GREGORIO V. TONGKO, G.R. No. 167622 We resolve petitioner Gregorio V.

Tongkos bid,
Petitioner, through his Motion for Reconsideration,[1] to set aside our
Present: June 29, 2010 Resolution that reversed our Decision of
CORONA, C.J., November 7, 2008.[2] With the reversal, the assailed June
CARPIO, 29, 2010 Resolution effectively affirmed the Court of
CARPIO MORALES, Appeals ruling[3] in CA-G.R. SP No. 88253 that the petitioner
VELASCO, JR., was an insurance agent, not the employee, of the
NACHURA, respondent The Manufacturers Life Insurance Co. (Phils.),
- versus - LEONARDO-DE CASTRO, Inc. (Manulife).
BRION,
PERALTA,
BERSAMIN, In his Motion for Reconsideration, petitioner reiterates
DEL CASTILLO, the arguments he had belabored in his petition and various
ABAD, other submissions. He argues that for 19 years, he
VILLARAMA, JR., performed administrative functions and exercised
PEREZ, supervisory authority over employees and agents of
THE MANUFACTURERS MENDOZA, and Manulife, in addition to his insurance agent functions.[4] In
LIFE INSURANCE CO. SERENO, JJ. these 19 years, he was designated as a Unit Manager, a
(PHILS.), INC. and RENATO Promulgated:
A. VERGEL DE DIOS, Branch Manager and a Regional Sales Manager, and now
Respondents. January 25, 2011 posits that he was not only an insurance agent for Manulife
but was its employee as well.
x-----------------------------------------------------------------------------
------------x We find no basis or any error to merit the
reconsideration of our June 29, 2010 Resolution.

RESOLUTION A. Labor Law Control = Employment Relationship

BRION, J.:
Control over the performance of the task of one
providing service both with respect to the means and
1
manner, and the results of the service is the primary binds himself to do something in behalf of another, with the
element in determining whether an employment relationship consent or authority of the latter.[7] Article 1887 of the Civil
exists. We resolve the petitioners Motion against his favor Code also provides that in the execution of the agency, the
since he failed to show that the control Manulife exercised agent shall act in accordance with the instructions of the
over him was the control required to exist in an employer- principal.
employee relationship; Manulifes control fell short of this
norm and carried only the characteristic of the relationship All these, read without any clear understanding of fine
between an insurance company and its agents, as defined legal distinctions, appear to speak of control by the
by the Insurance Code and by the law of agency under the insurance company over its agents. They are, however,
Civil Code. controls aimed only at specific results in undertaking an
insurance agency, and are, in fact, parameters set by law in
The petitioner asserts in his Motion that Manulifes defining an insurance agency and the attendant duties and
labor law control over him was demonstrated (1) when it set responsibilities an insurance agent must observe and
the objectives and sales targets regarding production, undertake. They do not reach the level of control into the
recruitment and training programs; and (2) when it means and manner of doing an assigned task that invariably
prescribed the Code of Conduct for Agents and the Manulife characterizes an employment relationship as defined by
Financial Code of Conduct to govern his activities.[5] We find labor law. From this perspective, the petitioners contentions
no merit in these contentions. cannot prevail.

In our June 29, 2010 Resolution, we noted that there To reiterate, guidelines indicative of labor law control
are built-in elements of control specific to an insurance do not merely relate to the mutually desirable result
agency, which do not amount to the elements of control that intended by the contractual relationship; they must have the
characterize an employment relationship governed by the nature of dictating the means and methods to be employed
Labor Code. The Insurance Code provides definite in attaining the result.[8] Tested by this norm,
parameters in the way an agent negotiates for the sale of Manulifes instructions regarding the objectives and sales
the companys insurance products, his collection activities targets, in connection with the training and engagement of
and his delivery of the insurance contract or policy.[6] In other agents, are among the directives that the principal
addition, the Civil Code defines an agent as a person who may impose on the agent to achieve the assigned
2
tasks. They are targeted results that Manulife wishes to The petitioner also questions Manulifes act of
attain through its agents. Manulifes codes of conduct, investing him with different titles and positions in the course
likewise, do not necessarily intrude into the insurance of their relationship, given the respondents position that he
agents means and manner of conducting their sales. Codes simply functioned as an insurance agent.[11]He also
of conduct are norms or standards of behavior rather than considers it an unjust and inequitable situation that he would
employer directives into how specific tasks are to be be unrewarded for the years he spent as a unit manager, a
done. These codes, as well as insurance industry rules and branch manager, and a regional sales manager.[12]
regulations, are not per se indicative of labor law control
under our jurisprudence.[9] Based on the evidence on record, the petitioners
occupation was to sell Manulifes insurance policies and
The duties[10] that the petitioner enumerated in his Motion products from 1977 until the termination of the Career
are not supported by evidence and, therefore, deserve Agents Agreement (Agreement). The evidence also shows
scant consideration. Even assuming their existence, that through the years, Manulife permitted him to exercise
however, they mostly pertain to the duties of an insurance guiding authority over other agents who operate under their
agent such as remitting insurance fees to Manulife, own agency agreements with Manulife and whose
delivering policies to the insured, and after-sale commissions he shared.[13] Under this scheme an
services. For agents leading other agents, these include the arrangement that pervades the insurance industry petitioner
task of overseeing other insurance agents, the recruitment in effect became a lead agent and his own commissions
of other insurance agents engaged by Manulife as principal, increased as they included his share in the commissions of
and ensuring that these other agents comply with the the other agents;[14] he also received greater
paperwork necessary in selling insurance. That Manulife reimbursements for expenses and was allowed to use
exercises the power to assign and remove agents under the Manulifes facilities. His designation also changed from unit
petitioners supervision is in keeping with its role as a manager to branch manager and then to regional sales
principal in an agency relationship; they are Manulife agents manager, to reflect the increase in the number of agents he
in the same manner that the petitioner had all along been a recruited and guided, as well as the increase in the area
Manulife agent. where these agents operated.

