined that SSCP was not a labor-only
contractor and was an independent contractor having
substantial capital to operate and conduct its own business.
The CA further bolstered its decision by citing the
Agreement whereby it was stipulated that there shall be no
employer-employee relationship between the security guards
and PLDT.

Anent the pay slips that were presented by petitioners,

the CA noted that those were issued by SSCP and not PLDT;
hence, SSCP continued to pay the salaries of petitioners after
the Agreement. This fact allegedly proved that petitioners
continued to be employees of SSCP albeit performing their
work at PLDT's premises.

From such assailed decision, petitioners filed a motion

for reconsideration which was denied in the assailed
resolution.

Hence, we have this petition.

The Issues

1. Whether or not; complainants extended services to

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

2. Whether or not; in accordance to the provision of

the Article 280 of the Labor Code, complainants
extended services to the respondent for another
one (1) year without a contract be considered as
contractual employment.

3. Whether or not; in accordance to the provision of

the Article 280 of the Labor Code, does
complainants thirteen (13) years of service to the
respondent with manifestation to the respondent
thirteen (13) years renewal of its security
contract with the complainant agency SSCP, can
be considered only as "seasonal in nature" or fixed
as [specific projects] or undertakings and its
completion or termination can be dictated as
[controlled] by the respondent anytime they
wanted to.

4. Whether or not; complainants from being an alleged

contractual employees of the respondent for
thirteen (13) years as they were then covered by
a contract, becomes regular employees of the
respondent as the one (1) year extended services
of the complainants were not covered by a
contract, and can be considered as direct
employment pursuant to the provision of the
Article 280 of the Labor Code.

5. Whether or not; the Court of Appeals committed

grave abuse of discretion when it set aside and
 [annulled] the labor [arbiter's] decision and of the
NLRC's resolution declaring the dismissal of the
complainant as illegal. 6

The Court's Ruling

This petition is hereby granted.

An Employer-Employee
Relationship Existed Between the Parties

It is beyond cavil that there was no employer-employee

relationship between the parties from the time of
petitioners' first assignment to respondent by SSCP in 1988
until the alleged termination of the Agreement between
respondent and SSCP. In fact, this was the conclusion that
was reached by this Court in Abella v.Philippine Long
Distance Telephone Company, 7 where we ruled that
petitioners therein, including herein petitioners, cannot be
considered as employees of PLDT. It bears pointing out that
petitioners were among those declared to be employees of
their respective security agencies and not of PLDT.

The only issue in this case is whether petitioners

became employees of respondent after the Agreement
between SSCP and respondent was terminated. CTDAaE

This must be answered in the affirmative.

Notably, respondent does not deny the fact that

petitioners remained in the premises of their offices even
after the Agreement was terminated. And it is this fact that
must be explained.
 To recapitulate, the CA, in rendering a decision in
favor of respondent, found that: (1) petitioners failed to
prove that SSCP was a labor-only contractor; and (2)
petitioners are employees of SSCP and not of PLDT.

In arriving at such conclusions, the CA relied on the

provisions of the Agreement, wherein SSCP undertook to
supply PLDT with the required security guards, while
furnishing PLDT with a performance bond in the amount of
PhP707,000. Moreover, the CA gave weight to the provision
in the Agreement that SSCP warranted that it "carry on an
independent business and has substantial capital or
investment in the form of equipment, work premises, and
other materials which are necessary in the conduct of its
business".

Further, in determining that no employer-employee

relationship existed between the parties, the CA quoted the
express provision of the Agreement, stating that no
employer-employee relationship existed between the parties
herein. The CA disregarded the pay slips
of Locsin considering that they were in fact issued by SSCP
and not by PLDT.

From the foregoing explanation of the CA, the fact

remains that petitioners remained at their post after the
termination of the Agreement. Notably, in its Comment
dated March 10, 2009, 8 respondent never denied that
petitioners remained at their post until September 30,
2002. While respondent denies the alleged circumstances
stated by petitioners, that they were told to remain at their
post by respondent's Security Department and that they
were informed by SSCP Operations Officer Eduardo Juliano
that their salaries would be coursed through SSCP as per
arrangement with PLDT, it does not state why they were
not made to vacate their posts. Respondent said that it did
not know why petitioners remained at their posts.

Rule 131, Section 3 (y) of the Rules of Court provides:

SEC. 3. Disputable presumptions. — The following

presumptions are satisfactory if uncontradicted, but
may be contradicted and overcome by other evidence:

xxx xxx xxx

(y) That things have happened according to the

ordinary course of nature and the ordinary habits of
life.

In the ordinary course of things, responsible business

owners or managers would not allow security guards of an
agency with whom the owners or managers have severed ties
with to continue to stay within the business' premises. This is
because upon the termination of the owners' or managers'
agreement with the security agency, the agency's
undertaking of liability for any damage that the security
guard would cause has already been terminated. Thus, in the
event of an accident or otherwise damage caused by such
security guards, it would be the business owners and/or
managers who would be liable and not the agency. The
business owners or managers would, therefore, be opening
themselves up to liability for acts of security guards over
whom the owners or managers allegedly have no control. cDTHIE

At the very least, responsible business owners or

managers would inquire or learn why such security guards
were remaining at their posts, and would have a clear
understanding of the circumstances of the guards' stay. It is
but logical that responsible business owners or managers
would be aware of the situation in their premises.

We point out that with respondent's hypothesis, it

would seem that SSCP was paying petitioners' salaries while
securing respondent's premises despite the termination of
their Agreement. Obviously, it would only be respondent
that would benefit from such a situation. And it is seriously
doubtful that a security agency that was established for
profit would allow its security guards to secure respondent's
premises when the Agreement was already terminated.

From the foregoing circumstances, reason dictates that

we conclude that petitioners remained at their post under
the instructions of respondent. We can further conclude that
respondent dictated upon petitioners that the latter
perform their regular duties to secure the premises during
operating hours. This, to our mind and under the
circumstances, is sufficient to establish the existence of an
employer-employee relationship. Certainly, the facts as
narrated by petitioners are more believable than the
irrational denials made by respondent. Thus, we ruled in Lee
Eng Hong v. Court of Appeals: 9 HcSDIE

Evidence, to be believed, must not only proceed from

the mouth of a credible witness, but it must be credible
in itself — such as the common experience and
observation of mankind can approve as probable under
the circumstances. We have no test of the truth of
human testimony, except its conformity to our
knowledge, observation and experience. Whatever is
repugnant to these belongs to the miraculous and is
outside judicial cognizance (Castañares v. Court of
Appeals, 92 SCRA 568 [1979]).

To reiterate, while respondent and SSCP no longer had

any legal relationship with the termination of the
Agreement, petitioners remained at their post securing the
premises of respondent while receiving their salaries,
allegedly from SSCP. Clearly, such a situation makes no sense,
and the denials proffered by respondent do not shed any
light to the situation. It is but reasonable to conclude that,
with the behest and, presumably, directive of respondent,
petitioners continued with their services. Evidently, such
are indicia of control that respondent exercised over
petitioners.

Such power of control has been explained as the "right

to control not only the end to be achieved but also the means
to be used in reaching such end". 10 With the conclusion that
respondent directed petitioners to remain at their posts and
continue with their duties, it is clear that respondent
exercised the power of control over them; thus, the existence
of an employer-employee relationship.

In Tongko v. The Manufacturers Life Insurance Co.

(Phils.) Inc., 11 we reiterated the oft repeated rule that
control is the most important element in the determination
of the existence of an employer-employee relationship:

In the determination of whether an

employer-employee relationship exists between two
parties, this Court applies the four-fold test to
determine the existence of the elements of such
relationship. In Pacific Consultants International Asia,
Inc. v. Schonfeld, the Court set out the elements of an
employer-employee relationship, thus:

Jurisprudence is firmly settled that whenever the

existence of an employment relationship is in
dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power
to control the employee's conduct. It is the
so-called "control test" which constitutes the
most important index of the existence of the
employer-employee relationship that is, whether
the employer controls or has reserved the right
to control the employee not only as to the result
of the work to be done but also as to the means
and methods by which the same is to be
accomplished. Stated otherwise, an
employer-employee relationship exists where the
 person for whom the services are performed
reserves the right to control not only the end to
be achieved but also the means to be used in
reaching such end.

Furthermore, Article 106 of the Labor Code contains a

provision on contractors, to wit: HCETDS

Art. 106. Contractor or subcontractor. — Whenever

an employer enters into a contract with another
person for the performance of the former's work, the
employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with
the provisions of this Code.

In the event that the contractor or subcontractor fails

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

The Secretary of Labor and Employment may, by

appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as
well as differentiations within these types of
contracting and determine who among the parties
involved shall be considered the employer for purposes
 of this Code, to prevent any violation or circumvention
of any provision of this Code.

There is "labor-only" contracting where the person

supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others,
and the workers recruited and placed by such person
are performing activities which are directly related to
the principal business of such employer. In such cases,
the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to
the workers in the same manner and extent as if the
latter were directly employed by him. (Emphasis
supplied.)

Thus, the Secretary of Labor issued Department Order

No. 18-2002, Series of 2002, implementing Art. 106 as
follows:

Section 5. Prohibition against labor-only

contracting. –— Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for
a principal, and any of the following elements are
present:

(i) The contractor or subcontractor does not have

substantial capital or investment which relates to
the job, work or service to be performed and the
employees recruited, supplied or placed by such
 contractor or subcontractor are performing
activities which are directly related to the main
business of the principal; or

(ii) the contractor does not exercise the right to

control over the performance of the work of the
contractual employee.

The foregoing provisions shall be without prejudice to

the application of Article 248 (C) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital

stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements,
machineries and work premises, actually and directly
used by the contractor or subcontractor in the
performance or completion of the job, work or service
contracted out. TcSCEa

The "right to control" shall refer to the right reserved

to the person for whom the services of the contractual
workers are performed, to determine not only the end
to be achieved, but also the manner and means to be
used in reaching that end.

On the other hand, Sec. 7 of the department order

contains the consequence of such labor-only contracting:

Section 7. Existence of an employer-employee

relationship. –— The contractor or subcontractor shall
be considered the employer of the contractual
employee for purposes of enforcing the provisions of the
Labor Code and other social legislation. The principal,
 however, shall be solidarily liable with the contractor in
the event of any violation of any provision of the Labor
Code, including the failure to pay wages.

The principal shall be deemed the employer of the

contractual employee in any of the following cases as
declared by a competent authority:

(a) where there is labor-only contracting; or

(b) where the contracting arrangement falls within the

prohibitions provided in Section 6 (Prohibitions) hereof.
(Emphasis supplied.)

Evidently, respondent having the power of control over

petitioners must be considered as petitioners' employer —
from the termination of the Agreement onwards — as this
was the only time that any evidence of control was exhibited
by respondent over petitioners and in light of our ruling
in Abella. 12 Thus, as aptly declared by the NLRC, petitioners
were entitled to the rights and benefits of employees of
respondent, including due process requirements in the
termination of their services.

Both the Labor Arbiter and NLRC found that

respondent did not observe such due process requirements.
Having failed to do so, respondent is guilty of illegal
dismissal.

WHEREFORE, we SET ASIDE the CA's May 6, 2008

Decision and November 4, 2008 Resolution in CA-G.R. SP
No. 97398. We hereby REINSTATE the Labor Arbiter's
 Decision dated February 13, 2004 and the NLRC's
Resolutions dated October 28, 2005 and August 28, 2006.

No costs.

SO ORDERED.

||| (Locsin v. Philippine Long Distance Telephone Co., G.R. No.

185251, [October 2, 2009], 617 PHIL 955-967)

G.R. No. 179652. March 6, 2012.]

PEOPLE'S BROADCASTING SERVICE (BOMBO

RADYO PHILS., INC.), petitioner, vs.
THE SECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT,
THE REGIONAL DIRECTOR, DOLE REGION VII,
and JANDELEON JUEZAN, respondents.

RESOLUTION

VELASCO, JR., J : p

In a Petition for Certiorari under Rule 65,

petitioner People's Broadcasting Service, Inc. (Bombo Radyo
Phils., Inc.) questioned the Decision and Resolution of the
Court ofAppeals (CA) dated October 26, 2006 and June 26,
2007, respectively, in C.A. G.R. CEB-SP No. 00855. cSaCDT
Private respondent Jandeleon Juezan filed a complaint against
petitioner with the Department of Labor and Employment
(DOLE) Regional Office No. VII, Cebu City, for illegal deduction,
nonpayment of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal
diminution of benefits, delayed payment ofwages and
noncoverage of SSS, PAG-IBIG and Philhealth. 1 After the
conduct of summary investigations, and after the parties
submitted their position papers, the DOLE Regional Director
found that private respondent was an employee of petitioner,
and was entitled to his money claims. 2 Petitioner sought
reconsideration of the Director's Order, but failed. The Acting
DOLE Secretary dismissed petitioner's appeal on the ground
that petitioner submitted a Deed of Assignment of Bank
Deposit instead of posting a cash or surety bond. When the
matter was brought before the CA, where petitioner claimed
that it had been denied due process, it was held that petitioner
was accorded due process as it had been given the opportunity
to be heard, and that the DOLE Secretary had jurisdiction over
the matter, as the jurisdictional limitation imposed by Article
129 of the Labor Code on the power of the
DOLE Secretary under Art. 128 (b) of the Code had been
repealed by Republic Act No. (RA) 7730.3

In the Decision of this Court, the CA Decision was reversed and

set aside, and the complaint against petitioner was dismissed.
The dispositive portion of the Decision reads as follows:
 WHEREFORE, the petition is GRANTED. The Decision
dated 26 October 2006 and the Resolution dated 26
June 2007 of the Court of Appeals in C.A. G.R.
CEB-SP No. 00855 are REVERSED and SET ASIDE.
The Order of the then Acting Secretary of the
Department of Labor and Employment dated 27
January 2005 denying petitioner's appeal, and the
Orders of the Director, DOLE Regional Office No. VII,
dated 24 May 2004 and 27 February 2004,
respectively, are ANNULLED. The complaint against
petitioner is DISMISSED. 4

The Court found that there was no employer-employee

relationship between petitioner and private respondent. It was
held that while the DOLE may make a determination of the
existence of an employer-employee relationship, this function
could not be co-extensive with the visitorial and enforcement
power provided in Art. 128 (b) of the Labor Code,as
amended by RA 7730. The National Labor Relations
Commission (NLRC) was held to be the primary agency in
determining the existence ofan employer-employee
relationship. This was the interpretation of the Court of the
clause "in cases where the relationship of employer-employee
still exists" in Art. 128 (b). 5

From this Decision, the Public Attorney's Office (PAO) filed a

Motion for Clarification of Decision (with Leave of Court). The
PAO sought to clarify as to when the visitorial and enforcement
power of the DOLE be not considered as co-extensive with the
power to determine the existence of an employer-employee
relationship. 6 In its Comment, 7 the DOLE sought clarification
as well, as to the extent of its visitorial and enforcement power
under the Labor Code, as amended. SIDTCa

The Court treated the Motion for Clarification as a second

motion for reconsideration, granting said motion and
reinstating the petition. 8 It is apparent that there is a need to
delineate the jurisdiction of the DOLE Secretary vis-à-vis
that of the NLRC.