3
 As our assailed Resolution concluded and as we now as an employee. In technical terms, he could not have
similarly conclude, these arrangements, and the titles and earned all these as an employee because he failed to
positions the petitioner was invested with, did not change provide the substantial evidence required in administrative
his status from the insurance agent that he had always been cases to support the finding that he was a Manulife
(as evidenced by the Agreement that governed his employee. No inequity results under this legal situation;
relationship with Manulife from the start to its disagreeable what would be unjust is an award of backwages and
end). The petitioner simply progressed from his individual separation pay amounts that are not due him because he
agency to being a lead agent who could use other agents in was never an employee.
selling insurance and share in the earnings of these other
agents. The Dissents discussion on this aspect of the case
begins with the wide disparity in the status of the parties that
In sum, we find absolutely no evidence of labor law Manulife is a big Canadian insurance company while
control, as extensively discussed in our Resolution of June Tongko is but a single agent of Manulife. The Dissent then
29, 2010, granting Manulifes motion for went on to say that [i]f is but just, it is but right, that the
reconsideration. The Dissent, unfortunately, misses this Court interprets the relationship between Tongko and
point. Manulife as one of employment under labor laws and to
uphold his constitutionally protected right, as an employee,
B. No Resulting Inequity to security of tenure and entitlement to monetary award
should such right be infringed.[15] We cannot simply invoke
We also do not agree that our assailed Resolution has the magical formula by creating an employment relationship
the effect of fostering an inequitable or unjust situation. The even when there is none because of the unavoidable and
records show that the petitioner was very amply paid for his inherently weak position of an individual over a giant
services as an insurance agent, who also shared in the corporation.
commissions of the other agents under his guidance. In
1997, his income was P2,822,620; in 1998, P4,805,166.34; The Dissent likewise alluded to an ambiguity in the
in 1999, P6,797,814.05; in 2001, P6,214,737.11; and in true relationship of the parties after Tongkos successive
2002, P8,003,180.38. All these he earned as an insurance appointments. We already pointed out that the legal
agent, as he failed to ever prove that he earned these sums significance of these appointments had not been sufficiently
4
explained and that it did not help that Tongko never his cause and we should simply view him and his case as
bothered to present evidence on this point. The Dissent they are; our duty is to sit as a judge in the case that he and
recognized this but tried to excuse Tongko from this failure the respondent presented.
in the subsequent discussion, as follows:
To support its arguments on equity, the Dissent uses
[o]ther evidence was adduced to show such the Constitution and the Civil Code, using provisions and
duties and responsibilities. For one, in his letter principles that are all motherhood statements. The mandate
of November 6, 2001, respondent De Dios
addressed petitioner as sales manager. And as I of the Court, of course, is to decide cases based on the
wrote in my Dissent to the June 29, facts and the law, and not to base its conclusions on
2010 Resolution, it is difficult to imagine that fundamental precepts that are far removed from the
Manulife did not issue promotional appointments particular case presented before it. When there is no room
to petitioner as unit manager, branch manager, for their application, of capacity of principles, reliance on the
and, eventually, regional sales manager. Sound application of these fundamental principles is misplaced.
management practice simply requires an
appointment for any upward personnel
movement, particularly when additional functions C. Earnings were Commissions
and the corresponding increase in compensation
are involved. Then, too, the adverted affidavits That his earnings were agents commissions arising
of the managers of Manulife as to the duties and from his work as an insurance agent is a matter that the
responsibilities of a unit manager, such as petitioner cannot deny, as these are the declarations and
petitioner, point to the conclusion that these representations he stated in his income tax returns through
managers were employees of Manulife, applying the years. It would be doubly unjust, particularly to the
the four-fold test.[16]
government, if he would be allowed at this late point to turn
around and successfully claim that he was merely an
This Court (and all adjudicators for that matter) cannot employee after he declared himself, through the years, as
and should not fill in the evidentiary gaps in a partys case an independent self-employed insurance agent with the
that the party failed to support; we cannot and should not privilege of deducting business expenses. This aspect of the
take the cudgels for any party. Tongko failed to support case alone considered together with the probative value of
income tax declarations and returns filed prior to the present
5
controversy should be enough to clinch the present case employment relationship exists in a particular case largely
against the petitioners favor. depends on the facts and, in no small measure, on the
parties evidence vis--vis the clearly defined jurisprudential
D. The Dissents Solution: standards. Given that the parties control what and how the
Unwieldy and Legally Infirm facts will be established in a particular case and/or how a
particular suit is to be litigated, deciding the issues on a
The Dissent proposes that Tongko should be case-to-case basis becomes an imperative.
considered as part employee (as manager) and part
insurance agent; hence, the original decision should be Another legal reality, a more important one, is that the
modified to pertain only to the termination of his duty of a court is to say what the law is.[17] This is the same
employment as a manager and not as an insurance duty of the Supreme Court that underlies the stare
agent. Accordingly, the backwages component of the decisis principle. This is how the public, in general and the
original award to him should not include the insurance sales insurance industry in particular, views the role of this Court
commissions. This solution, according to the line taken by and courts in general in deciding cases. The lower courts
the Dissent then, was justified on the view that this was and the bar, most specially, look up to the rulings of this
made on a case-to-case basis. Court for guidance. Unless extremely unavoidable, the
Court must, as a matter of sound judicial policy, resist the
Decisions of the Supreme Court, as the Civil Code temptation of branding its ruling pro hac vice.
provides, form part of the law of the land. When the Court
states that the determination of the existence of an The compromise solution of declaring Tongko both an
employment relationship should be on a case-to-case basis, employee and an agent is legally unrealistic, unwieldy and
this does not mean that there will be as many laws on the is, in fact, legally infirm, as it goes against the above basic
issue as there are cases. In the context of this case, the principles of judicial operation.Likewise, it does not and
four-fold test is the established standard for determining cannot realistically solve the problem/issue in this case; it
employer-employee relationship and the existence of these actually leaves more questions than answers.
elements, most notably control, is the basis upon which a
conclusion on the absence of employment relationship was As already pointed out, there is no legal basis (be it
anchored. This simply means that a conclusion on whether statutory or jurisprudential) for the part-employee/part-
6
insurance agent status under an essentially principal-agent termination letter, can we simply rule that his role as a
contractual relation which the Dissent proposes to accord to manager was illegally terminated without touching on the
Tongko. If the Dissent intends to establish one, this is highly consequences of this ruling on his status as an insurance
objectionable for this would amount to judicial legislation. A agent? Expressed in these terms, the inseparability of his
legal relationship, be it one of employment or one based on contract as agent with any other relationship that springs
a contract other than employment, exists as a matter of law therefrom can thus be seen as an insurmountable legal
pursuant to the facts, incidents and legal consequences of obstacle.
the relationship; it cannot exist devoid of these legally
defined underlying facts and legal consequences unless the The Dissents compromise approach would also
law itself creates the relationship an act that is beyond the sanction split jurisdiction. The labor tribunals shall have
authority of this Court to do. jurisdiction over Tongkos employment as manager while
another entity shall decide the issues/cases arising from the
Additionally, the Dissents conclusion completely agency relationship. If the managerial employment is
ignores an unavoidable legal reality that the parties are anchored on the agency, how will the labor tribunals decide
bound by a contract of agency that clearly subsists an issue that is inextricably linked with a relationship that is
notwithstanding the successive designation of Tongko as a outside the loop of their jurisdiction? As already mentioned
unit manager, a branch manager and a regional sales in the Resolution granting Manulifes reconsideration,
manager. (As already explained in our Resolution granting the DOMINANT relationship in this case is agency and no
Manulifes motion for reconsideration, no evidence on record other.
exists to provide the Court with clues as to the precise
impact of all these designations on the contractual agency E. The Dissents Cited Cases
relationship.) The Dissent, it must be pointed out, concludes
that Tongkos employment as manager was illegally The Dissent cites the cases of Great Pacific Life
terminated; thus, he should be accordingly afforded relief Assurance Corporation v. National Labor Relations
therefor. But, can Tongko be given the remedies incidental Commission[18] and Insular Life Assurance Co., Ltd. v.
to his dismissal as manager separately from his status as National Labor Relations Commission[19] to support the
an insurance agent? In other words, since the respondents allegation that Manulife exercised control over the petitioner
terminated all relationships with Tongko through the as an employer.
7
 petitioners employment with Manulife. As previously stated
In considering these rulings, a reality that cannot but above and in our assailed Resolution, the petitioner had
be recognized is that cases turn and are decided on the always been governed by the Agreement from the start until
basis of their own unique facts; the ruling in one case the end of his relationship with Manulife. His agency status
cannot simply be bodily lifted and applied to another, never changed except to the extent of being a lead
particularly when notable differences exist between the cited agent. Thus, the cited cases where changes in company-
cases and the case under consideration; their respective agent relationship expressly changed and where the
facts must be strictly examined to ensure that the ruling in subsequent contracts were the ones passed upon by the
one applies to another. This is particularly true in a Court cannot be totally relied upon as authoritative.
comparison of the cited cases with the present
case. Specifically, care should be taken in reading the cited We cannot give credit as well to the petitioners claim
cases and applying their rulings to the present case as the of employment based on the affidavits executed by other
cited cases all dealt with the proper legal characterization Manulife agents describing their duties, because these
of subsequent management contracts that superseded the same affidavits only affirm their status as independent
original agency contract between the insurance company agents, not as employees. To quote these various claims:[20]
and the agent.
1.a. I have no fixed wages or salary since my
In Great Pacific Life, the Ruiz brothers were appointed services are compensated by way of
to positions different from their original positions as commissions based on the computed premiums
paid in full on the policies obtained thereat;
insurance agents, whose duties were clearly defined in a
subsequent contract. Similarly, in Insular, de los Reyes, a 1.b. I have no fixed working hours and employ
former insurance agent, was appointed as acting unit my own method in soliciting insurance at a time
manager based on a subsequent contract. In both cases, and place I see fit;
the Court anchored its findings of labor control on the
stipulations of these subsequent contracts. 1.c. I have my own assistant and messenger
who handle my daily work load;
In contrast, the present case is remarkable for the
absence of evidence of any change in the nature of the
8
 1.d. I use my own facilities, tools, materials and operational guidelines on how Tongko could
supplies in carrying out my business of selling align his operations with Manulifes re-directed
insurance; goal of being a big league player. The method is
to expand coverage through the use of more
xxxx agents. This requirement for the recruitment of
more agents is not a means-and-method control
6. I have my own staff that handles day to day as it relates, more than anything else, and is
operations of my office; directly relevant, to Manulifes objective of
expanded business operations through the use
7. My staff are my own employees and received of a bigger sales force whose members are all
salaries from me; on a principal-agent relationship.An important
point to note here is that Tongko was not
xxxx supervising regular full-time employees of
Manulife engaged in the running of the
9. My commission and incentives are all insurance business; Tongko was effectively
reported to the Bureau of Internal Revenue guiding his corps of sales agents, who are
(BIR) as income by a self-employed individual or bound to Manulife through the same agreement
professional with a ten (10) percent creditable that he had with manulife, all the while sharing in
withholding tax. I also remit monthly for these agents commissions through his
professionals. overrides.[21]