Under Art. 129 of the Labor Code,the power of the DOLE

and its duly authorized hearing officers to hear and decide any
matter involving the recovery of wages and other monetary
claims and benefits was qualified by the proviso that the
complaint not include a claim for reinstatement, or that the
aggregate money claims not exceed PhP5,000. RA 7730, or
an Act Further Strengthening the Visitorial and Enforcement
Powers of the Secretary of Labor, did away with the
PhP5,000 limitation, allowing the DOLE Secretary to exercise
its visitorial and enforcement power for claims beyond
PhP5,000. The only qualification to this expanded power of the
DOLE was only that there still be an existing
employer-employee relationship.

It is conceded that if there is no employer-employee

relationship, whether it has been terminated or it has not
existed from the start, the DOLE has no jurisdiction. Under Art.
128 (b) of the Labor Code,as amended by RA 7730, the first
sentence reads, "Notwithstanding the provisions of Articles
129 and 217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists,
the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders
to give effect to the labor standards provisions of this Code and
other labor legislation based on the
findings of laboremployment and enforcement officers or
industrial safety engineers made in the course of inspection." It
is clear and beyond debate that an employer-employee
relationship must exist for the exercise of the visitorial and
enforcement power of the DOLE. The question now arises, may
the DOLE make a determination of whether or not an
employer-employee relationship exists, and if so, to what
extent?

The first portion of the question must be answered in the

affirmative.

The prior decision of this Court in the present case accepts such
answer, but places a limitation upon the power of the DOLE,
that is, the determination of the existenceof an
employer-employee relationship cannot be co-extensive with
the visitorial and enforcement power of the DOLE. But even in
conceding the power of the DOLE to determine the
existence of an employer-employee relationship, the Court held
that the determination of the existence of an
employer-employee relationship is still primarily within the
power of the NLRC, that any finding by the DOLE is merely
preliminary.

This conclusion must be revisited.

No limitation in the law was placed upon the power of the
DOLE to determine the existence of an employer-employee
relationship. No procedure was laid down where the DOLE
would only make a preliminary finding, that the power was
primarily held by the NLRC. The law did not say that the DOLE
would first seek the NLRC's determination of the
existence of an employer-employee relationship, or that should
the existence of the employer-employee relationship be
disputed, the DOLE would refer the matter to the NLRC. The
DOLE must have the power to determine whether or not an
employer-employee relationship exists, and from there to
decide whether or not to issue compliance orders in accordance
with Art. 128 (b) of the Labor Code,as amended by RA
7730. aCASEH

The DOLE, in determining the existence of an

employer-employee relationship, has a ready set of guidelines
to follow, the same guide the courts themselves use. The
elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power ofdismissal;
(4) the employer's power to control the employee's
conduct. 9 The use of this test is not solely limited to the NLRC.
The DOLE Secretary, or his or her representatives, can utilize
the same test, even in the course of inspection, making
use of the same evidence that would have been presented
before the NLRC.
The determination of the existence of an employer-employee
relationship by the DOLE must be respected. The expanded
visitorial and enforcement power of the DOLE granted by RA
7730 would be rendered nugatory if the alleged employer
could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at
least a prima facie showing of the absence of an
employer-employee relationship be made to oust the
DOLE of jurisdiction. But it is precisely the DOLE that will be
faced with that evidence, and it is the DOLE that will weigh it,
to see if the same does successfully refute the existence of an
employer-employee relationship.

If the DOLE makes a finding that there is an existing

employer-employee relationship, it takes cognizance of the
matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has
already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.

The Court, in limiting the power of the DOLE, gave the

rationale that such limitation would eliminate the
prospect of competing conclusions between the DOLE and the
NLRC. The prospect of competing conclusions could just as well
have been eliminated by according respect to the DOLE findings,
to the exclusion of the NLRC, and this We believe is the more
prudent course of action to take.
This is not to say that the determination by the DOLE is beyond
question or review. Suffice it to say, there are judicial remedies
such as a petition for certiorari under Rule 65 that may be
availed of, should a party wish to dispute the findings of the
DOLE.

It must also be remembered that the power of the DOLE to

determine the existence of an employer-employee relationship
need not necessarily result in an affirmative finding. The DOLE
may well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the
case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.

Under Art. 128 (b) of the Labor Code,as amended by RA

7730, the DOLE is fully empowered to make a determination
as to the existence of an employer-employee relationship in the
exercise of its visitorial and enforcement power, subject to
judicial review, not review by the NLRC.

There is a view that despite Art. 128 (b) of the Labor Code,as
amended by RA 7730, there is still a threshold amount set by
Arts. 129 and 217 of the Labor Code when money claims
are involved, i.e., that if it is for PhP5,000 and below, the
jurisdiction is with the regional director of the DOLE, under
Art. 129, and if the amount involved exceeds PhP5,000, the
jurisdiction is with the labor arbiter, under Art. 217. The view
states that despite the wording of Art. 128 (b), this would only
apply in the course ofregular inspections undertaken by the
DOLE, as differentiated from cases under Arts. 129 and 217,
which originate from complaints. There are several cases,
however, where the Court has ruled that Art. 128 (b) has been
amended to expand the powers of the DOLE Secretary and his
duly authorized representatives by RA 7730. In these cases, the
Court resolved that the DOLE had the jurisdiction, despite the
amount of the money claims involved. Furthermore, in these
cases, the inspection held by the DOLE regional director was
prompted specifically by a complaint. Therefore, the
initiation of a case through a complaint does not divest the
DOLE Secretary or his duly authorized
representative of jurisdiction under Art. 128 (b). CAcEaS

To recapitulate, if a complaint is brought before the DOLE to

give effect to the labor standards provisions of the Labor
Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship,
the DOLE exercises jurisdiction to the exclusion of the NLRC. If
the DOLE finds that there is no employer-employee
relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a
claim for reinstatement, the jurisdiction is properly with
the Labor Arbiter, under Art. 217 (3) of the Labor
Code,which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages,
rates of pay, hours of work, and other terms and
conditions of employment, if accompanied by a claim for
reinstatement. If a complaint is filed with the NLRC, and there
is still an existing employer-employee relationship, the
jurisdiction is properly with the DOLE. The findings of the
DOLE, however, may still be questioned through a petition
for certiorari under Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director

that there was an employer-employee relationship has been
subjected to review by this Court, with the finding being that
there was no employer-employee relationship between
petitioner and private respondent, based on the evidence
presented. Private respondent presented self-serving
allegations as well as self-defeating evidence. 10 The
findings of the Regional Director were not based on substantial
evidence, and private respondent failed to prove the
existence of an employer-employee relationship. The DOLE had
no jurisdiction over the case, as there was no
employer-employee relationship present. Thus, the
dismissal of the complaint against petitioner is proper.

WHEREFORE, the Decision of this Court in G.R. No. 179652 is

hereby AFFIRMED, with the MODIFICATION that in the
exercise of the DOLE's visitorial and enforcement power,
the Labor Secretary or the latter's authorized representative
shall have the power to determine the existence of an
employer-employee relationship, to the exclusion of the NLRC.

SO ORDERED.

Corona, C.J., Carpio, Leonardo-de Castro, Peralta, Bersamin,

Abad, Villarama, Jr., Perez, Mendoza, Sereno,
Reyes and Perlas-Bernabe, JJ., concur.
Brion, J., see Concurring Opinion (In the Result).

Del Castillo, J., is on official leave.

Separate Opinions

BRION, J., concurring:

I concur in the result in affirming with modification the Court's

Decision of May 8, 2009. This Decision originally dismissed
respondent Jandeleon Juezan's money claims against the
petitioner People's Broadcasting Service (Bombo Radyo Phils.,
Inc.). The present Resolution still affirms the ruling in
favor of the petitioner, but more importantly to me, it
recognizes the validity of the Department of Labor and
Employment's (DOLE's) plenary power under Article 128
(b) of the Labor Code,as amended by Republic Act No. 7730,
including its power to determine the
existence of employer-employee relationship in the
exercise of its Article 128 (b) powers. ACDIcS

Background

The case arose when the DOLE Regional Office No. VII
conducted an inspection of Bombo Radyo's premises in response
to Juezan's money claims against thebroadcasting company,
resulting in an order for Bombo Radyo to rectify/restitute
the labor standards violations discovered during the inspection.
Bombo Radyo failed to make any rectification or restitution,
prompting the DOLE to conduct a summary investigation.
Bombo Radyo reiterated its position, made during the
inspection, that Juezan was not its employee. Both parties
submitted evidence to support their respective positions.

DOLE Director Rodolfo M. Sabulao found Juezan to be an

employee of Bombo Radyo. Consequently, Director Sabulao
ordered Bombo Radyo to pay Juezan P203,726.30
representing his demanded money claims. Bombo Radyo moved
for reconsideration and submitted additional evidence, but
Director Sabulao denied the motion. Bombo Radyo then
appealed to the DOLE Secretary, insisting that Juezan was not
its employee as he was a drama talent hired on a per drama
basis. The Acting DOLESecretary dismissed the appeal for
non-perfection due to Bombo Radyo's failure to put a cash or
surety bond, as required by Article 128 (b) of the Labor
Code.

Bombo Radyo went to the Court of Appeals (CA) through a

petition for certiorari under Rule 65 of the Rules of Court. The
CA dismissed the petition for lack of merit. Bombo Radyo then
sought relief from this Court, likewise through a Rule 65
petition, contending that the CA committed grave
abuse of discretion in dismissing the petition. It justified its
recourse to a petition for certiorari instead of a Rule 45 appeal
by claiming that there was no appeal or any plain and adequate
remedy available to it in the ordinary course of law.

On May 8, 2009, the Court's Second Division rendered a

Decision reversing the CA rulings and dismissing Juezan's
complaint. It reviewed the evidence and found that there was
no employer-employee relationship between Juezan and
Bombo Radyo. The Court overruled the CA's recognition of the
DOLE's power to determine the
existence of employer-employee relationship in
a labor standards case under Article 128 (b) of the Labor
Code. It stressed that the power to determine the
existence of employer-employee relationship is primarily
lodged with the National Labor Relations
Commission (NLRC) based on the clause "in cases where the
relationship of employer-employee still exists" in Article 128
(b). cSCADE

The Dissent

The May 8, 2009 Court Decision was not unanimous. I wrote a

Dissent and was joined by Justice Conchita Carpio Morales. I
took strong exception to the Court's Decision for:

1. taking cognizance of Bombo Radyo's Rule 65 petition

for certiorari despite the fact that a Rule 45 appeal (petition
for review on certiorari) was available to the company and
would have been the proper recourse since errors of law against
the CA were raised;

2. allowing a Deed of Assignment of Bank Deposits as a

substitute for a cash or surety bond in perfecting an appeal to
the Labor Secretary, in violation of Article 128 (b) of the
Labor Code which requires only a cash or surety bond;

3. re-examining the evidence and finding that there was no

employer-employee relationship between Juezan and Bombo
Radyo, thereby reversing the DOLE Regional Director's findings
which had already lapsed into finality in view of the
non-perfection of the appeal;

4. holding that while the Regional Director and the

DOLE Secretary may preliminarily determine the
existence of an employer-employee relationship in
a laborstandards case, they can be divested of jurisdiction over
the issue by a mere prima facie showing of an absence of an
employer-employee relationship.

The Public Attorney's Office (PAO) moved, with leave of court,

to clarify the Decision on the question of when the visitorial and
enforcement power of the DOLE can be considered
co-extensive or not co-extensive with the power to determine
the existence of an employer-employee relationship. The DOLE,
in its Comment, also sought to clarify the extent of its visitorial
and enforcement power under the Labor Code.

The Court, treating the Motion for Clarification as a Second

Motion for Reconsideration, granted the motion and reinstated
the petition. 1

The Court's Ruling

In a reversal of position, the present Resolution now recognizes

that the determination of the existence of an
employer-employee relationship by the DOLE, in the
exercise of its visitorial and enforcement power under Article
128 (b) of the Labor Code,is entitled to full respect and must
be fully supported. It categorically states: ICDSca
No limitation in the law was placed upon the
power of the DOLE to determine the existence of an
employer-employee relationship. No procedure was laid
down where the DOLE would only make a preliminary
finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first
seek the NLRC's determination of the existence of an
employer-employee relationship, or that should the
existence of the employer-employee relationship be
disputed, the DOLE would refer the matter to the
NLRC. The DOLE must have the power to determine
whether or not an employer-employee relationship
exists, and from there to decide whether or not to issue
compliance orders in accordance with Art.
128(b) of the Labor Code,as amended by RA
7730. 2

The determination of the existence of an

employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement
power of the DOLE granted by RA 7730 would be
rendered nugatory if the alleged employer could, by the
simple expedient of disputing the employer-employee
relationship, force the referral of the matter to the
NLRC. The Court issued the declaration that at least
a prima facie showing of the absence of an
employer-employee relationship be made to oust the
DOLE of jurisdiction. But it is precisely the DOLE that
will be faced with that evidence, and it is the DOLE
that will weigh it, to see if the same does successfully
 refute the existence of an employer-employee
relationship. 3

This is not to say that the determination by the DOLE

is beyond question or review. Suffice it to say, there are
judicial remedies such as a petition for certiorari under
Rule 65 that may be availed of, should a party wish to
dispute the findings of the DOLE. 4 (underscoring ours)

In short, the Court now recognizes that the DOLE has the full
power to determine the existence of an employer-employee
relationship in cases brought to it under Article 128 (b) of the
Labor Code.This power is parallel and not subordinate to
that of the NLRC.