The petitioner cannot also rely on the letter written by Lastly, in assailing the Agreement between him and
respondent Renato Vergel de Dios to prove that Manulife Manulife, the petitioner cites Paguio v. National Labor
exercised control over him. As we already explained in the Relations Commission[22] on the claim that the agreement
assailed Resolution: that the parties signed did not conclusively indicate the legal
relationship between them.
Even de Dios letter is not determinative of
control as it indicates the least amount of The evidentiary situation in the present case,
intrusion into Tongkos exercise of his role as however, shows that despite the petitioners insistence that
manager in guiding the sales agents. Strictly
viewed, de Dios directives are merely the Agreement was no longer binding between him and
9
Manulife, no evidence was ever adduced to show that their Commission,[27] Dealco Farms, Inc. v. National Labor
relationship changed so that Manulife at some point Relations Commission,[28]South Davao Development
controlled the means and method of the petitioners work. In Company, Inc. v. Gamo,[29] and Abante, Jr. v. Lamadrid
fact, his evidence only further supports the conclusion that Bearing & Parts Corporation.[30] The dissent cited these
he remained an independent insurance agent a status he cases to support its allegation that labor laws and
admits, subject only to the qualification that he is at the jurisprudence should be applied in cases, to the exclusion of
same time an employee. Thus, we can only conclude that other laws such as the Civil Code or the Insurance Code,
the Agreement governed his relations with Manulife. even when the latter are also applicable.

Additionally, it is not lost on us that Paguio is a ruling In Social Security System, Cosmopolitan Funeral
based on a different factual setting; it involves a publishing Homes, Dealco Farms, and South Davao Development, the
firm and an account executive, whose repeated issue that repeats itself is whether complainants were
engagement was considered as an indication of employees or independent contractors; the legal
employment. Our ruling in the present case is specific to the relationships involved are both labor law concepts and
insurance industry, where the law permits an insurance make no reference to the Civil Code (or even the Insurance
company to exercise control over its agents within the limits Code). The provisions cited in the Dissent Articles 1458-
prescribed by law, and to engage independent agents for 1637 of the Civil Code[31] and Articles 1713-1720 of the Civil
several transactions and within an unlimited period of time Code [32] do not even appear in the decisions cited.
without the relationship amounting to employment. In light of
these realities, the petitioners arguments on his last In Algon, the issue was whether the lease contract
argument must also fail. should dictate the legal relationship between the parties,
when there was proof of an employer-employee
The dissent also erroneously cites eight other cases Social relationship. In the cited case, the lease provisions on
Security System v. Court of Appeals,[23] Cosmopolitan termination were thus considered irrelevant because of a
Funeral Homes, Inc. v. Maalat,[24] Algon Engineering substantial evidence of an employment relationship. The
Construction Corporation v. National Labor Relations cited case lacks the complexity of the present case; Civil
Commission,[25] Equitable Banking Corporation v. National Code provisions on lease do not prescribe that lessees
Labor Relations Commission,[26] Lazaro v. Social Security exercise control over their lessors in the way that the
10
Insurance Code and the Civil provide that insurance
companies and principals exercised control over their It bears stressing that our ruling in this case is not
agents. about which law has primacy over the other, but that we
should be able to reconcile these laws. We are merely
The issue in Equitable, on the other hand, is whether saying that where the law makes it mandatory for a
a lawyer-client relationship or an employment relationship company to exercise control over its agents, the
governs the legal relation between parties. Again, this case complainant in an illegal dismissal case cannot rely on
is inapplicable as it does not illustrate the predominance of these legally prescribed control devices as indicators of an
labor laws and jurisprudence over other laws, in general, employer-employee relationship. As shown in our
and the Insurance Code and Civil Code, in particular. It discussion, our consideration of the Insurance Code and
merely weighed the evidence in favor of an employment Civil Code provisions does not negate the application of
relationship over that of a lawyer-client relationship. labor laws and jurisprudence; ultimately, we dismissed the
Similarly in Lazaro, the Court found ample proof of control petition because of its failure to comply with the control test.
determinative of an employer-employee relationship. Both
cases are not applicable to the present case, which is WHEREFORE, premises considered, we
attended by totally different factual considerations as the hereby DENY the Motion for Reconsideration WITH
petitioner had not offered any evidence of the companys FINALITY for lack of merit. No further pleadings shall be
control in the means and manner of the performance of his entertained. Let entry of judgment proceed in due course.
work.
SO ORDERED.
On the other hand, we find it strange that the dissent
cites Abante as a precedent, since the Court, in this case, DIGEST:
held that an employee-employer relationship is notably Tongko v. Manufacturers LIfe Insurance Co.
absent in this case as the complainant was a sales agent. (Phils.), Inc.
This case better supports the majoritys position that a sales (570 SCRA 503)
agent, who fails to show control in the concept of labor law, FACTS:
cannot be considered an employee, even if the company The contractual relationship between Tongko and
exercised control in the concept of a sales agent.[33] Manulife had two basic phases. The first phase began on
11
July 1, 1977, under a CareerAgent’s Agreement, which decreed that no employer-employee relationship
provided that “the Agent is an independent contractor existed between the parties.The
and nothing contained herein shall be construed NLRC
or interpreted ascreating an employer-employee relationship reversed the labor arbiter’s decision on appeal; it
between the Company and the Agent.”The second phase found the existence of an employer-employee relationship
started in 1983 when Tongko was named Unit Manager in and concluded thatTongko had been illegally dismissed.The
Manulife’s Sales Agency Organization. In 1990, he became Court of Appeals
aBranch Manager. In 1996), Tongko became a Regional found that the NLRC gravely abused its discretion in
Sales Manager. Tongko’s gross earnings consisted of its ruling and reverted to the labor arbiter’s decision that
commissions, persistency income, andmanagement noemployer-employee relationship existed between Tongko
overrides. Since the beginning, Tongko consistently and Manulife.
declared himself self-employed in his income tax returns. ISSUE:
Under oath, he declared hisgross business income and Is there an employer-employee relationship between
deducted his business expenses to arrive at his taxable Tongko and Manulife?.
business income.Respondent Renato Vergel de Dios, sales HELD:
manager, wrote Tongko a letter dated November 6, 2001 on NO. In the determination of whether an employer-
concerns that were brought up duringthe Metro North Sales employee relationship exists between 2 parties, this court
Managers Meeting, expressing dissatisfaction of Tongko’s applies the four-fold test todetermine the existence of the
performance in their agent recruiting business, which elements of such relationship. Jurisprudence is firmly settled
resulted in somechanges on how Tongko would conduct his that whenever the existence of an employment
duties, including that Tongko hire at his expense a relationshipis in dispute, four elements constitute the
competent assistant to unload him of routine tasks, whichhe reliable yardstick: (a) the selection and engagement of the
had been complaining to be too taxing for him.On employee; (b) the payment of wages; (c) the powerof
December 18, 2001, de Dios wrote Tongko another letter dismissal; and (d) the employer’s power to
which served as notice of termination of his Agency control
Agreement with the companyeffective fifteen days from the employee’s conduct. IT is the so-called “control
the date of the letter. Tongko filed an illegal dismissal test” which constitutes the most important indexof existence
complaint with the National Labor Relations of the employer-employee relationship that is, whether the
Commission (NLRC),alleging that despite the clear terms of employer controls or has reserved the right to control the
the letter terminating his Agency Agreement, that he was employee not only asto the result of the work to be done but
Manulife’s employee before he was illegally dismissed.The also as to the means and methods by which the same is to
labor arbiter be accomplished. Stated otherwise, an employer-employee
12
relationship exists where the person for whom the services DECISION
are performed reserves the right to control not only the end
to be achieved butalso the means to be used in reaching PERALTA, J.:
such end. In the case at bar, the absence of evidence
Before the Court is a petition for review on certiorari under
showing Manulife’s control over Tongko’s contractualduties
points to the absence of any employer-employee Rule 45 of the Revised Rules of Court which seeks to
relationship between Tongko and Manulife. In the context of review, reverse and set-aside the Decision1 of the Court of
the established evidence, Tongkoremained an agent all Appeals (CA), dated May 30, 2005, and its Resolution2dated
along; although his subsequent duties made him a lead January 10, 2006 in the case entitled Jndophil Textile Mills,
agent with leadership role, he was nevertheless only an Inc. v. Hon. Rolando R. Velasco and Engr. Salvador
agent whosebasic contract yields no evidence of means-
Adviento, docketed as CA-G.R. SP No. 83099.
and-manner control.
Claimant clearly failed to substantiate his claim of The facts are not disputed.
employment relationship by thequantum of evidence the
Labor Code requires.Tongko’s failure to comply with the Petitioner Indophil Textile Mills, Inc. is a domestic
guidelines of de Dios’ letter, as a ground for termination of corporation engaged in the business of manufacturing
Tongko’s agency, is a matter that the labortribunals cannot thread for weaving.3 On August 21, 1990, petitioner hired
rule upon in the absence of an employer-employee respondent Engr. Salvador Adviento as Civil Engineer to
relationship. Jurisdiction over the matter belongs to the
courts applying the laws ofinsurance, agency and contracts. maintain its facilities in Lambakin, Marilao, Bulacan.4 On
Dispositive: August 7, 2002, respondent consulted a physician due to
We REVERSE our Decision of November 7, 2008, recurring weakness and dizziness.5 Few days later, he was
GRANT Manulife’s motion for reconsideration and, diagnosed with Chronic Poly Sinusitis, and thereafter, with
accordingly, DISMISSTongko’s petition moderate, severe and persistent Allergic
6
Rhinitis. Accordingly, respondent was advised by his doctor
to totally avoid house dust mite and textile dust as it will
G.R. No. 171212 August 4, 2014 transmute into health problems.7

INDOPHIL TEXTILE MILLS, INC., Petitioner, Distressed, respondent filed a complaint against petitioner
vs. with the National Labor Relations Commission (NLRC), San
ENGR. SALVADOR ADVIENTO, Respondents. Fernando, Pampanga, for alleged illegal dismissal and for
13
the payment of backwages, separation pay, actual damages management.16 According to respondent, these
and attorney’s fees. The said case, docketed as NLRC healthhazards have been the persistent complaints of most,
Case No. RAB-III-05-5834-03, is still pending resolution with if not all, workers of petitioner.17 Nevertheless, said
the NLRC at the time the instant petition was filed.8 complaints fell on deaf ears as petitioner callously ignored
the health problems of its workers and even tended to be
Subsequently, respondent filed another Complaint9 with the
apathetic to their plight, including respondent.18
Regional Trial Court (RTC) of Aparri, Cagayan, alleging that
he contracted such occupational disease by reason of the Respondent averred that, being the only breadwinner in the
gross negligence of petitioner to provide him with a safe, family, he made several attempts to apply for a new job, but
healthy and workable environment. to his dismay and frustration, employers who knew ofhis
present health condition discriminated against him and
In his Complaint, respondent alleged that as part of his job
turned down his application.19 By reason thereof,
description, he conducts regular maintenance check on
respondent suffered intense moral suffering, mental
petitioner’s facilities including its dye house area, which is
anguish, serious anxiety and wounded feelings, praying for
very hot and emits foul chemical odor with no adequate
the recovery of the following: (1) Five Million Pesos
safety measures introduced by petitioner.10 According to
(₱5,000,000.00) asmoral damages; (2) Two Million Pesos
respondent, the air washer dampers and all roof exhaust
(₱2,000,000.00) as exemplary damages; and (3) Seven
vests are blown into open air, carrying dust
Million Three Thousand and Eight Pesos (₱7,003,008.00)
thereto.11 Concerned, respondent recommended to
as compensatory damages.20 Claiming to be a pauper
management to place roof insulation to minimize, if not,
litigant, respondent was not required to pay any filing fee.21
eradicate the health hazards attendant in the work
place.12 However, said recommendation was turned down In reply, petitioner filed a Motion to Dismiss22 on the ground
by management due to high cost.13 Respondent further that: (1) the RTC has no jurisdiction over the subject matter
suggested to petitioner’s management that the engineering of the complaint because the same falls under the original
office be relocated because ofits dent prone location, such and exclusive jurisdiction of the Labor Arbiter (LA) under
that even if the door of the office is sealed, accumulated Article 217(a)(4) of the Labor Code; and (2) there is another
dust creeps in outside the office.14 This was further action pending with the Regional Arbitration Branch III of the
aggravated by the installation of new filters fronting the NLRC in San Fernando City, Pampanga, involving the same
office.15 However, no action was taken by parties for the same cause.
14
On December 29, 2003, the RTC issued a the complaint despite the broad and clear terms of Article
Resolution23 denying the aforesaid Motion and sustaining its 217 of the Labor Code, as amended.26
jurisdiction over the instant case. It held that petitioner’s
After the submission by the parties of their respective
alleged failure to provide its employees with a safe, healthy
Memoranda, the CA rendered a Decision27 dated May 30,
and workable environment is an act of negligence, a case of
2005 dismissing petitioner’s Petition for lack of merit, the
quasi-delict. As such, it is not within the jurisdiction of the LA
dispositive portion of which states:
under Article 217 of the Labor Code. On the matter of
dismissal based on lis pendencia, the RTC ruled that the WHEREFORE, premises considered, petition for certiorari is
complaint before the NLRC has a different cause of action hereby DISMISSEDfor lack of merit. SO ORDERED.28
which is for illegal dismissal and prayer for backwages,
From the aforesaid Decision, petitioner filed a Motion for
actual damages, attorney’s fees and separation pay due to
illegal dismissal while in the present case, the cause of Reconsideration which was nevertheless denied for lack of
action is for quasi-delict.24 The falloof the Resolution is merit in the CA’s Resolution29 dated January 10, 2006.
Hence, petitioner interposed the instant petition upon the
quoted below:
solitary ground that "THE HONORABLE COURT OF
WHEREFORE, finding the motion to dismiss to be without APPEALS HAS DECIDED A QUESTION OF SUBSTANCE
merit, the Court deniesthe motion to dismiss. IN A WAY NOT IN ACCORD WITH LAW AND WITH
APPLICABLE DECISIONS OF THE HONORABLE
SO ORDERED.25
SUPREME COURT."30 Simply, the issue presented before
On February 9, 2004, petitioner filed a motion for us is whether or not the RTC has jurisdiction over the
reconsideration thereto, which was likewise denied in an subject matter of respondent’s complaint praying for moral
Order issued on even date. damages,exemplary damages, compensatory damages,
anchored on petitioner’s alleged gross negligence in failing
Expectedly, petitioner then filed a Petition for Certiorariwith
to provide a safe and healthy working environment for
the CA on the ground that the RTC committed grave abuse
respondent.
of discretion amounting to lack or excess of jurisdiction in
upholding that it has jurisdiction over the subject matter of The delineation between the jurisdiction of regular courts
and labor courts over cases involving workers and their