Our present ruling on the authority of the DOLE with respect

to Article 128 (b) of the Labor Code is, to my mind, a very
positive development that cannot but benefit our working
masses, the vast majority of whom "are not organized and,
therefore, outside the protective mantle of collective
bargaining." 5

It should be welcome to the DOLE, too, as it will greatly boost

its visitorial and enforcement power, and serve as an invaluable
tool in its quest to ensure that workers enjoy minimum terms
and conditions of employment. The DOLE's labor inspection
program can now proceed without being sidetracked by
unscrupulous employers who could, as the Resolution
acknowledges, render nugatory the "expanded visitorial and
enforcement power of the DOLE granted by RA 7730 . . . by
the simple expedient of disputing the employer-employee
relationship [and] force the referral of the matter to the
NLRC." 6

But our Resolution does not fully go the DOLE's way. The Court,
at the same time, confirms its previous finding that no
employer-employee relationship exists between Juezan and
Bombo Radyo based on the evidence presented, 7 and that a
Deed of Assignment of Bank Deposits can be a substitute for a
cash or surety bond in perfecting an appeal to
the Labor Secretary.

I continue to entertain strong reservations against the

validity of these rulings, particularly the ruling on the Court's
acceptance of a Deed of Assignment of Bank Deposits to
perfect an appeal to the Labor Secretary; this mode directly
contravenes the express terms of Article 128 (b) of the Labor
Code which requires only a cash or surety bond. I do hope that
the Court will consider this ruling an isolated one applicable
only to the strict facts obtaining in the present case as this is a
step backward in the DOLE's bid for an orderly and efficient
delivery of labor justice. cHCaIE

In light of these reservations, I cannot fully concur with the

present Resolution and must only "concur in the result."

||| (People's Broadcasting Service v. Secretary of the Department

of Labor and Employment, G.R. No. 179652 (Resolution),
[March 6, 2012], 683 PHIL 509-526)
 G.R. No. 184885. March 7, 2012.]

ERNESTO
G. YMBONG, petitioner, vs. ABS-CBN BROADCAS
TING CORPORATION, VENERANDA SY AND
DANTE LUZON, respondents.

DECISION

VILLARAMA, JR., J : p

Before us is a Rule 45 Petition seeking to set aside the August

22, 2007 Decision 1 and September 18, 2008 Resolution 2 of
the Court of Appeals (CA) in CA-G.R. SP No. 86206 declaring
petitioner to have resigned from work and not illegally
dismissed.

The antecedent facts follow:

Petitioner Ernesto G. Ymbong started working

for ABS-CBN Broadcasting Corporation (ABS-CBN) in 1993
at its regional station in Cebu as a television talent,
co-anchoring Hoy Gising and TV Patrol Cebu. His stint
in ABS-CBN later extended to radio when ABS-CBN Cebu
launched its AM station DYAB in 1995 where he worked as
drama and voice talent, spinner, scriptwriter and public affairs
program anchor.

Like Ymbong, Leandro Patalinghug also worked

for ABS-CBN Cebu. Starting 1995, he worked as talent,
director and scriptwriter for various radio programs aired over
DYAB.

On January 1, 1996, the ABS-CBN Head Office in Manila

issued Policy No. HR-ER-016 or the "Policy on Employees
Seeking Public Office." The pertinent portions read:

1. 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.

xxx xxx xxx

3. Further, 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 (e.g., publicly speaking/endorsing
candidate, recruiting campaign workers,
etc.) must file a request for leave of absence
subject to management's approval. For this
particular reason, the employee should file the
leave request at least thirty (30) days prior to
the start of the planned leave period. AHDcCT

xxx xxx xxx 3 [Emphasis and underscoring supplied.]

Because of the impending May 1998 elections and based on his

immediate recollection of the policy at that time, Dante Luzon,
Assistant Station Manager of DYAB issued the following
memorandum:
 TO : ALL CONCERNED

FROM : DANTE LUZON

DATE : MARCH 25, 1998

SUBJECT : AS STATED

Please be informed that per company policy, any

employee/talent who wants to run for any position in
the coming election will have to file a leave of
absencethe moment he/she files his/her certificate of
candidacy.

The services rendered by the concerned

employee/talent to this company will then be
temporarily suspended for the entire
campaign/election period.

For strict compliance. 4 [Emphasis and underscoring

supplied.]

Luzon, however, admitted that upon double-checking of the

exact text of the policy and subsequent confirmation with
the ABS-CBN Head Office, he saw that the policy actually
required suspension for those who intend to campaign for a
political party or candidate and resignation for those who will
actually run in the elections. 5

After the issuance of the March 25, 1998

Memorandum, Ymbong got in touch with Luzon. Luzon claims
that Ymbong approached him and told him that he would
leave radio for a couple of months because he will campaign for
the administration ticket. It was only after the elections that
they found out that Ymbong actually ran for public office
himself at the eleventh hour. Ymbong, on the other hand,
claims that in accordance with the March 25, 1998
Memorandum, he informed Luzon through a letter that he
would take a few months leave of absence from March 8, 1998
to May 18, 1998 since he was running for councilor of
Lapu-Lapu City.

As regards Patalinghug, Patalinghug approached Luzon and

advised him that he will run as councilor for Naga, Cebu.
According to Luzon, he clarified to Patalinghug that he will be
considered resigned and not just on leave once he files a
certificate of candidacy. Thus, Patalinghug wrote Luzon the
following letter on April 13, 1998:

Dear Mr. Luzon,

I'm submitting to you my letter of resignation as your

Drama Production Chief and Talent due to your
company's policy that every person connected
to ABS-CBN that should seek an elected position in the
government will be forced to resigned (sic) from his
position. So herewith I'm submitting my resignation
with a hard heart. But I'm still hoping to be connected
again with your prestigious company after the
election[s] should you feel that I'm still an asset to your
drama production department. I'm looking forward to
that day and I'm very happy and proud that I have
served for two and a half years the most stable and the
most prestigious Radio and TV Network in the
Philippines. TaCSAD
 As a friend[,] wish me luck and Pray for me. Thank
you.

Very Truly Yours,

(Sgd.)
Leandro "Boy"
Patalinghug 6

Unfortunately, both Ymbong and Patalinghug lost in the May

1998 elections.

Later, Ymbong and Patalinghug both tried to come back

to ABS-CBN Cebu. According to Luzon, he informed them that
they cannot work there anymore because of company policy.
This was stressed even in subsequent meetings and they were
told that the company was not allowing any
exceptions. ABS-CBN, however, agreed out of pure liberality to
give them a chance to wind up their participation in the radio
drama, Nagbabagang Langit, since it was rating well and to
avoid an abrupt ending. The agreed winding-up, however,
dragged on for so long prompting Luzon to issue to Ymbong the
following memorandum dated September 14, 1998:

TO : NESTOR YMBONG

FROM : DANTE LUZON

SUBJECT : AS STATED

DATE : 14 SEPT. 1998

Please be reminded that your services as drama talent

had already been automatically terminated when you
ran for a local government position last election.
 The Management however gave you more than enough
time to end your drama participation and other
involvement with the drama department.

It has been decided therefore that all your drama

participation shall be terminated effective immediately.
However, your involvement as drama spinner/narrator
of the drama "NAGBA[BA]GANG LANGIT" continues
until its writer/director Mr. Leandro Patalinghug
wraps it up one week upon receipt of a separate memo
issued to him. 7

Ymbong in contrast 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. On September 14,
1998, he received a memorandum stating that his services are
being terminated immediately, much to his surprise. Thus, he
filed an illegal dismissal complaint 8 against ABS-CBN, Luzon
and DYAB Station Manager Veneranda Sy. He argued that the
ground cited by ABS-CBN for his dismissal was not among
those enumerated in the Labor Code, as amended. And even
granting without admitting the existence of the company policy
supposed to have been violated, Ymbongaverred that it was
necessary that the company policy meet certain requirements
before willful disobedience of the policy may constitute a just
cause for termination.Ymbong further argued that the
company policy violates his constitutional right to suffrage. 9

Patalinghug likewise filed an illegal dismissal

complaint 10 against ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing
that there is no employer-employee relationship between the
company and Ymbong and Patalinghug. ABS-CBN contended
that they are not employees but talents as evidenced by their
talent contracts. However, notwithstanding their
status, ABS-CBN has a standing policy on persons connected
with the company whenever they will run for public
office. 11 cHATSI

On July 14, 1999, the Labor Arbiter rendered a

decision 12 finding the dismissal of Ymbong and Patalinghug
illegal, thus:

WHEREFORE, in the light of the foregoing, judgment is

rendered finding the dismissal of the two complainants
illegal. An order is issued directing
respondent ABS[-]CBNto immediately reinstate
complainants to their former positions without loss of
seniority rights plus the payment of backwages in the
amount of P200,000.00 to each complainant.

All other claims are dismissed.

SO ORDERED. 13

The Labor Arbiter found that there exists an

employer-employee relationship
between ABS-CBN and Ymbong and Patalinghug considering
the stipulations in their appointment letters/talent contracts.
The Labor Arbiter noted particularly that the appointment
letters/talent contracts imposed conditions in the performance
of their work, specifically on attendance and punctuality, which
effectively placed them under the control of ABS-CBN. The
Labor Arbiter likewise ruled that although the subject company
policy is reasonable and not contrary to law, the same was not
made known to Ymbong and Patalinghug and in fact was
superseded by another one embodied in the March 25, 1998
Memorandum issued by Luzon. Thus, there is no valid or
authorized cause in terminating Ymbong and Patalinghug from
their employment.

In its memorandum of appeal 14 before the National Labor

Relations Commission (NLRC), ABS-CBN contended that the
Labor Arbiter has no jurisdiction over the case because there is
no employer-employee relationship between the company
and Ymbong and Patalinghug, and that Sy and Luzon
mistakenly assumed that Ymbong and Patalinghug could just
file a leave of absence since they are only talents and not
employees. In its Supplemental Appeal, 15 ABS-CBN insisted
that Ymbong and Patalinghug were engaged as radio talents
for DYAB dramas and personality programs and their contract
is one between a self-employed contractor and the hiring party
which is a standard practice in the broadcasting industry. It
also argued that the Labor Arbiter should not have made much
of the provisions on Ymbong's attendance and punctuality since
such requirement is a dictate of the programming of the station,
the slating of shows at regular time slots, and availability of
recording studios — not an attempt to exercise control over the
manner of his performance of the contracted anchor work
within his scheduled spot on air. As for the pronouncement that
the company policy has already been superseded by the March
25, 1998 Memorandum issued by Luzon, the latter already
clarified that it was the very policy he sought to enforce. This
matter was relayed by Luzon to Patalinghug when the latter
disclosed his plans to join the 1998 elections
while Ymbong only informed the company that he was
campaigning for the administration ticket and the company
had no inkling that he will actually run until the issue was
already moot and academic. ABS-CBN further contended
that Ymbong and Patalinghug's "reinstatement" is legally and
physically impossible as the talent positions they vacated no
longer exist. Neither is there basis for the award of back wages
since they were not earning a monthly salary but paid talent
fees on a per production/per script basis. Attached to the
Supplemental Appeal is a Sworn Statement 16 of Luzon.

On March 8, 2004, the NLRC rendered a decision 17 modifying

the labor arbiter's decision. The fallo of the NLRC decision
reads:

WHEREFORE, premises considered, the decision of

Labor Arbiter Nicasio C. Aninon dated 14 July 1999 is
MODIFIED, to wit:

Ordering respondent ABS-CBN to reinstate

complainant Ernesto G. Ymbong and to pay his full
backwages computed from 15 September 1998 up to
the time of his actual reinstatement.

SO ORDERED. 18 EHaASD
The NLRC dismissed ABS-CBN's Supplemental Appeal for being
filed out of time. The NLRC ruled that to entertain the same
would be to allow the parties to submit their appeal on
piecemeal basis, which is contrary to the agency's duty to
facilitate speedy disposition of cases. The NLRC also held
that ABS-CBN wielded the power of control over Ymbong and
Patalinghug, thereby proving the existence of an
employer-employee relationship between them.

As to the issue of whether they were illegally dismissed, the

NLRC treated their cases differently. In the case of Patalinghug,
it found that he voluntarily resigned from employment on April
21, 1998 when he submitted his resignation letter. The NLRC
noted that although the tenor of the resignation letter is
somewhat involuntary, he knew that it is the policy of the
company that every person connected therewith should resign
from his employment if he seeks an elected position in the
government. As to Ymbong, however, the NLRC ruled
otherwise. It ruled that the March 25, 1998 Memorandum
merely states that an employee who seeks any elected position
in the government will only merit the temporary suspension of
his services. It held that under the principle of social justice, the
March 25, 1998 Memorandum shall prevail andABS-CBN is
estopped from enforcing the September 14, 1998
memorandum issued to Ymbong stating that his services had
been automatically terminated when he ran for an elective
position.
ABS-CBN moved to reconsider the NLRC decision, but the
same was denied in a Resolution dated June 21, 2004. 19

Imputing grave abuse of discretion on the

NLRC, ABS-CBN filed a petition for certiorari 20 before the CA
alleging that:

I.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE

OF DISCRETION AND SERIOUSLY MISAPPRECIATED
THE FACTS IN NOT HOLDING THAT
RESPONDENT YMBONG IS A FREELANCE RADIO
TALENT AND MEDIA PRACTITIONER — NOT A
"REGULAR EMPLOYEE" OF PETITIONER — TO WHOM
CERTAIN PRODUCTION WORK HAD BEEN
OUTSOURCED BY ABS-CBN CEBU UNDER AN
INDEPENDENT CONTRACTORSHIP SITUATION, THUS
RENDERING THE LABOR COURTS WITHOUT
JURISDICTION OVER THE CASE IN THE ABSENCE OF
EMPLOYMENT RELATIONS BETWEEN THE PARTIES.

II.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE

OF DISCRETION IN DECLARING
RESPONDENT YMBONG TO BE A REGULAR
EMPLOYEE OF PETITIONER AS TO CREATE A
CONTRACTUAL EMPLOYMENT RELATION BETWEEN
THEM WHEN NONE EXISTS OR HAD BEEN AGREED
UPON OR OTHERWISE INTENDED BY THE PARTIES.

III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT
RELATION TO EXIST FOR THE SAKE OF ARGUMENT,
RESPONDENT NLRC IN ANY CASE COMMITTED A
GRAVE ABUSE OF DISCRETION IN NOT SIMILARLY
UPHOLDING AND APPLYING COMPANY POLICY NO.
HR-ER-016 IN THE CASE OF
RESPONDENT YMBONG AND DEEMING HIM AS
RESIGNED AND DISQUALIFIED FROM FURTHER
ENGAGEMENT AS A RADIO TALENT
IN ABS-CBN CEBU AS A CONSEQUENCE OF HIS
CANDIDACY IN THE 1998 ELECTIONS, AS
RESPONDENT NLRC HAD DONE IN THE CASE OF
PATALINGHUG. EAHcCT

IV.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE

OF DISCRETION AND DENIED DUE PROCESS TO
PETITIONER IN REFUSING TO CONSIDER ITS
SUPPLEMENTAL APPEAL, DATED OCTOBER 18,
1999, "FOR BEING FILED OUT OF TIME"
CONSIDERING THAT THE FILING OF SUCH A
PLEADING IS NOT IN ANY CASE PROSCRIBED AND
RESPONDENT NLRC IS AUTHORIZED TO CONSIDER
ADDITIONAL EVIDENCE ON APPEAL; MOREOVER,
TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN
LABOR CASES.

V.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE

OF DISCRETION IN GRANTING THE RELIEF OF
REINSTATEMENT AND BACKWAGES TO
 RESPONDENT YMBONG SINCE HE NEVER OCCUPIED
ANY "REGULAR" POSITION IN PETITIONER FROM
WHICH HE COULD HAVE BEEN "ILLEGALLY
DISMISSED," NOR ARE ANY OF THE RADIO
PRODUCTIONS IN WHICH HE HAD DONE TALENT
WORK FOR PETITIONER STILL EXISTING. INDEED,
THERE IS NO BASIS WHATSOEVER FOR THE AWARD
OF BACKWAGES TO RESPONDENT YMBONG IN THE
AMOUNT OF P200,000.00 CONSIDERING THAT, AS
SHOWN BY THE UNCONTROVERTED EVIDENCE, HE
WAS NOT EARNING A MONTHLY "SALARY" OF
"P20,000.00," AS HE FALSELY CLAIMS, BUT WAS
PAID TALENT FEES ON A "PER PRODUCTION/PER
SCRIPT" BASIS WHICH AVERAGED LESS THAN
P10,000.00 PER MONTH IN TALENT FEES ALL IN
ALL. 21

On August 22, 2007, the CA rendered the assailed decision

reversing and setting aside the March 8, 2004 Decision and
June 21, 2004 Resolution of the NLRC. The CA
declared Ymbong resigned from employment and not to have
been illegally dismissed. The award of full back wages in his
favor was deleted accordingly.

The CA ruled that ABS-CBN is estopped from claiming

that Ymbong was not its employee after applying the
provisions of Policy No. HR-ER-016 to him. It noted that said
policy is entitled "Policy on Employees Seeking Public Office"
and the guidelines contained therein specifically pertain to
employees and did not even mention talents or independent
contractors. It held that it is a complete turnaround
on ABS-CBN's part to later argue that Ymbong is only a radio
talent or independent contractor and not its employee. By
applying the subject company policy
on Ymbong, ABS-CBN had explicitly recognized him to be an
employee and not merely an independent contractor.

The CA likewise held that the subject company policy is the

controlling guideline and therefore, Ymbong should be
considered resigned from ABS-CBN. While Luzon has
policy-making power as assistant radio manager, he had no
authority to issue a memorandum that had the effect of
repealing or superseding a subsisting policy. Contrary to the
findings of the Labor Arbiter, the subject company policy was
effective at that time and continues to be valid and subsisting
up to the present. The CA cited Patalinghug's resignation letter
to buttress this conclusion, noting that Patalinghug openly
admitted in his letter that his resignation was in line with the
said company policy. Since ABS-CBN applied Policy No.
HR-ER-016 to Patalinghug, there is no reason not to apply the
same regulation to Ymbong who was on a similar situation as
the former. Thus, the CA found that the NLRC overstepped its
area of discretion to a point of grave abuse in
declaring Ymbong to have been illegally terminated. The CA
concluded that there is no illegal dismissal to speak of in the
instant case as Ymbong is considered resigned when he ran for
an elective post pursuant to the subject company policy. DaECST

Hence, this petition.

Petitioner argues that the CA gravely erred: (1) in upholding
Policy No. HR-ER-016; (2) in upholding the validity of the
termination of Ymbong's services; and (3) when it reversed the
decision of the NLRC 4th Division of Cebu City which affirmed
the decision of Labor Arbiter Nicasio C. Aniñon. 22

Ymbong argues that the subject company policy is a clear

interference and a gross violation of an employee's right to
suffrage. He is surprised why it was easy for the CA to rule that
Luzon's memorandum ran counter to an existing policy while
on the other end, it did not see that it was in conflict with the
constitutional right to suffrage. He also points out that the
issuance of the March 25, 1998 Memorandum was precisely an
exercise of the management power to which an employee like
him must respect; otherwise, he will be sanctioned for
disobedience or worse, even terminated. He was not in a
position to know which between the two issuances was correct
and as far as he is concerned, the March 25, 1998
Memorandum superseded the subject company policy.
Moreover, ABS-CBN cannot disown acts of its officers most
especially since it prejudiced his property rights. 23

As to the validity of his dismissal, Ymbong contends that the

ground relied upon by ABS-CBN is not among the just and
authorized causes provided in the Labor Code, as amended.
And even assuming the subject company policy passes the test
of validity under the pretext of the right of the management to
discipline and terminate its employees, the exercise of such
right is not without bounds. Ymbong avers that his automatic
termination was a blatant disregard of his right to due process.
He was never asked to explain why he did not tender his
resignation before he ran for public office as mandated by the
subject company policy. 24 ACIESH

Ymbong likewise asseverates that both the Labor Arbiter and

the NLRC were consistent in their findings that he was illegally
dismissed. It is settled that factual findings of labor
administrative officials, if supported by substantial evidence,
are accorded not only great respect but even finality. 25

ABS-CBN, for its part, counters that the validity of policies

such as Policy No. HR-ER-016 has long been upheld by this
Court which has ruled that a media company has a right to
impose a policy providing that employees who file their
certificates of candidacy in any election shall be considered
resigned. 26 Moreover, case law has upheld the validity of the
exercise of management prerogatives even if they appear to
limit the rights of employees as long as there is no showing that
management prerogatives were exercised in a manner contrary
to law. 27 ABS-CBN contends that being the largest media and
entertainment company in the country, its reputation stems
not only from its ability to deliver quality entertainment
programs but also because of neutrality and impartiality in
delivering news. 28 IcaEDC

ABS-CBN further argues that nothing in the company policy

prohibits its employees from either accepting a public
appointive position or from running for public office. Thus, it
cannot be considered as violative of the constitutional right of
suffrage. Moreover, the Supreme Court has recognized the
employer's right to enforce occupational qualifications as long
as the employer is able to show the existence of a reasonable
business necessity in imposing the questioned policy. Here,
Policy No. HR-ER-016 itself states that it was issued "to
protect the company from any public misconceptions" and "[t]o
preserve its objectivity, neutrality and credibility." Thus, it
cannot be denied that it is reasonable under the
circumstances. 29

ABS-CBN likewise opposes Ymbong's claim that he was

terminated. ABS-CBN argues that on the contrary, Ymbong's
unilateral act of filing his certificate of candidacy is an overt act
tantamount to voluntary resignation on his part by virtue of
the clear mandate found in Policy No. HR-ER-016. Ymbong,
however, failed to file his resignation and in fact misled his
superiors by making them believe that he was going on leave to
campaign for the administration candidates but in fact, he
actually ran for councilor. He also claims to have fully apprised
Luzon through a letter of his intention to run for public office,
but he failed to adduce a copy of the same. 30

As to Ymbong's argument that the CA should not have reversed

the findings of the Labor Arbiter and the
NLRC, ABS-CBN asseverates that the CA is not precluded from
making its own findings most especially if upon its own review
of the case, it has been revealed that the NLRC, in affirming the
findings of the Labor Arbiter, committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it
failed to apply the subject company policy in Ymbong's case
when it readily applied the same to Patalinghug. 31

Essentially, the issues to be resolved in the instant petition are:

(1) whether Policy No. HR-ER-016 is valid; (2) whether the
March 25, 1998 Memorandum issued by Luzon superseded
Policy No. HR-ER-016; and (3) whether Ymbong, by seeking
an elective post, is deemed to have resigned and not dismissed
by ABS-CBN.

Policy No. HR-ER-016 is valid.

This is not the first time that this Court has dealt with a policy
similar to Policy No. HR-ER-016. In the case of Manila
Broadcasting Company v. NLRC, 32 this Court ruled:

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:

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.

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
employer's station. 33 DISEaC

ABS-CBN, like Manila Broadcasting Company, also had a valid

justification for Policy No. HR-ER-016. Its rationale is
embodied in the policy itself, to wit:

Rationale:

ABS-CBN BROADCASTING CORPORATION strongly

believes that it is to the best interest of the company to
continuously remain apolitical. While it encourages and
supports its employees to have greater political
awareness and for them to exercise their right to
suffrage, the company, however, prefers to remain
politically independent and unattached to any political
individual or entity.

Therefore, employees who [intend] to run for public

office or accept political appointment should resign
from their positions, in order to protect the company
from any public misconceptions. To preserve its
objectivity, neutrality and credibility, the company
 reiterates the following policy guidelines for strict
implementation.

xxx xxx xxx 34 [Emphasis supplied.]

We have consistently held that 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. 35 In the instant case,ABS-CBN validly
justified the implementation of Policy No. HR-ER-016. It is
well within its rights to ensure that it maintains its objectivity
and credibility and freeing itself from any appearance of
impartiality so that the confidence of the viewing and listening
public in it will not be in any way eroded. 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. 36

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, or shall take a leave of absence from his/her
work as such during the campaign
period: Provided, That any media practitioner who is
an official of a political party or a member of the
campaign staff of a candidate or political party shall
not use his/her time or space to favor any candidate or
political party. [Emphasis and underscoring supplied.]

Policy No. HR-ER-016 was not

superseded by the March 25, 1998
Memorandum

The CA correctly ruled that though Luzon, as Assistant Station

Manager for Radio of ABS-CBN, has policy-making powers in
relation to his principal task of administering the network's
radio station in the Cebu region, the exercise of such power
should be in accord with the general rules and regulations
imposed by the ABS-CBN Head Office to its employees. Clearly,
the March 25, 1998 Memorandum issued by Luzon which only
requires employees to go on leave if they intend to run for any
elective position is in absolute contradiction with Policy No.
HR-ER-016 issued by the ABS-CBN Head Office in Manila
which requires the resignation, not only the filing of a leave of
absence, of any employee who intends to run for public office.
Having been issued beyond the scope of his authority, the March
25, 1998 Memorandum is therefore void and did not
supersede Policy No. HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement
admitted the inaccuracy of his recollection of the company
policy when he issued the March 25, 1998 Memorandum and
stated therein that upon double-checking of the exact text of
the policy statement and subsequent confirmation with
the ABS-CBN Head Office in Manila, he learned that the policy
required resignation for those who will actually run in elections
because the company wanted to maintain its independence.
Since the officer who himself issued the subject memorandum
acknowledged that it is not in harmony with the Policy issued
by the upper management, there is no reason for it to be a
source of right for Ymbong. cACTaI

Ymbong is deemed resigned when

he ran for councilor.

As Policy No. HR-ER-016 is the subsisting company policy and

not Luzon's March 25, 1998 Memorandum, Ymbong is
deemed resigned when he ran for councilor.

We find no merit in Ymbong's argument that "[his] automatic

termination . . . was a blatant [disregard] of [his] right to due
process" as he was "never asked to explain why he did not
tender his resignation before he ran for public office as
mandated by [the subject company policy]." 37 Ymbong's overt
act of running for councilor of Lapu-Lapu City is tantamount
to resignation on his part. He was separated
from ABS-CBN not because he was dismissed but because he
resigned. Since there was no termination to speak of, the
requirement of due process in dismissal cases cannot be applied
to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to
explain why he did not tender his resignation before he ran for
public office as mandated by the subject company policy.

In addition, we do not subscribe to Ymbong's claim that he was

not in a position to know which of the two issuances was
correct. Ymbong most likely than not, is fully aware that the
subsisting policy is Policy No. HR-ER-016 and not the March
25, 1998 Memorandum and it was for this reason that, as
stated by Luzon in his Sworn Statement, he only told the latter
that he will only campaign for the administration ticket and
not actually run for an elective post. Ymbong claims he had
fully apprised Luzon by letter of his plan to run and even filed a
leave of absence but records are bereft of any proof of said
claim. Ymbong claims that the letter stating his intention to go
on leave to run in the election is attached to his Position Paper
as Annex "A," a perusal of said pleading attached to his petition
before this Court, however, show that Annex "A" was not his
letter to Luzon but the September 14, 1998 Memorandum
informing Ymbong that his services had been automatically
terminated when he ran for a local government position.

Moreover, as pointed out by ABS-CBN, had Ymbong been

truthful to his superiors, they would have been able to clarify to
him the prevailing company policy and inform him of the
consequences of his decision in case he decides to run, as Luzon
did in Patalinghug's case.