15
employers has always been a matter of dispute.31 It is up to jurisdiction to hear and decide, within thirty (30) calendar
the Courts to lay the line after careful scrutiny of the factual days after the submission of the case by the parties for
milieu of each case. Here, we find that jurisdiction rests on decision without extension, even in the absence of
the regular courts. stenographic notes, the following cases involving all
workers, whether agricultural or nonagricultural:
In its attempt to overturn the assailed Decision and
Resolution of the CA, petitioner argues that 1. Unfair labor practice cases;
respondent’sclaim for damages is anchored on the alleged
2. Termination disputes;
gross negligence of petitioner as an employer to provide its
employees, including herein respondent, with a safe, 3. If accompanied with a claim for reinstatement, those
healthy and workable environment; hence, it arose from an cases that workers may file involvingwages, rates of pay,
employer-employee relationship.32 The fact of respondent’s hours of work and other terms and conditions of
employment withpetitioner as a civil engineer is a necessary employment;
element of his cause of action because without the same,
4. Claims for actual, moral, exemplary and other forms of
respondent cannot claim to have a right to a safe, healthy
and workable environment.33 Thus, exclusive jurisdiction damages arising from employer-employee relations;
over the same should be vested in the Labor Arbiter and the 5. Cases arising from any violation of Article 264 of this
NLRC pursuant to Article 217(a)(4) of the Labor Code of the Code including questions involving the legality of strikes and
Philippines (Labor Code), as amended.34 lockouts; and
We are not convinced. 6. Except claims for Employees Compensation, Social
The jurisdiction of the LA and the NLRC is outlined in Article Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
217 of the Labor Code, as amended by Section 9 of
persons in domestic or household service,involving an
Republic Act (R.A.) No. 6715, to wit:
amount exceeding five thousand pesos (₱5,000.00)
ART. 217. Jurisdiction of Labor Arbiters and the regardless of whether accompanied with a claim for
Commission-- (a) Except as otherwise provided under this reinstatement.
Code the Labor Arbiter shall have original and exclusive
x x x.35
16
While we have upheld the present trend to refer worker- It is obvious from the complaint that the plaintiffs have not
employer controversies to labor courts in light of the alleged any unfair labor practice. Theirs is a simple action
aforequoted provision, we have also recognized that not all for damages for tortious acts allegedly committed by the
claims involving employees can be resolved solely by our defendants. Such being the case, the governing statute is
labor courts, specifically when the law provides the Civil Code and not the Labor Code. It results that the
otherwise.36 For this reason, we have formulated the orders under revieware based on a wrong premise.40
"reasonable causal connection rule," wherein if there is a
Similarly, we ruled in the recent case of Portillo v. Rudolf
reasonable causal connection between the claim asserted
Lietz, Inc.41 that not all disputes between an employer and
and the employer-employee relations, then the case is
his employees fall within the jurisdiction of the labor
within the jurisdiction of the labor courts; and in the absence
tribunals suchthat when the claim for damages is grounded
thereof, it is the regular courts that have jurisdiction.37 Such
on the "wanton failure and refusal" without just cause of an
distinction is apt since it cannot be presumed that money
employee to report for duty despite repeated notices served
claims of workers which do not arise out of or in connection
upon him of the disapproval of his application for leave
with their employer-employee relationship, and which would
ofabsence, the same falls within the purview of Civil Law, to
therefore fall within the general jurisdiction of the regular
wit:
courts of justice, were intended by the legislative authority to
be taken away from the jurisdiction of the courts and lodged As early as Singapore Airlines Limited v. Paño, we
with Labor Arbiters on an exclusive basis.38 established that not all disputes between an employer and
his employee(s) fall within the jurisdiction of the labor
In fact, as early as Medina vs. Hon. Castro-Bartolome,39 in
tribunals. We differentiated between abandonment per
negating the jurisdiction of the LA, although the parties
seand the manner and consequent effects of such
involved were an employer and two employees, the Court
abandonment and ruled that the first, is a labor case, while
succinctly held that:
the second, is a civil law case.
The pivotal question to Our mind iswhether or not the Labor
Upon the facts and issues involved, jurisdiction over the
Code has any relevance to the reliefs sought by the
present controversy must be held to belong to the civil
plaintiffs. For if the Labor Code has no relevance, any
Courts. While seemingly petitioner's claim for damages
discussion concerning the statutes amending it and whether
arises from employer-employee relations, and the latest
or not they have retroactive effect is unnecessary.
17
amendment to Article 217 of the Labor Code under PD No. In the case at bench, we find that such connection is nil.
1691 and BP Blg. 130 provides that all other claimsarising
True, the maintenance of a safe and healthy workplace is
from employer-employee relationship are cognizable by
ordinarily a subject of labor cases. More, the acts
Labor Arbiters [citation omitted], in essence, petitioner's
complained of appear to constitute matters involving
claim for damages is grounded on the "wanton failure and
employee-employer relations since respondent used to be
refusal"without just cause of private respondent Cruz to
the Civil Engineer of petitioner. However, it should be
report for duty despite repeated notices served upon him of
stressed that respondent’s claim for damages is specifically
the disapproval of his application for leave of absence
grounded on petitioner’s gross negligenceto provide a safe,
without pay. This, coupled with the further averment that
healthy and workable environment for its employees −a
Cruz "maliciously and with bad faith" violated the terms and
case of quasi-delict. This is easily ascertained from a plain
conditions of the conversion training course agreement to
and cursory reading of the Complaint,45 which enumerates
the damage of petitioner removes the present controversy
the acts and/or omissions of petitioner relative to the
from the coverage of the Labor Code and brings it within the
conditions in the workplace, to wit:
purview of Civil Law.
1. Petitioner’s textile mills have excessive flying textile dust
Clearly, the complaint was anchored not on the
and waste in its operations and no effort was exerted by
abandonment per se by private respondent Cruz of his
petitioner to minimize or totally eradicate it;
job—as the latter was not required in the Complaint to
report back to work—but on the manner and consequent 2. Petitioner failed to provide adequate and sufficient dust
effects of such abandonmentof work translated in terms of suction facilities;
the damages which petitioner had to suffer. x x x.42
3. Textile machines are cleaned with air compressors
Indeed, jurisprudence has evolved the rule that claims for aggravating the dusty work place;
damages under Article 217(a)(4) of the Labor Code, to be
4. Petitioner has no physician specializing in
cognizable by the LA, must have a reasonable causal
connection withany of the claims provided for in that respiratoryrelated illness considering it is a textile company;
article.43Only if there is such a connection with the other 5. Petitioner has no device to detectthe presence or density
claims can a claim for damages be considered as arising of dust which is airborne;
from employer-employee relations.44
18
6. The chemical and color room are not equipped with fault or negligence, if there is no pre-existing contractual
proper safety chemical nose mask; and relation between the parties, is called quasi-delict.50