WHEREFORE, the petition for review

on certiorari is DENIED for lack of merit.
With costs against petitioner. HCTAEc

SO ORDERED.

||| (Ymbong v. ABS-CBN Broadcasting Corp., G.R. No. 184885,

[March 7, 2012], 683 PHIL 647-667)

[G.R. No. 126297. February 11, 2008.]

PROFESSIONAL SERVICES, INC., petitioner, vs.

THE COURT OF APPEALS and NATIVIDAD and
ENRIQUE AGANA, respondents.

[G.R. No. 126467. February 11, 2008.]

NATIVIDAD (Substituted by her children

MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and
RAYMUND AGANA) and ENRIQUE
AGANA, petitioners, vs. THE COURT OF APPEALS
and JUAN FUENTES, respondents.

[G.R. No. 127590. February 11, 2008.]

MIGUEL AMPIL, petitioner, vs. THE COURT OF

APPEALS and NATIVIDAD AGANA and ENRIQUE
AGANA, respondents.

R E S O L U TI O N
SANDOVAL-GUTIERREZ, J : p

As the hospital industry changes, so must the laws and

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

Before this Court is a motion for reconsideration filed

by Professional Services, Inc. (PSI), petitioner in G.R. No.
126297, assailing the Court's First Division Decision dated
January 31, 2007, finding PSI and Dr. Miguel Ampil,
petitioner in G.R. No. 127590, jointly and severally liable for
medical negligence.

A brief revisit of the antecedent facts is imperative.

On April 4, 1984, Natividad Agana was admitted at the

Medical City General Hospital (Medical City) because of
difficulty of bowel movement and bloody anal discharge. Dr.
Ampil diagnosed her to be suffering from "cancer of the
sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted by the
medical staff 1 of Medical City, performed an anterior resection
surgery upon her. During the surgery, he found that the
malignancy in her sigmoid area had spread to her left ovary,
necessitating the removal of certain portions of it. Thus, Dr.
Ampil obtained the consent of Atty. Enrique Agana, Natividad's
husband, to permit Dr. Juan Fuentes, respondent in G.R. No.
126467, to perform hysterectomy upon Natividad.
Dr. Fuentes performed and completed the hysterectomy.
Afterwards, Dr. Ampil took over, completed the operation and
closed the incision. However, the operation appeared to be
flawed. In the corresponding Record of Operation dated April
11, 1984, the attending nurses entered these remarks:

sponge count lacking 2

announced to surgeon searched done (sic) but to no

avail

continue for closure.

After a couple of days, Natividad complained of excruciating

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

On May 9, 1984, Natividad, accompanied by her husband,

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

On August 31, 1984, Natividad flew back to the Philippines,

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

Despite Dr. Ampil's assurance, the pains intensified, prompting

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

On November 12, 1984, Natividad and her husband filed with

the Regional Trial Court, Branch 96, Quezon City a complaint
for damages against PSI (owner of Medical City), Dr. Ampil and
Dr. Fuentes.

On February 16, 1986, pending the outcome of the above case,

Natividad died. She was duly substituted by her above-named
children (the Aganas).

On March 17, 1993, the trial court rendered judgment in

favor of spouses Agana finding PSI, Dr. Ampil and Dr. Fuentes
jointly and severally liable. On appeal, the Court of Appeals, in
its Decision dated September 6, 1996, affirmed the assailed
judgment with modification in the sense that the complaint
against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas filed with this Court separate
petitions for review on certiorari. On January 31, 2007, the
Court, through its First Division, rendered a Decision holding
that PSI is jointly and severally liable with Dr. Ampil for the
following reasons: first, there is an employer-employee
relationship between Medical City and Dr. Ampil. The Court
relied on Ramos v. Court of Appeals, 2 holding that for the
purpose of apportioning responsibility in medical negligence
cases, an employer-employee relationship in effect
exists between hospitals and their attending and visiting
physicians; second, PSI's act of publicly displaying in the lobby
of the Medical City the names and specializations of its
accredited physicians, including Dr. Ampil, estopped it from
denying the existence of an employer-employee relationship
between them under the doctrine of ostensible agency or
agency by estoppel; and third, PSI's failure to supervise Dr.
Ampil and its resident physicians and nurses and to take an
active step in order to remedy their negligence rendered it
directly liable under the doctrine of corporate negligence.

In its motion for reconsideration, PSI contends that the Court

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

The motion lacks merit.

As earlier mentioned, the First Division, in its assailed Decision,

ruled that an employer-employee relationship "in effect" exists
between the Medical City and Dr. Ampil. Consequently, both
are jointly and severally liable to the Aganas. This ruling
proceeds from the following ratiocination in Ramos:

We now discuss the responsibility of the hospital in this

particular incident. The unique practice (among private
hospitals) of filling up specialist staff with attending
and visiting "consultants," who are allegedly not
hospital employees, presents problems in apportioning
responsibility for negligence in medical malpractice
cases.However, the difficulty is only more apparent
than real.

In the first place, hospitals exercise significant control

in the hiring and firing of consultants and in the
conduct of their work within the hospital premises.
Doctors who apply for "consultant" slots, visiting or
attending, are required to submit proof of completion
of residency, their educational qualifications; generally,
evidence of accreditation by the appropriate board
(diplomate), evidence of fellowship in most cases, and
references. These requirements are carefully scrutinized
by members of the hospital administration or by a
review committee set up by the hospital who either
accept or reject the application. This is particularly true
with respondent hospital.

After a physician is accepted, either as a visiting or

attending consultant, he is normally required to attend
clinico-pathological conferences, conduct bedside
rounds for clerks, interns and residents, moderate
grand rounds and patient audits and perform other
tasks and responsibilities, for the privilege of being able
to maintain a clinic in the hospital, and/or for the
privilege of admitting patients into the hospital. In
addition to these, the physician's performance as a
specialist is generally evaluated by a peer review
committee on the basis of mortality and morbidity
statistics, and feedback from patients, nurses, interns
and residents. A consultant remiss in his duties, or a
consultant who regularly falls short of the minimum
standards acceptable to the hospital or its peer review
committee, is normally politely terminated.

In other words, private hospitals hire, fire and exercise

real control over their attending and visiting
"consultant" staff. While "consultants" are not,
technically employees, a point which respondent
hospital asserts in denying all responsibility for the
patient's condition, the control exercised, the hiring,
and the right to terminate consultants all fulfill the
 important hallmarks of an employer-employee
relationship, with the exception of the payment of
wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on
the basis of the foregoing, we rule that for the purpose
of allocating responsibility in medical negligence cases,
an employer-employee relationship in effect exists
between hospitals and their attending and visiting
physicians. This being the case, the question now arises
as to whether or not respondent hospital is solidarily
liable with respondent doctors for petitioner's
condition.

The basis for holding an employer solidarily responsible

for the negligence of its employee is found in Article
2180 of the Civil Code which considers a person
accountable not only for his own acts but also for those
of others based on the former's responsibility under a
relationship of partia ptetas.

Clearly, in Ramos, the Court considered the peculiar

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

Actually, contrary to PSI's contention, the Court did not

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

In the instant cases, PSI merely offered a general denial of

responsibility, maintaining that consultants, like Dr. Ampil, are
"independent contractors," not employees of the hospital. Even
assuming that Dr. Ampil is not an employee of Medical City,
but an independent contractor, still the said hospital is liable to
the Aganas.

In Nograles, et al. v. Capitol Medical Center, et al., 4 through

Mr. Justice Antonio T. Carpio, the Court held:

The question now is whether CMC is automatically

exempt from liability considering that Dr. Estrada is an
independent contractor-physician.

In general, a hospital is not liable for the negligence of

an independent contractor-physician. There is,
however, an exception to this principle. The hospital
may be liable if the physician is the "ostensible" agent of
the hospital. (Jones v. Philpott, 702 F. Supp. 1210
[1988]) This exception is also known as the "doctrine of
apparent authority." (Sometimes referred to as the
apparent or ostensible agency theory. [King v.
Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169
(2006)].

xxx xxx xxx

The doctrine of apparent authority essentially involves
two factors to determine the liability of an
independent contractor-physician.

The first factor focuses on the hospital's manifestations

and is sometimes described as an inquiry whether the
hospital acted in a manner which would lead a
reasonable person to conclude that the individual who
was alleged to be negligent was an employee or agent
of the hospital. (Diggs v. Novant Health, Inc., 628
S.E.2d 851 (2006) citing Hylton v. Koontz, 138 N.C.
App. 629 (2000). In this regard, the hospital need not
make express representations to the patient that the
treating physician is an employee of the hospital; rather
a representation may be general and implied. (Id.)

The doctrine of apparent authority is a specie of the

doctrine of estoppel. Article 1431 of the Civil Code
provides that "[t]hrough estoppel, an admission or
representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as
against the person relying thereon." Estoppel rests on
this rule: "Whether a party has, by his own declaration,
act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act
upon such belief, he cannot, in any litigation arising out
of such declaration, act or omission, be permitted to
falsify it. (de Castro v. Ginete, 137 Phil. 453 [1969],
citing Sec. 3, par. A, Rule 131 of the Rules of Court.
See also King v. Mitchell, 31 A.D.3rd 958, 819
N.Y.S.2d 169 [2006]).
 xxx xxx xxx

The second factor focuses on the patient's reliance. It is

sometimes characterized as an inquiry on whether the
plaintiff acted in reliance upon the conduct of the
hospital or its agent, consistent with ordinary care and
prudence. (Diggs v. Novant Health, Inc.)

PSI argues that the doctrine of apparent authority cannot

apply to these cases because spouses Agana failed to establish
proof of their reliance on the representation of Medical City
that Dr. Ampil is its employee.

The argument lacks merit.

Atty. Agana categorically testified that one of the reasons why

he chose Dr. Ampil was that he knew him to be a staff member
of Medical City, a prominent and known hospital.

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

Ampil?

A Well, I saw Dr. Ampil at the Medical City, I know him

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

Atty. Agcaoili

On that particular occasion, April 2, 1984, what was

your reason for choosing to contact Dr. Ampil in
connection with your wife's illness?

A First, before that, I have known him to be a specialist

on that part of the body as a surgeon; second, I
have known him to be a staff member of the
Medical City which is a prominent and known
hospital. And third, because he is a neighbor, I
expect more than the usual medical service to be
given to us, than his ordinary patients. 5

Clearly, PSI is estopped from passing the blame solely to Dr.

Ampil. Its act of displaying his name and those of the other
physicians in the public directory at the lobby of the hospital
amounts to holding out to the public that it offers quality
medical service through the listed physicians. This justifies Atty.
Agana's belief that Dr. Ampil was a member of the hospital's
staff. It must be stressed that under the doctrine of apparent
authority, the question in every case is whether the principal
has by his voluntary act placed the agent in such a situation
that a person of ordinary prudence, conversant with business
usages and the nature of the particular business, is justified in
presuming that such agent has authority to perform the
particular act in question. 6 In these cases, the circumstances
yield a positive answer to the question.
The challenged Decision also anchors its ruling on the doctrine
of corporate responsibility. 7 The duty of providing quality
medical service is no longer the sole prerogative and
responsibility of the physician. This is because the modern
hospital now tends to organize a highly-professional medical
staff whose competence and performance need also to be
monitored by the hospital commensurate with its inherent
responsibility to provide quality medical care. 8 Such
responsibility includes the proper supervision of the members of
its medical staff. Accordingly, the hospital has the duty to make
a reasonable effort to monitor and oversee the treatment
prescribed and administered by the physicians practicing in its
premises.

Unfortunately, PSI had been remiss in its duty. It did not

conduct an immediate investigation on the reported missing
gauzes to the great prejudice and agony of its patient. Dr.
Jocson, a member of PSI's medical staff, who testified on
whether the hospital conducted an investigation, was evasive,
thus:

Q We go back to the operative technique, this was

signed by Dr. Puruganan, was this submitted to
the hospital?

A Yes, sir, this was submitted to the hospital with the

record of the patient.

Q Was the hospital immediately informed about the

missing sponges?

A That is the duty of the surgeon, sir.

Q As a witness to an untoward incident in the
operating room, was it not your obligation, Dr.,
to also report to the hospital because you are
under the control and direction of the hospital?

A The hospital already had the record of the two OS

missing, sir.

Q If you place yourself in the position of the hospital,

how will you recover.

A You do not answer my question with another

question.

Q Did the hospital do anything about the missing

gauzes?

A The hospital left it up to the surgeon who was doing

the operation, sir.

Q Did the hospital investigate the surgeon who did the

operation?

A I am not in the position to answer that, sir.

Q You never did hear the hospital investigating the

doctors involved in this case of those missing
sponges, or did you hear something?

xxx xxx xxx

A I think we already made a report by just saying that

two sponges were missing, it is up to the hospital
to make the move.

Atty. Agana
 Precisely, I am asking you if the hospital did a move, if
the hospital did a move.

A I cannot answer that.

Court

By that answer, would you mean to tell the Court that

you were aware if there was such a move done by
the hospital?

A I cannot answer that, your honor, because I did not

have any more follow-up of the case that
happened until now. 9

The above testimony obviously shows Dr. Jocson's lack of

concern for the patients. Such conduct is reflective of the
hospital's manner of supervision. Not only did PSI breach its
duty to oversee or supervise all persons who practice medicine
within its walls, it also failed to take an active step in fixing the
negligence committed. This renders PSI, not only vicariously
liable for the negligence of Dr. Ampil under Article 2180 of the
Civil Code, but also directly liable for its own negligence under
Article 2176.

Moreover, there is merit in the trial court's finding that the

failure of PSI to conduct an investigation "established PSI's part
in the dark conspiracy of silence and concealment about the
gauzes." The following testimony of Atty. Agana supports such
findings, thus:

Q You said you relied on the promise of Dr. Ampil and

despite the promise you were not able to obtain
 the said record. Did you go back to the record
custodian?

A I did not because I was talking to Dr. Ampil. He

promised me.

Q After your talk to Dr. Ampil, you went to the record

custodian?

A I went to the record custodian to get the clinical

record of my wife, and I was given a portion of
the records consisting of the findings, among
them, the entries of the dates, but not the
operating procedure and operative report. 10

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

WHEREFORE, we DENY PSI's motion for reconsideration with

finality.

SO ORDERED.

||| (Professional Services, Inc. v. Court of Appeals, G.R. No.

126297, 126467, 127590, [February 11, 2008], 568 PHIL
158-171)

[G.R. No. 186621. March 12, 2014.]

SOUTH EAST INTERNATIONAL RATTAN, INC.

and/or ESTANISLAO 1 AGBAY, petitioners, vs.
JESUS J. COMING, respondent.
 DECISION

VILLARAMA, JR., J : p

Before the Court is a petition for review on certiorari under

Rule 45 to reverse and set aside the Decision 2 dated February
21, 2008 and Resolution 3 dated February 9, 2009 of the
Court of Appeals (CA) in CA-G.R. CEB-SP No. 02113.

Petitioner South East International Rattan, Inc. (SEIRI) is a

domestic corporation engaged in the business of manufacturing
and exporting furniture to various countries with principal
place of business at Paknaan, Mandaue City, while petitioner
Estanislao Agbay, as per records, is the President and General
Manager of SEIRI. 4

On November 3, 2003, respondent Jesus J. Coming filed a

complaint 5 for illegal dismissal, underpayment of wages,
non-payment of holiday pay, 13th month pay and service
incentive leave pay, with prayer for reinstatement, back wages,
damages and attorney's fees.

Respondent alleged that he was hired by petitioners as Sizing

Machine Operator on March 17, 1984. His work schedule is
from 8:00 a.m. to 5:00 p.m. Initially, his compensation was
on "pakiao" basis but sometime in June 1984, it was fixed at
P150.00 per day which was paid weekly. In 1990, without
any apparent reason, his employment was interrupted as he
was told by petitioners to resume work in two months time.
Being an uneducated person, respondent was persuaded by the
management as well as his brother not to complain, as
otherwise petitioners might decide not to call him back for
work. Fearing such consequence, respondent accepted his fate.
Nonetheless, after two months he reported back to work upon
order of management. 6

Despite being an employee for many years with his work

performance never questioned by petitioners, respondent was
dismissed on January 1, 2002 without lawful cause. He was
told that he will be terminated because the company is not
doing well financially and that he would be called back to work
only if they need his services again. Respondent waited for
almost a year but petitioners did not call him back to work.
When he finally filed the complaint before the regional
arbitration branch, his brother Vicente was used by
management to persuade him to withdraw the case. 7 TDSICH

On their part, petitioners denied having hired respondent

asserting that SEIRI was incorporated only in 1986, and that
respondent actually worked for SEIRI's furniture suppliers
because when the company started in 1987 it was engaged
purely in buying and exporting furniture and its business
operations were suspended from the last quarter of 1989 to
August 1992. They stressed that respondent was not included
in the list of employees submitted to the Social Security System
(SSS). Moreover, respondent's brother, Vicente Coming,
executed an affidavit 8 in support of petitioners' position while
Allan Mayol and Faustino Apondar issued notarized
certifications 9that respondent worked for them instead. 10
With the denial of petitioners that respondent was their
employee, the latter submitted an affidavit 11 signed by five
former co-workers stating that respondent was one of the
pioneer employees who worked in SEIRI for almost twenty
years.

In his Decision 12 dated April 30, 2004, Labor Arbiter Ernesto

F. Carreon ruled that respondent is a regular employee of SEIRI
and that the termination of his employment was illegal. The
dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby

rendered ordering the
respondent South East (Int'1.) Rattan, Inc. to pay
complainant Jesus J. Coming the following:

1. Separation pay P114,400.00

2. Backwages P30,400.00

3. Wage differential P15,015.00

4. 13th month pay P5,958.00

5. Holiday pay P4,000.00

Service incentive leave

6. P2,000.00
pay

––––––––––

Total award P171,773.00

==========
 The other claims and the case against respondent
Estanislao Agbay are dismissed for lack of merit.

SO ORDERED. 13

Petitioners appealed to the National Labor Relations

Commission (NLRC)-Cebu City where they submitted the
following additional evidence: (1) copies of SEIRI's payrolls and
individual pay records of employees; 14 (2) affidavit 15 of
SEIRI's Treasurer, Angelina Agbay; and (3) second
affidavit 16 of Vicente Coming.

On July 28, 2005, the NLRC's Fourth Division rendered its

Decision, 17 the dispositive portion of which states:

WHEREFORE, premises considered, the decision of the

Labor Arbiter is hereby SET ASIDE and VACATED and
a new one entered DISMISSING the complaint.

SO ORDERED. 18

The NLRC likewise denied respondent's motion for

reconsideration. 19

Respondent elevated the case to the CA via a petition

for certiorari under Rule 65.

By Decision dated February 21, 2008, the CA reversed the

NLRC and ruled that there existed an employer-employee
relationship between petitioners and respondent who was
dismissed without just and valid cause.

The CA thus decreed:

 WHEREFORE, in view of the foregoing, the petition is
hereby GRANTED. The assailed Decision dated July 28,
2005 issued by the National Labor Relations
Commission (NLRC), Fourth Division, Cebu City in
NLRC Case No. V-000625-2004 is REVERSED and
SET ASIDE. The Decision of the Labor Arbiter dated
April 30, 2004 is REINSTATED with MODIFICATION
on the computation of backwages which should be
computed from the time of illegal termination until the
finality of this decision. HaEcAC

Further, the Labor Arbiter is directed to make the

proper adjustment in the computation of the award of
separation pay as well as the monetary awards of wage
differential, 13th month pay, holiday pay and service
incentive leave pay.

SO ORDERED. 20

Petitioners filed a motion for reconsideration but the CA denied

it under Resolution dated February 9, 2009.

Hence, this petition raising the following issues:

6.1

WHETHER UNDER THE FACTS AND EVIDENCE ON

RECORD, THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT THERE EXISTS
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PETITIONERS AND RESPONDENT IS IN ACCORD
WITH LAW AND APPLICABLE DECISIONS OF THIS
HONORABLE COURT.

6.2
 WHETHER THE HONORABLE COURT OF APPEALS
CORRECTLY APPRECIATED IN ACCORDANCE WITH
APPLICABLE LAW AND JURISPRUDENCE THE
EVIDENCE PRESENTED BY BOTH PARTIES.

6.3

WHETHER UNDER THE FACTS AND EVIDENCE

PRESENTED, THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT PETITIONERS ARE
LIABLE FOR ILLEGAL DISMISSAL OF RESPONDENT
IS IN ACCORD WITH APPLICABLE LAW AND
JURISPRUDENCE.

6.4

WHETHER UNDER THE FACTS PRESENTED, THE

RULING OF THE HONORABLE COURT OF APPEALS
THAT THE BACKWAGES DUE THE RESPONDENT
SHOULD BE COMPUTED FROM THE TIME OF
ILLEGAL TERMINATION UNTIL THE FINALITY OF
THE DECISION IS SUPPORTED BY PREVAILING
JURISPRUDENCE. 21

Resolution of the first issue is paramount in view of petitioners'

denial of the existence of employer-employee relationship.

The issue of whether or not an employer-employee relationship

exists in a given case is essentially a question of fact. As a rule,
this Court is not a trier of facts and this applies with greater
force in labor cases. 22 Only errors of law are generally
reviewed by this Court. 23 This rule is not absolute, however,
and admits of exceptions. For one, the Court may look into
factual issues in labor cases when the factual findings of the
Labor Arbiter, the NLRC, and the CA are conflicting. 24 Here,
the findings of the NLRC differed from those of the Labor
Arbiter and the CA, which compels the Court's exercise of its
authority to review and pass upon the evidence presented and
to draw its own conclusions therefrom. 25

To ascertain the existence of an employer-employee

relationship jurisprudence has invariably adhered to the
four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employee's conduct, or the
so-called "control test." 26 In resolving the issue of whether such
relationship exists in a given case, substantial evidence — that
amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion — is sufficient.
Although no particular form of evidence is required to prove
the existence of the relationship, and any competent and
relevant evidence to prove the relationship may be admitted, a
finding that the relationship exists must nonetheless rest on
substantial evidence. 27 TaDSHC

In support of their claim that respondent was not their

employee, petitioners presented Employment Reports to the
SSS from 1987 to 2002, the Certifications issued by Mayol
and Apondar, two affidavits of Vicente Coming, payroll sheets
(1999-2000), individual pay envelopes and employee earnings
records (1999-2000) and affidavit of Angelina Agbay
(Treasurer and Human Resources Officer). The payroll and pay
records did not include the name of respondent. The affidavit of
Ms. Agbay stated that after SEIRI started its business in 1986
purely on export trading, it ceased operations in 1989 as
evidenced by Certification dated January 18, 1994 from the
Securities and Exchange Commission (SEC); that when business
resumed in 1992, SEIRI undertook only a little of
manufacturing; that the company never hired any workers for
varnishing and pole sizing because it bought the same from
various suppliers, including Faustino Apondar; respondent was
never hired by SEIRI; and while it is true that Mr. Estanislao
Agbay is the company President, he never dispensed the
salaries of workers. 28

In his first affidavit, Vicente Coming averred that:

6. [Jesus Coming] is a furniture factory worker. In

1982 to 1986, he was working with Ben Mayol as
round core maker/splitter.

7. Thereafter, we joined Okay Okay Yard owned by

Amelito Montececillo. This is a rattan trader with
business address near Cebu Rattan Factory on a
"Pakiao" basis.

8. However, Jesus and I did not stay long at Okay

Okay Yard and instead we joined Eleuterio Agbay in
Labogon, Cebu in 1989. In 1991, we went back to
Okay Okay located near the residence of Atty. Vicente
de la Serna in Mandaue City. We were on a "pakiao"
basis. We stayed put until 1993 when we resigned and
joined Dodoy Luna in Labogon, Mandaue City as
classifier until 1995. In 1996[,] Jesus rested. It was
 only in 1997 that he worked back. He replaced me, as
a classifier in Rattan Traders owned by Allan Mayol.
But then, towards the end of the year, he left the
factory and relaxed in our place of birth, in Sogod,
Cebu.

9. It was only towards the end of 1999 that Jesus

was taken back by Allan Mayol as sizing machine
operator. However, the work was off and on basis. Not
regular in nature, he was harping a side line job with
me knowing that I am now working with Faustino
Apondar that
supplies rattan furniture's [sic] to South East (Int'l.) R
attan, Inc. As a brother, I allowed Jesus to work with
me and collect the proceeds of his services as part of
my collectibles from Faustino Apondar since I was on a
"pakiao" basis. He was working at his pleasure. Which
means, he works if he likes to? That will be until 10:00
o'clock in the evening.

xxx xxx xxx 29

The Certification dated January 20, 2004 of Allan Mayol

reads:

This is to certify that I personally know Jesus Coming,

the brother of Vicente Coming. Jesus is
a rattan factory worker and he was working with me
as rattan pole sizing/classifier of my business from
1997 up to part of 1998 when he left my factory at
will I took him back towards the end of 1999, this
time as a sizing machine operator. In all these years, his
services are not regular. He works only if he likes to. 30
Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of

finished Rattan Furniture. As such, I have
several rattan furniture workers under me, one of
whom is Vicente Coming, the brother of Jesus Coming.

That sometime in 1999, Vicente pleaded to me for a

side line job of his brother, Jesus who was already
connected with Allan Mayol. Having vouched for the
integrity of his brother and knowing that the job is
temporary in character, I allowed Jesus to work with
his brother Vicente. However, the proceeds will be
collected together with his brother Vicente since it was
the latter who was working with me. He renders
services to his brother work only after the regular
working hours but off and on basis.31

On the other hand, respondent submitted the affidavit

executed by Eleoterio Brigoli, Pedro Brigoli, Napoleon Coming,
Efren Coming and Gil Coming who all attested that respondent
was their co-worker at SEIRI. Their affidavit reads:

We, the undersigned, all of legal ages, Filipino, and

resident[s] of Cebu, after having been duly sworn to in
accordance with law, depose and say:

That we are former employees

of SOUTH EAST RATTAN which is owned by Estan
Eslao Agbay;

That we personally know JESUS COMING considering

that we worked together in one
company SOUTH EAST RATTANT [sic];
 That we together with JESUS COMING are all under
the employ of ESTAN ESLAO AGBAY considering that
the latter is the one directly paying us and holds the
absolute control of all aspects of our employment; aICcHA

That it is not true that JESUS COMING is under the

employ of one person other than ESTAN ESLAO
AGBAY OF SOUTH EAST RATTAN;

That Jesus Coming is one of the pioneer employees

of SOUTH EAST RATTAN and had been employed
therein for almost twenty years;

That we executed this affidavit to attest to the truth of

the foregoing facts and to deny any contrary allegation
made by the company against his employment
withSOUTH EAST RATTAN. 32

In his decision, Labor Arbiter Carreon found that respondent's

work as sizing machine operator is usually necessary and
desirable to the rattan furniture business of petitioners and
their failure to include respondent in the employment report to
SSS is not conclusive proof that respondent is not their
employee. As to the affidavit of Vicente Coming, Labor Arbiter
Carreon did not give weight to his statement that respondent is
not petitioners' employee but that of one Faustino Apondar.
Labor Arbiter Carreon was not convinced that Faustino
Apondar is an independent contractor who has a contractual
relationship with petitioners.

In reversing the Labor Arbiter, the NLRC reasoned as follows:

First complainant alleged that he worked continuously
from March 17, 1984 up to January 21, 2002.
Records reveal however that South East (Int'l.) Rattan,
Inc. was incorporated only last July 18, 1986 (p. 55
records)[.] Moreover, when they started to actually
operate in 1987, the company was engaged purely on
"buying and exporting rattan furniture" hence no
manufacturing employees were hired. Furthermore,
from the last quarter of 1989 up to August of 1992,
the company suspended operations due to economic
reverses as per Certification issued by the Securities and
Exchange Commission (p. 56 records)[.]

Second, for all his insistence that he was a regular

employee, complainant failed to present a single
payslip, voucher or a copy of a company payroll
showing that he rendered service during the period
indicated therein. . . .