7. The power and boiler plant emit too much smoke with Thus, to sustain a claim liability under quasi-delict, the
solid particles blown to the air from the smoke stack of the following requisites must concur: (a) damages suffered by
power plant emitting a brown rust color which engulfs the the plaintiff; (b) fault or negligence of the defendant, or
entire compound.46 someother person for whose acts he must respond; and (c)
the connection of cause and effect between the fault or
In addition, respondent alleged that despite his earnest
negligence of the defendant and the damages incurred by
efforts to suggest to management to place roof insulation to
the plaintiff.51
minimize, if not, eradicate the health hazards attendant in
the workplace, the same was not heeded.47 In the case at bar, respondent alleges that due to the
continued and prolonged exposure to textile dust seriously
It is a basic tenet that jurisdiction over the subject matter is
inimical to his health, he suffered work-contracted disease
determined upon the allegations made in the complaint,
which is now irreversible and incurable, and deprived him of
irrespective of whether or not the plaintiff is entitled to
job opportunities.52 Clearly, injury and damages were
recover upon the claim asserted therein, which is a matter
allegedly suffered by respondent, an element of quasi-delict.
resolved only after and as a result of a trial.48 Neither can
Secondly, the previous contract of employment between
jurisdiction of a court bemade to depend upon the defenses
petitioner and respondent cannot be used to counter the
made by a defendant in his answer or motion to
element of "no pre-existing contractual relation" since
dismiss.49 In this case, a perusal of the complaint would
petitioner’s alleged gross negligence in maintaining a
reveal that the subject matter is one of claim for damages
hazardous work environment cannot be considered a mere
arising from quasi-delict, which is within the ambit of the
breach of such contract of employment, but falls squarely
regular court's jurisdiction.
within the elements of quasi-delictunder Article 2176 of the
The pertinent provision of Article 2176 of the Civil Code Civil Code since the negligence is direct, substantive and
which governs quasi-delictprovides that: Whoever by act or independent.53 Hence, we ruled in Yusen Air and Sea
omissioncauses damageto another, there being fault or Services Phils., Inc. v. Villamor54 that:
negligence, is obliged to pay for the damagedone. Such

19
When, as here, the cause of action is based on a quasi- Further, it cannot be gainsaid that the claim for damages
delictor tort, which has no reasonable causal connection occurred afterthe employer-employee relationship of
with any of the claims provided for in Article 217, jurisdiction petitioner and respondent has ceased. Given that
over the action is with the regular courts.55 respondent no longer demands for any relief under the
Labor Code as well as the rules and regulations pertinent
It also bears stressing that respondent is not praying for any
thereto, Article 217(a)(4) of the Labor Code is inapplicable
relief under the Labor Code of the Philippines. He neither
to the instant case, as emphatically held in Portillo, to wit:
claims for reinstatement nor backwages or separation pay
resulting from an illegal termination. The cause of action It is clear, therefore, that while Portillo’s claim for unpaid
herein pertains to the consequence of petitioner’s omission salaries is a money claim that arises out ofor in connection
which led to a work-related disease suffered by respondent, with an employeremployee relationship, Lietz Inc.’s claim
causing harm or damage to his person. Such cause of against Portillo for violation of the goodwill clause is a
action is within the realm of Civil Law, and jurisdiction over money claim based on an act done after the cessation of
the controversy belongs to the regular courts.56 the employment relationship. And, while the jurisdiction over
Portillo’s claim is vested in the labor arbiter, the jurisdiction
Our ruling in Portillo, is instructive, thus:
over Lietz Inc.’s claim rests on the regular courts. Thus:
There is no causal connection between private respondent’s
As it is, petitioner does not ask for any relief under the Labor
claim for damages and the respondent employers’ claim for
Code. It merely seeks to recover damages based on the
damages for the alleged "Goodwill Clause" violation.
parties' contract of employment as redress for respondent's
Portillo’s claim for unpaid salaries did not have anything to
breach thereof. Such cause of action is within the realm of
do with her alleged violation of the employment contract as,
Civil Law, and jurisdiction over the controversy belongs to
in fact, her separation from employmentis not "rooted" in the
the regular courts. More so must this be in the present case,
alleged contractual violation. She resigned from her
what with the reality that the stipulation refers to the post-
employment. She was not dismissed. Portillo’s entitlementto
employment relations of the parties.58
the unpaid salaries is not even contested. Indeed, Lietz
Inc.’s argument about legal compensation necessarily Where the resolution of the dispute requires expertise, not
admits that it owesthe money claimed by Portillo.57 in labor management relations nor in wage structures and
other terms and conditions of employment, but rather in the
20
application of the general civil law, such claim falls outside - versus - PEREZ,*** and
the area of competence of expertise ordinarily ascribed to
MENDOZA, JJ.
the LA and the NLRC.59

Guided by the aforequoted doctrines, we find no reason to

reverse the findings of the CA.1âwphi1 The RTC has
jurisdiction over the subject matter of respondent's
complaint praying for moral damages, exemplary damages,
compensatory damages, anchored on petitioner's alleged FLY ACE CORPORATION/ Promulgated:
gross negligence in failing to provide a safe and healthy
working environment for respondent. WHEREFORE, the FLORDELYN CASTILLO,
petition is DENIED. The Decision of the Court of Appeals, Respondents. February 15, 2012
dated May 30, 2005, and its Resolution dated January 10,
2006 in CA-G.R. SP No. 83099 are hereby AFFIRMED.

SO ORDERED.

BITOY JAVIER G.R. No. 192558 x -----------------------------------------------------------------------------

-----------x
(DANILO P. JAVIER),

Petitioner, Present:
DECISION

CARPIO,* J.,
MENDOZA, J.:
**
PERALTA, Acting Chairperson,

ABAD,

21
This is a petition under Rule 45 of the Rules of Civil May 6, 2008, he reported for work but he was no longer
Procedure assailing the March 18, 2010 Decision[1] of the allowed to enter the company premises by the security
Court of Appeals (CA) and its June 7, 2010 Resolution,[2] in guard upon the instruction of Ruben Ong (Mr. Ong), his
CA-G.R. SP No. 109975, which reversed the May 28, 2009 superior;[5] that after several minutes of begging to the guard
Decision[3] of the National Labor Relations to allow him to enter, he saw Ong whom he approached and
Commission (NLRC) in the case entitled Bitoy Javier v. Fly asked why he was being barred from entering the premises;
Ace/Flordelyn Castillo,[4] holding that petitioner Bitoy that Ong replied by saying, Tanungin mo anak mo; [6]that he
Javier (Javier) was illegally dismissed from employment and then went home and discussed the matter with his family;
ordering Fly Ace Corporation (Fly Ace) to pay backwages that he discovered that Ong had been courting his daughter
and separation pay in lieu of reinstatement. 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
Antecedent Facts 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.
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 Fly Ace To support his allegations, Javier presented an affidavit of
since September 2007, performing various tasks at the one Bengie Valenzuela who alleged that Javier was a
respondents warehouse such as cleaning and arranging the stevedore or pahinante of Fly Ace from September 2007 to
canned items before their delivery to certain locations, January 2008. The said affidavit was subscribed before the
except in instances when he would be ordered to Labor Arbiter (LA).[7]
accompany the companys delivery vehicles, as pahinante;
that he reported for work from Monday to Saturday from
7:00 oclock in the morning to 5:00 oclock in the afternoon; For its part, Fly Ace averred that it was engaged in the
that during his employment, he was not issued an business of importation and sales of groceries. Sometime in
identification card and payslips by the company; that on December 2007, Javier was contracted by its employee, Mr.

22
Ong, as extra helper on a pakyaw basis at an agreed rate of Respondents. His contention that Respondent failed to give
₱300.00 per trip, which was later increased to ₱325.00 in him said ID and payslips implies that indeed he was not a
January 2008. Mr. Ong contracted Javier roughly 5 to 6 regular employee of Fly Ace considering that complainant
times only in a month whenever the vehicle of its contracted was a helper and that Respondent company has contracted
hauler, Milmar Hauling Services, was not available. On April a regular trucking for the delivery of its products.
30, 2008, Fly Ace no longer needed the services of
Respondent Fly Ace is not engaged in trucking business but
Javier. Denying that he was their employee, Fly Ace insisted
in the importation and sales of groceries. Since there is a
that there was no illegal dismissal.[8] Fly Ace submitted a
regular hauler to deliver its products, we give credence to
copy of its agreement with Milmar Hauling Services and
Respondents claim that complainant was contracted on
copies of acknowledgment receipts evidencing payment to
pakiao basis.
Javier for his contracted services bearing the words, daily
manpower (pakyaw/piece rate pay) and the latters As to the claim for underpayment of salaries, the payroll
signatures/initials. 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
Ruling of the Labor Arbiter uniform, they appeared to be his true signature.

xxxx

On November 28, 2008, the LA dismissed the complaint for Hence, as complainant received the rightful salary as shown
lack of merit on the ground that Javier failed to present proof by the above described payrolls, Respondents are not liable
that he was a regular employee of Fly Ace. He wrote: for salary differentials. [9]

Ruling of the NLRC

Complainant has no employee ID showing his employment On appeal with the NLRC, Javier was favored. It ruled that
with the Respondent nor any document showing that he the LA skirted the argument of Javier and immediately
received the benefits accorded to regular employees of the concluded that he was not a regular employee simply
23
because he failed to present proof. It was of the view that Finding Javier to be a regular employee, the NLRC ruled
a pakyaw-basis arrangement did not preclude the existence that he was entitled to a security of tenure. For failing to
of employer-employee relationship. Payment by result x x present proof of a valid cause for his termination, Fly Ace
x is a method of compensation and does not define the was found to be liable for illegal dismissal of Javier who was
essence of the relation. It is a mere method of computing likewise entitled to backwages and separation pay in lieu of
compensation, not a basis for determining the existence or reinstatement. The NLRC thus ordered:
absence of an employer-employee relationship.[10] The
WHEREFORE, premises considered, complainants appeal
NLRC further averred that it did not follow that a worker was
is partially GRANTED. The assailed Decision of the labor
a job contractor and not an employee, just because the
arbiter is VACATED and a new one is hereby entered
work he was doing was not directly related to the employers
holding respondent FLY ACE CORPORATION guilty of
trade or business or the work may be considered as extra
illegal dismissal and non-payment of 13th month pay.
helper as in this case; and that the relationship of an
Consequently, it is hereby ordered to pay complainant
employer and an employee was determined by law and the
DANILO Bitoy JAVIER the following:
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 1. Backwages -₱45,770.83
employee of Fly Ace because there was reasonable 2. Separation pay, in lieu of reinstatement - 8,450.00
connection between the particular activity performed by the
employee (as a pahinante) in relation to the usual business 3. Unpaid 13th month pay (proportionate) - 5,633.33
or trade of the employer (importation, sales and delivery of TOTAL -₱59,854.16
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 All other claims are dismissed for lack of merit.
a helper.

SO ORDERED.[11]
24
 It is incumbent upon private respondent to prove, by
substantial evidence, that he is an employee of petitioners,
Ruling of the Court of Appeals
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
On March 18, 2010, the CA annulled the NLRC findings that
not its employee.[12]
Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javiers complaint as ordered by
the LA. The CA exercised its authority to make its own
The CA likewise added that Javiers failure to present salary
factual determination anent the issue of the existence of an
vouchers, payslips, or other pieces of evidence to bolster
employer-employee relationship between the
his contention, pointed to the inescapable conclusion that
parties. According to the CA:
he was not an employee of Fly Ace. Further, it found that
Javiers work was not necessary and desirable to the
business or trade of the company, as it was only when there
xxx 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
In an illegal dismissal case the onus probandi rests on the facts alleged by Javier did not pass the control test.
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. x
He contracted work outside the company premises; he was
x x it is incumbent upon private respondent to prove the not required to observe definite hours of work; he was not
employee-employer relationship by substantial evidence. 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-
xxx terminous with the trip only.[13] Since no substantial
25
evidence was presented to establish an employer-employee acknowledgment receipts bearing his signature and the
relationship, the case for illegal dismissal could not prosper. 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,
The petitioners moved for reconsideration, but to no avail. Javiers 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
Hence, this appeal anchored on the following grounds: 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
I. subject to the control and supervision of the company, as he
was made to report to the office from Monday to Saturday,
WHETHER THE HONORABLE COURT OF APPEALS from 7:00 oclock in the morning until 5:00 oclock in the
ERRED IN HOLDING THAT THE PETITIONER WAS NOT afternoon. The list of deliverable goods, together with the
A REGULAR EMPLOYEE OF FLY ACE. corresponding clients and their respective purchases and
II. addresses, would necessarily have been prepared by Fly
Ace. Clearly, he was subjected to compliance with company
WHETHER THE HONORABLE COURT OF APPEALS rules and regulations as regards working hours, delivery
ERRED IN HOLDING THAT THE PETITIONER IS NOT schedule and output, and his other duties in the
ENTITLED TO HIS MONETARY CLAIMS.[14] warehouse.[16]

The petitioner contends that other than its bare allegations The petitioner chiefly relied on Chavez v. NLRC,[17] where
and self-serving affidavits of the other employees, Fly Ace the Court ruled that payment to a worker on a per trip basis
has nothing to substantiate its claim that Javier was is not significant because this is merely a method of
engaged on a pakyaw basis. Assuming that Javier was computing compensation and not a basis for determining
indeed hired on a pakyaw basis, it does not preclude his the existence of employer-employee relationship. Javier
regular employment with the company. Even the likewise invokes the rule that, in controversies between a
26
laborer and his master, x x x doubts reasonably arising from would leave the company premises using their own means,
the evidence should be resolved in the formers favour. The method, best judgment and discretion on how to deliver,
policy is reflected is no less than the Constitution, Labor time to deliver, where and [when] to start, and manner of
Code and Civil Code.[18] delivering the products.[20]

Claiming to be an employee of Fly Ace, petitioner asserts Fly Ace dismisses Javiers claims of employment as
that he was illegally dismissed by the latters failure to baseless assertions. Aside from his bare allegations, he
observe substantive and procedural due process. Since his presented nothing to substantiate his status as an
dismissal was not based on any of the causes recognized employee. It is a basic rule of evidence that each party must
by law, and was implemented without notice, Javier is prove his affirmative allegation. If he claims a right granted
entitled to separation pay and backwages. 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
In its Comment,[19] Fly Ace insists that there was no v. Bodega City,[22] Fly Ace insists that in an illegal dismissal
substantial evidence to prove employer-employee case, the burden of proof is upon the complainant who
relationship. Having a service contract with Milmar Hauling claims to be an employee. It is essential that an employer-
Services for the purpose of transporting and delivering employee relationship be proved by substantial evidence.
company products to customers, Fly Ace contracted Javier Thus, it cites:
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 In an illegal dismissal case, the onus probandi rests on the
delivery vehicle with its loaded company products. With the employer to prove that its dismissal of an employee was for
vehicle and products in their custody, the driver and Javier a valid cause. However, before a case for illegal dismissal

27
can prosper, an employer-employee relationship must first their contracted services and neither were they subjected to
be established. definite hours or condition of work.