From the above established facts we are inclined to give

weight and credence to the Certifications of Allan
Mayol and Faustino Apondar, both suppliers of
finishedRattan Furniture (pp. 442-43, records). It
appears that complainant first worked with Allan
Mayol and later with Faustino Apondar upon the
proddings of his brother Vicente. Vicente's affidavit as
to complainant's employment history was more
detailed and forthright. . . .

xxx xxx xxx

 In the case at bar, there is likewise substantial evidence
to support our findings that complainant was not an
employee of respondents. Thus:

1. Complainant's name does not appear in the

list of employees reported to the SSS.

2. His name does not also appear in the sample

payrolls of respondents' employees.

3. The certification of Allan Mayol and

Fasutino Apondar[,] supplier of
finished rattan products[,] that
complainant had at one time or another
worked with them.

4. The Affidavit of Vicente Coming,

complainant's full brother[,] attesting that
complainant had never been an employee
of respondent. The only connection was
that their employer Faustino Apondar
supplies finished rattan products to
respondents. 33

On the other hand, the CA gave more credence to the

declarations of the five former employees of petitioners that
respondent was their co-worker in SEIRI. One of said affiants is
Vicente Coming's own son, Gil Coming. Vicente averred in his
second affidavit that when he confronted his son, the latter
explained that he was merely told by their Pastor to sign the
affidavit as it will put an end to the controversy. Vicente
insisted that his son did not know the contents and
implications of the document he signed. As to the absence of
respondent's name in the payroll and SSS employment report,
the CA observed that the payrolls submitted were only from
January 1, 1999 to December 29, 2000 and not the entire
period of eighteen years when respondent claimed he worked
for SEIRI. It further noted that the names of the five affiants,
whom petitioners admitted to be their former employees,
likewise do not appear in the aforesaid documents. According
to the CA, it is apparent that petitioners maintained a separate
payroll for certain employees or willfully retained a portion of
the payroll. SEcADa

. . . As to the "control test", the following facts

indubitably reveal that respondents wielded control
over the work performance of petitioner, to wit: (1)
they required him to work within the company
premises; (2) they obliged petitioner to report every
day of the week and tasked him to usually perform the
same job; (3) they enforced the observance of definite
hours of work from 8 o'clock in the morning to 5
o'clock in the afternoon; (4) the mode of payment of
petitioner's salary was under their discretion, at first
paying him on pakiao basis and thereafter, on daily
basis; (5) they implemented company rules and
regulations; (6) [Estanislao] Agbay directly paid
petitioner's salaries and controlled all aspects of his
employment and (7) petitioner rendered work
necessary and desirable in the business of the
respondent company.34

We affirm the CA.

In Tan v. Lagrama, 35 the Court held that the fact that a
worker was not reported as an employee to the SSS is not
conclusive proof of the absence of employer-employee
relationship. Otherwise, an employer would be rewarded for his
failure or even neglect to perform his obligation. 36

Nor does the fact that respondent's name does not appear in
the payrolls and pay envelope records submitted by petitioners
negate the existence of employer-employee relationship. For a
payroll to be utilized to disprove the employment of a person, it
must contain a true and complete list of the employee. 37 In
this case, the exhibits offered by petitioners before the NLRC
consisting of copies of payrolls and pay earnings records are
only for the years 1999 and 2000; they do not cover the
entire 18-year period during which respondent supposedly
worked for SEIRI.

In their comment to the petition filed by respondent in the CA,

petitioners emphasized that in the certifications issued by
Mayol and Apondar, it was shown that respondent was
employed and working for them in those years he claimed to be
working for SEIRI. However, a reading of the certification by
Mayol would show that while the latter claims to have
respondent under his employ in 1997, 1998 and 1999,
respondent's services were not regular and that he works only if
he wants to. Apondar's certification likewise stated that
respondent worked for him since 1999 through his brother
Vicente as "sideline" but only after regular working hours and
"off and on" basis. Even assuming the truth of the foregoing
statements, these do not foreclose respondent's regular or
full-time employment with SEIRI. In effect, petitioners suggest
that respondent was employed by SEIRI's suppliers, Mayol and
Apondar but no competent proof was presented as to the
latter's status as independent contractors.

In the same comment, petitioners further admitted that the

five affiants who attested to respondent's employment with
SEIRI are its former workers whom they describe as
"disgruntled workers of SEIRI" with an axe to grind against
petitioners, and that their execution of affidavit in support of
respondent's claim is "their very way of hitting back the
management of SEIRI after disciplinary measures were meted
against them." 38 This allegation though was not substantiated
by petitioners. Instead, after the CA rendered its decision
reversing the NLRC's ruling, petitioners subsequently changed
their theory by denying the employment relationship with the
five affiants in their motion for reconsideration, thus:

. . . Since the five workers were occupying and working

on a leased premises of the private respondent, they
were called workers of SEIRI (private respondent). Such
admission however, does not connote employment. For
the truth of the matter, all of the five employees of the
supplier assigned at the leased premises of the private
respondent. Because of the recommendation of the
private respondent with regards to the disciplinary
measures meted on the five workers, they wanted to
hit back against the private respondent. Their motive
to implicate private respondent was to vindicate.
 Definitely, they have an axe to grind against the
private respondent. Mention has to be made that
despite the dismissal of these five (5) witnesses from
their service, none of them ever went to the National
Labor [Relations] Commission and invoked their rights,
if any, against their employer or at the very least
against the respondent. The reason is obvious, since
they knew pretty well that they were not employees of
SEIRI but rather under the employ of Allan Mayol and
Faustino Apondar, working on a leased premise of
respondent. . . . 39

Petitioners' admission that the five affiants were their former

employees is binding upon them. While they claim that
respondent was the employee of their suppliers Mayol and
Apondar, they did not submit proof that the latter were indeed
independent contractors; clearly, petitioners failed to discharge
their burden of proving their own affirmative
allegation. 40 There is thus no showing that the five former
employees of SEIRI were motivated by malice, bad faith or any
ill-motive in executing their affidavit supporting the claims of
respondent.

In any controversy between a laborer and his master, doubts

reasonably arising from the evidence are resolved in favor of the
laborer. 41

As a regular employee, respondent enjoys the right to security

of tenure under Article 279 42 of the Labor Code and may
only be dismissed for a just 43 or authorized 44cause, otherwise
the dismissal becomes illegal.
Respondent, whose employment was terminated without valid
cause by petitioners, is entitled to reinstatement without loss of
seniority rights and other privileges and to his full back wages,
inclusive of allowances and other benefits or their monetary
equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
Where reinstatement is no longer viable as an option, back
wages shall be computed from the time of the illegal
termination up to the finality of the decision. Separation pay
equivalent to one month salary for every year of service should
likewise be awarded as an alternative in case reinstatement in
not possible. 45

WHEREFORE, the petition for review on certiorari is DENIED.

The Decision dated February 21, 2008 and Resolution dated
February 9, 2009 of the Court of Appeals in CA-G.R. No.
CEB-SP No. 02113 are hereby AFFIRMED and UPHELD.

Petitioners to pay the costs of suit. acHDTE

SO ORDERED.

||| (South East International Rattan, Inc. v. Coming, G.R. No.

186621, [March 12, 2014])

G.R. No. 192998. April 2, 2014.]

BERNARD A. TENAZAS, JAIME M. FRANCISCO

and ISIDRO G. ENDRACA, petitioners, vs.
 R. VILLEGAS TAXI TRANSPORT and
ROMUALDO VILLEGAS,respondents.

DECISION

REYES, J : p

This is a petition for review on certiorari 1 filed under Rule 45

of the Rules of Court, assailing the Decision 2 dated March 11,
2010 and Resolution 3 dated June 28, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with
modification the Decision 4 dated June 23, 2009 of the
National Labor Relations Commission (NLRC) in NLRC LAC
Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M.

Francisco (Francisco) filed a complaint for illegal dismissal
against R. Villegas Taxi Transport and/or
Romualdo Villegas (Romualdo) and Andy Villegas (Andy)
(respondents). At that time, a similar case had already been
filed by Isidro G. Endraca (Endraca) against the same
respondents. The two (2) cases were subsequently
consolidated. 5

In their position paper, 6 Tenazas, Francisco and Endraca

(petitioners) alleged that they were hired and dismissed by the
respondents on the following dates:
 Name Date of Hiring Date of Dismissal Salary

Bernard
10/1997 07/03/07 Boundary System
A. Tenazas

Jaime M.
04/10/04 06/04/07 Boundary System
Francisco

Boundary
Isidro G. Endraca 04/2000 03/06/06
System 7

Relaying the circumstances of his dismissal, Tenazas alleged

that on July 1, 2007, the taxi unit assigned to him was
sideswiped by another vehicle, causing a dent on the left fender
near the driver seat. The cost of repair for the damage was
estimated at P500.00. Upon reporting the incident to the
company, he was scolded by respondents Romualdo and Andy
and was told to leave the garage for he is already fired. He was
even threatened with physical harm should he ever be seen in
the company's premises again. Despite the
warning, Tenazas reported for work on the following day but
was told that he can no longer drive any of the company's units
as he is already fired. 8 DEHaAS

Francisco, on the other hand, averred that his dismissal was

brought about by the company's unfounded suspicion that he
was organizing a labor union. He was instantaneously
terminated, without the benefit of procedural due process, on
June 4, 2007. 9
Endraca, for his part, alleged that his dismissal was instigated
by an occasion when he fell short of the required boundary for
his taxi unit. He related that before he was dismissed, he
brought his taxi unit to an auto shop for an urgent repair. He
was charged the amount of P700.00 for the repair services and
the replacement parts. As a result, he was not able to meet his
boundary for the day. Upon returning to the company garage
and informing the management of the incident, his driver's
license was confiscated and was told to settle the deficiency in
his boundary first before his license will be returned to him. He
was no longer allowed to drive a taxi unit despite his persistent
pleas. 10 IcHSCT

For their part, the respondents admitted that Tenazas and

Endraca were employees of the company, the former being a
regular driver and the latter a spare driver. The respondents,
however, denied that Francisco was an employee of the
company or that he was able to drive one of the company's
units at any point in time. 11

The respondents further alleged that Tenazas was never

terminated by the company. They claimed that on July 3,
2007, Tenazas went to the company garage to get his taxi unit
but was informed that it is due for overhaul because of some
mechanical defects reported by the other driver who takes
turns with him in using the same. He was thus advised to wait
for further notice from the company if his unit has already
been fixed. On July 8, 2007, however, upon being informed
that his unit is ready for release, Tenazas failed to report back
to work for no apparent reason. 12

As regards Endraca, the respondents alleged that they hired

him as a spare driver in February 2001. They allow him to
drive a taxi unit whenever their regular driver will not be able
to report for work. In July 2003, however, Endraca stopped
reporting for work without informing the company of his
reason. Subsequently, the respondents learned that a complaint
for illegal dismissal was filed by Endraca against them. They
strongly maintained, however, that they could never have
terminated Endraca in March 2006 since he already stopped
reporting for work as early as July 2003. Even then, they
expressed willingness to accommodate Endraca should he wish
to work as a spare driver for the company again since he was
never really dismissed from employment anyway. 13

On May 29, 2008, the petitioners, by registered mail, filed a

Motion to Admit Additional Evidence. 14 They alleged that
after diligent efforts, they were able to discover new pieces of
evidence that will substantiate the allegations in their position
paper. Attached with the motion are the following: (a) Joint
Affidavit of the petitioners; 15 (2) Affidavit of Good Faith of
Aloney Rivera, a co-driver; 16 (3) pictures of the petitioners
wearing company shirts; 17 and (4) Tenazas'
Certification/Record of Social Security System (SSS)
contributions. 18 AHSEaD

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a
Decision, 19 which pertinently states, thus:

In the case of complainant Jaime Francisco,

respondents categorically denied the existence of an
employer-employee relationship. In this situation, the
burden of proof shifts to the complainant to prove the
existence of a regular employment. Complainant
Francisco failed to present evidence of regular
employment available to all regular employees, such as
an employment contract, company ID, SSS,
withholding tax certificates, SSS membership and the
like.

In the case of complainant Isidro Endraca, respondents

claim that he was only an extra driver who stopped
reporting to queue for available taxi units which he
could drive. In fact, respondents offered him in their
Position Paper on record, immediate reinstatement as
extra taxi driver which offer he refused.

In case of Bernard Tenazas, he was told to wait while

his taxi was under repair but he did not report for
work after the taxi was repaired. Respondents[,] in
their Position Paper, on record likewise, offered him
immediate reinstatement, which offer he refused.

We must bear in mind that the complaint herein is one

of actual dismissal. But there was no formal
investigations, no show cause memos, suspension
memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of
dismissal committed by herein respondents. DSETac
 We are therefore constrained to rule that there was no
illegal dismissal in the case at bar.

The situations contemplated by law for entitlement to

separation pay does [sic] not apply.

WHEREFORE, premises considered, instant

consolidated complaints are hereby dismissed for lack
of merit.

SO ORDERED. 20

The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to

the NLRC. Subsequently, on June 23, 2009, the NLRC
rendered a Decision, 21 reversing the appealed decision of the
LA, holding that the additional pieces of evidence belatedly
submitted by the petitioners sufficed to establish the existence
of employer-employee relationship and their illegal dismissal. It
held, thus:

In the challenged decision, the Labor Arbiter found that

it cannot be said that the complainants were illegally
dismissed, there being no showing, in the first place,
that the respondent [sic] terminated their services. A
portion thereof reads:

"We must bear in mind that the complaint herein

is one of actual dismissal. But there were no
formal investigations, no show cause memos,
suspension memos or termination memos were
never issued. Otherwise stated, there is no proof
 of overt act of dismissal committed by herein
respondents.

We are therefore constrained to rule that there

was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally

dismissed from employment. cCEAHT

It is possible that the complainants' Motion to Admit

Additional Evidence did not reach the Labor Arbiter's
attention because he had drafted the challenged
decision even before they submitted it, and thereafter,
his staff attended only to clerical matters, and failed to
bring the motion in question to his attention. It is now
up to this Commission to consider the complainants'
additional evidence. Anyway, if this Commission must
consider evidence submitted for the first time on
appeal (Andaya vs. NLRC, G.R. No. 157371, July 15,
2005), much more so must it consider evidence that
was simply overlooked by the Labor Arbiter.

Among the additional pieces of evidence submitted by

the complainants are the following: (1) joint affidavit
(records, pp. 51-52) of the three (3) complainants; (2)
affidavit (records, p. 53) of Aloney Rivera y Aldo; and
(3) three (3) pictures (records, p. 54) referred to by
the complainant in their joint affidavit showing them
wearing t-shirts bearing the name and logo of the
respondent's company.

xxx xxx xxx

 WHEREFORE, the decision appealed from is
hereby REVERSED. Respondent
Rom[u]aldo Villegas doing business under the name
and style Villegas Taxi Transport is hereby ordered to
pay the complainants the following (1) full backwages
from the date of their dismissal (July 3, 2007 for
Tena[z]as, June 4, 2004 for Francisco, and March 6,
2006 for Endraca[)] up to the date of the finality of
this decision[;] (2) separation pay equivalent to one
month for every year of service; and (3) attorney's fees
equivalent to ten percent (10%) of the total judgment
awards.

SO ORDERED. 22

On July 24, 2009, the respondents filed a motion for

reconsideration but the NLRC denied the same in its
Resolution 23 dated September 23, 2009.

The Ruling of the CA

Unperturbed, the respondents filed a petition

for certiorari with the CA. On March 11, 2010, the CA
rendered a Decision, 24 affirming with modification the
Decision dated June 23, 2009 of the NLRC. The CA agreed
with the NLRC's finding that Tenazas and Endraca were
employees of the company, but ruled otherwise in the case of
Francisco for failing to establish his relationship with the
company. It also deleted the award of separation pay and
ordered for reinstatement of Tenazas and Endraca. The
pertinent portions of the decision read as follows: TEDaAc
At the outset, We declare that respondent Francisco
failed to prove that an employer-employee relationship
exists between him and R. Transport. If there is no
employer-employee relationship in the first place, the
duty of R. Transport to adhere to the labor standards
provisions of the Labor Code with respect to Francisco
is questionable.

xxx xxx xxx

Although substantial evidence is not a function of

quantity but rather of quality, the peculiar
environmental circumstances of the instant case
demand that something more should have been
proffered. Had there been other proofs of employment,
such as Francisco's inclusion in R.R. Transport's payroll,
this Court would have affirmed the finding of
employer-employee relationship. The NLRC, therefore,
committed grievous error in ordering R. Transport to
answer for Francisco's claims.

We now tackle R. Transport's petition with respect

to Tenazas and Endraca, who are both admitted to be
R. Transport's employees. In its petition, R. Transport
puts forth the theory that it did not terminate the
services of respondents but that the latter deliberately
abandoned their work. We cannot subscribe to this
theory.

xxx xxx xxx

Considering that the complaints for illegal dismissal

were filed soon after the alleged dates of dismissal, it
cannot be inferred that respondents Tenazas and
Endraca intended to abandon their employment. The
complainants for dismissal are, in themselves, pleas for
the continuance of employment. They are incompatible
with the allegation of abandonment. . . . . STcADa

For R. Transport's failure to discharge the burden of

proving that the dismissal of respondents Tenazas and
Endraca was for a just cause, We are constrained to
uphold the NLRC's conclusion that their dismissal was
not justified and that they are entitled to back wages.
Because they were illegally dismissed, private
respondents Tenazasand Endraca are entitled to
reinstatement and back wages . . . .

xxx xxx xxx

However, R. Transport is correct in its contention that

separation pay should not be awarded because
reinstatement is still possible and has been offered. It is
well[-]settled that separation pay is granted only in
instances where reinstatement is no longer feasible or
appropriate, which is not the case here.

xxx xxx xxx

WHEREFORE, the Decision of the National Labor

Relations Commission dated 23 June 2009, in NLRC
LAC Case No. 07-002648-08, and
its Resolution dated 23 September 2009 denying
reconsideration thereof
are AFFIRMED with MODIFICATION in that the award
of Jaime Francisco's claims is DELETED. The separation
 pay granted in favor of Bernard Tenazas and Isidro
Endraca is, likewise, DELETED and their reinstatement
is ordered instead.

SO ORDERED. 25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for

reconsideration but the same was denied by the CA in its
Resolution 26 dated June 28, 2010.

Undeterred, the petitioners filed the instant petition for review

on certiorari before this Court on July 15, 2010. IASEca

The Ruling of this Court

The petition lacks merit.

Pivotal to the resolution of the instant case is the determination

of the existence of employer-employee relationship and
whether there was an illegal dismissal. Remarkably, the LA,
NLRC and the CA had varying assessment on the matters at
hand. The LA believed that, with the admission of the
respondents, there is no longer any question regarding the
status of both Tenazas and Endraca being employees of the
company. However, he ruled that the same conclusion does not
hold with respect to Francisco whom the respondents denied to
have ever employed or known. With the respondents' denial,
the burden of proof shifts to Francisco to establish his regular
employment. Unfortunately, the LA found that Francisco failed
to present sufficient evidence to prove regular employment
such as company ID, SSS membership, withholding tax
certificates or similar articles. Thus, he was not considered an
employee of the company. Even then, the LA held
that Tenazas and Endraca could not have been illegally
dismissed since there was no overt act of dismissal committed
by the respondents. 27

On appeal, the NLRC reversed the ruling of the LA and ruled

that the petitioners were all employees of the company. The
NLRC premised its conclusion on the additional pieces of
evidence belatedly submitted by the petitioners, which it
supposed, have been overlooked by the LA owing to the time
when it was received by the said office. It opined that the said
pieces of evidence are sufficient to establish the circumstances of
their illegal termination. In particular, it noted that in the
affidavit of the petitioners, there were allegations about the
company's practice of not issuing employment records and this
was not rebutted by the respondents. It underscored that in a
situation where doubt exists between evidence presented by the
employer and the employee, the scales of justice must be tilted
in favor of the employee. It awarded the petitioners with: (1)
full backwages from the date of their dismissal up to the finality
of the decision; (2) separation pay equivalent to one month of
salary for every year of service; and (3) attorney's fees. cESDCa

On petition for certiorari, the CA affirmed with modification

the decision of the NLRC, holding that there was indeed an
illegal dismissal on the part of Tenazas and Endraca but not
with respect to Francisco who failed to present substantial
evidence, proving that he was an employee of the respondents.
The CA likewise dismissed the respondents' claim
that Tenazas and Endraca abandoned their work, asseverating
that immediate filing of a complaint for illegal dismissal and
persistent pleas for continuance of employment are
incompatible with abandonment. It also deleted the NLRC's
award of separation pay and instead ordered that Tenazas and
Endraca be reinstated. 28

"Well-settled is the rule that the jurisdiction of this Court in a

petition for review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are completely
devoid of support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts." 29 The
Court finds that none of the mentioned circumstances is
present in this case.

In reviewing the decision of the NLRC, the CA found that no

substantial evidence was presented to support the conclusion
that Francisco was an employee of the respondents and
accordingly modified the NLRC decision. It stressed that with
the respondents' denial of employer-employee relationship, it
behooved Francisco to present substantial evidence to prove
that he is an employee before any question on the legality of his
supposed dismissal becomes appropriate for discussion.
Francisco, however, did not offer evidence to substantiate his
claim of employment with the respondents. Short of the
required quantum of proof, the CA correctly ruled that the
NLRC's finding of illegal dismissal and the monetary awards
which necessarily follow such ruling lacked factual and legal
basis and must therefore be deleted.

The action of the CA finds support in Anonas Construction and

Industrial Supply Corp., et al. v. NLRC, et al., 30 where the
Court reiterated:

[J]udicial review of decisions of the NLRC via petition

for certiorari under Rule 65, as a general rule, is
confined only to issues of lack or excess of jurisdiction
and grave abuse of discretion on the part of the NLRC.
The CA does not assess and weigh the sufficiency of
evidence upon which the LA and the NLRC based
their conclusions. The issue is limited to the
determination of whether or not the NLRC acted
without or in excess of its jurisdiction, or with grave
abuse of discretion in rendering the resolution, except
if the findings of the NLRC are not supported by

substantial evidence. 31 (Citation omitted and

emphasis ours) ACHEaI

It is an oft-repeated rule that in labor cases, as in other

administrative and quasi-judicial proceedings, "the quantum of
proof necessary is substantial evidence, or such amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion." 32 "[T]he burden of proof rests
upon the party who asserts the affirmative of an
issue." 33 Corollarily, as Francisco was claiming to be an
employee of the respondents, it is incumbent upon him to
proffer evidence to prove the existence of said relationship. TIaEDC
"[I]n determining the presence or absence of an
employer-employee relationship, the Court has consistently
looked for the following incidents, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the
employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the
most important element." 34

There is no hard and fast rule designed to establish the

aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards,
cash vouchers, social security registration, appointment letters
or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status. 35

In this case, however, Francisco failed to present any proof

substantial enough to establish his relationship with the
respondents. He failed to present documentary evidence like
attendance logbook, payroll, SSS record or any personnel file
that could somehow depict his status as an employee. Anent his
claim that he was not issued with employment records, he
could have, at least, produced his social security records which
state his contributions, name and address of his employer, as
his co-petitioner Tenazas did. He could have also presented
testimonial evidence showing the respondents' exercise of
control over the means and methods by which he undertakes
his work. This is imperative in light of the respondents' denial of
his employment and the claim of another taxi operator,
Emmanuel Villegas (Emmanuel), that he was his employer.
Specifically, in his Affidavit, 36 Emmanuel alleged that
Francisco was employed as a spare driver in his taxi garage
from January 2006 to December 2006, a fact that the latter
failed to deny or question in any of the pleadings attached to
the records of this case. The utter lack of evidence is fatal to
Francisco's case especially in cases like his present predicament
when the law has been very lenient in not requiring any
particular form of evidence or manner of proving the presence
of employer-employee relationship.

In Opulencia Ice Plant and Storage v. NLRC, 37 this Court

emphasized, thus: cTSDAH

No particular form of evidence is required to prove

the existence of an employer-employee relationship.
Any competent and relevant evidence to prove the
relationship may be admitted. For, if only
documentary evidence would be required to show
that relationship, no scheming employer would ever
be brought before the bar of justice, as no employer
would wish to come out with any trace of the
illegality he has authored considering that it should
take much weightier proof to invalidate a written
instrument. 38

Here, Francisco simply relied on his allegation that he was an

employee of the company without any other evidence
supporting his claim. Unfortunately for him, a mere allegation
in the position paper is not tantamount to evidence. 39 Bereft
of any evidence, the CA correctly ruled that Francisco could not
be considered an employee of the respondents.

The CA's order of reinstatement of Tenazas and Endraca,

instead of the payment of separation pay, is also well in
accordance with prevailing jurisprudence. In Macaserov.
Southern Industrial Gases Philippines, 40 the Court reiterated,
thus:

[A]n illegally dismissed employee is entitled to two

reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained
relations between the employee and the employer,
separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement,
if viable, or separation pay if reinstatement is no
longer viable, and backwages. IaEScC

The normal consequences of respondents' illegal

dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed
from the time compensation was withheld up to the
date of actual reinstatement. Where reinstatement is
no longer viable as an option, separation pay equivalent
to one (1) month salary for every year of service should
be awarded as an alternative. The payment of
separation pay is in addition to payment of

backwages. 41 (Emphasis supplied) EHSADa

Clearly, it is only when reinstatement is no longer feasible that

the payment of separation pay is ordered in lieu thereof. For
instance, if reinstatement would only exacerbate the tension
and strained relations between the parties, or where the
relationship between the employer and the employee has been
unduly strained by reason of their irreconcilable differences, it
would be more prudent to order payment of separation pay
instead of reinstatement. 42

This doctrine of strained relations, however, should not be used

recklessly or applied loosely 43 nor be based on impression alone.
"It bears to stress that reinstatement is the rule and, for the
exception of strained relations to apply, it should be proved
that it is likely that if reinstated, an atmosphere of antipathy
and antagonism would be generated as to adversely affect the
efficiency and productivity of the employee concerned." 44

Moreover, the existence of strained relations, it must be

emphasized, is a question of fact. In Golden Ace Builders v.
Talde, 45 the Court underscored:

Strained relations must be demonstrated as a fact,

however, to be adequately supported by evidence —
substantial evidence to show that the relationship
between the employer and the employee is
indeed strained as a necessary consequence of the

judicial controversy. 46 (Citations omitted and

emphasis ours)

After a perusal of the NLRC decision, this Court failed to find

the factual basis of the award of separation pay to the
petitioners. The NLRC decision did not state the facts which
demonstrate that reinstatement is no longer a feasible option
that could have justified the alternative relief of granting
separation pay instead. HCATEa

The petitioners themselves likewise overlooked to allege

circumstances which may have rendered their reinstatement
unlikely or unwise and even prayed for reinstatement alongside
the payment of separation pay in their position paper. 47 A
bare claim of strained relations by reason of termination is
insufficient to warrant the granting of separation pay. Likewise,
the filing of the complaint by the petitioners does not
necessarily translate to strained relations between the parties.
As a rule, no strained relations should arise from a valid and
legal act asserting one's right. 48 Although litigation may also
engender a certain degree of hostility, the understandable
strain in the parties' relation would not necessarily rule out
reinstatement which would, otherwise, become the rule rather
the exception in illegal dismissal cases. 49 Thus, it was a prudent
call for the CA to delete the award of separation pay and order
for reinstatement instead, in accordance with the general rule
stated in Article 279 50 of the Labor Code.

Finally, the Court finds the computation of the petitioners'

backwages at the rate of P800.00 daily reasonable and just
under the circumstances. The said rate is consistent with the
ruling of this Court in Hyatt Taxi Services, Inc. v.
Catinoy, 51 which dealt with the same matter. IAETDc

WHEREFORE, in view of the foregoing disquisition, the petition

for review on certiorari is DENIED. The Decision dated March
11, 2010 and Resolution dated June 28, 2010 of the Court of
Appeals in CA-G.R. SP No. 111150 are AFFIRMED.

SO ORDERED.

||| (Tenazas v. R. Villegas Taxi Transport, G.R. No. 192998,

[April 2, 2014])