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 Fly Ace likewise claims that Javiers function as
a pahinante was not directly related or necessary to its
outside the premises of the respondent; he was not even
principal business of importation and sales of groceries.
required to report to work at regular hours; he was not made
to register his time in and time out every time he was Even without Javier, the business could operate its usual
contracted to work; he was not subjected to any disciplinary course as it did not involve the business of inland
transportation. Lastly, the acknowledgment receipts bearing
sanction imposed to other employees for company
Javiers signature and words pakiao rate, referring to his
violations; he was not issued a company I.D.; he was not
accorded the same benefits given to other employees; he earned salaries on a per trip basis, have evidentiary weight
that the LA correctly considered in arriving at the conclusion
was not registered with the Social Security System (SSS) as
petitioners employee; and, he was free to leave, accept and that Javier was not an employee of the company.
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 The Court affirms the assailed CA decision.
to the conclusion that petitioner is not an employee of the
respondents.[24]
It must be noted that the issue of Javiers alleged illegal
Moreover, Fly Ace claims that it had no right to control the dismissal is anchored on the existence of an employer-
result, means, manner and methods by which Javier would employee relationship between him and Fly Ace. This is
perform his work or by which the same is to be essentially a question of fact. Generally, the Court does not
accomplished.[25] In other words, Javier and the company review errors that raise factual questions. However, when
driver were given a free hand as to how they would perform
28
there is conflict among the factual findings of the antecedent evidence.[29] Accordingly, the petitioner needs to show by
deciding bodies like the LA, the NLRC and the CA, it is substantial evidence that he was indeed an employee of the
proper, in the exercise of Our equity jurisdiction, to review company against which he claims illegal dismissal.
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, Expectedly, opposing parties would stand poles apart and
substantial evidence that amount of relevant evidence which proffer allegations as different as chalk and cheese. It is,
a reasonable mind might accept as adequate to justify a therefore, incumbent upon the Court to determine whether
conclusion is sufficient.[27] 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
As the records bear out, the LA and the CA found Javiers relationship. Any competent and relevant evidence to prove
claim of employment with Fly Ace as wanting and deficient. the relationship may be admitted.Hence, while no particular
The Court is constrained to agree. Although Section 10, form of evidence is required, a finding that such relationship
Rule VII of the New Rules of Procedure of the exists must still rest on some substantial evidence.
NLRC[28] allows a relaxation of the rules of procedure and Moreover, the substantiality of the evidence depends on its
evidence in labor cases, this rule of liberality does not mean quantitative as well as its qualitative aspects.[30] Although
a complete dispensation of proof. Labor officials are substantial evidence is not a function of quantity but rather
enjoined to use reasonable means to ascertain the facts of quality, the x x x circumstances of the instant case
speedily and objectively with little regard to technicalities or demand that something more should have been proffered.
formalities but nowhere in the rules are they provided a Had there been other proofs of employment, such as x x x
license to completely discount evidence, or the lack of it. inclusion in petitioners payroll, or a clear exercise of control,
The quantum of proof required, however, must still be the Court would have affirmed the finding of employer-
satisfied. Hence, when confronted with conflicting versions employee relationship.[31]
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
29
In sum, the rule of thumb remains: the onus probandi falls ignore the inescapable conclusion that his mere presence at
on petitioner to establish or substantiate such claim by the the workplace falls short in proving employment therein. The
requisite quantum of evidence.[32] Whoever claims supporting affidavit could have, to an extent, bolstered
entitlement to the benefits provided by law should establish Javiers claim of being tasked to clean grocery items when
his or her right thereto x x x.[33] Sadly, Javier failed to there were no scheduled delivery trips, but no information
adduce substantial evidence as basis for the grant of relief. was offered in this subject simply because the witness had
no personal knowledge of Javiers employment status in the
company. Verily, the Court cannot accept Javiers
In this case, the LA and the CA both concluded that Javier statements, hook, line and sinker.
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 The Court is of the considerable view that on Javier lies the
an employee of Fly Ace. Clearly, Javier failed to pass the burden to pass the well-settled tests to determine the
substantiality requirement to support his claim. Hence, the existence of an employer-employee relationship, viz: (1) the
Court sees no reason to depart from the findings of the CA. selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct. Of these elements, the
While Javier remains firm in his position that as an most important criterion is whether the employer controls or
employed stevedore of Fly Ace, he was made to work in the has reserved the right to control the employee not only as to
company premises during weekdays arranging and cleaning the result of the work but also as to the means and methods
grocery items for delivery to clients, no other proof was by which the result is to be accomplished.[35]
submitted to fortify his claim. The lone affidavit executed by
one Bengie Valenzuela was unsuccessful in strengthening
Javiers cause. In said document, all Valenzuela attested to In this case, Javier was not able to persuade the Court that
was that he would frequently see Javier at the workplace the above elements exist in his case. He could not submit
where the latter was also hired as stevedore.[34] Certainly, in competent proof that Fly Ace engaged his services as a
gauging the evidence presented by Javier, the Court cannot regular employee; that Fly Ace paid his wages as an

30
employee, or that Fly Ace could dictate what his conduct Considering the above findings, the Court does not see the
should be while at work. In other words, Javiers allegations necessity to resolve the second issue presented.
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 One final note. The Courts decision does not contradict the
was not able to refute Fly Aces assertion that it had an settled rule that payment by the piece is just a method of
agreement with a hauling company to undertake the compensation and does not define the essence of the
delivery of its goods. It was also baffling to realize that relation.[37] Payment on a piece-rate basis does not negate
Javier did not dispute Fly Aces denial of his services regular employment. The term wage is broadly defined in
exclusivity to the company. In short, all that Javier laid down Article 97 of the Labor Code as remuneration or earnings,
were bare allegations without corroborative proof. 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
Fly Ace does not dispute having contracted Javier and paid
employer-employee relationship. However, in determining
him on a per trip rate as a stevedore, albeit on
whether the relationship is that of employer and employee
a pakyaw basis. The Court cannot fail to note that Fly Ace
or one of an independent contractor, each case must be
presented documentary proof that Javier was indeed paid
determined on its own facts and all the features of the
on a pakyaw basis per the acknowledgment receipts
relationship are to be considered.[38] Unfortunately for
admitted as competent evidence by the LA. Unfortunately
Javier, the attendant facts and circumstances of the instant
for Javier, his mere denial of the signatures affixed therein
case do not provide the Court with sufficient reason to
cannot automatically sway us to ignore the documents
uphold his claimed status as employee of Fly Ace.
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]
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not

31
be supposed that every labor dispute will be automatically The coverage of the term legal dependent as used in a
decided in favor of labor. Management also has its rights stipulation in a collective bargaining agreement (CBA)
which are entitled to respect and enforcement in the interest granting funeral or bereavement benefit to a regular
of simple fair play. Out of its concern for the less privileged employee for the death of a legal dependent, if the CBA is
in life, the Court has inclined, more often than not, toward silent about it, is to be construed as similar to the meaning
the worker and upheld his cause in his conflicts with the that contemporaneous social legislations have set. This is
employer. Such favoritism, however, has not blinded the because the terms of such social legislations are deemed
Court to the rule that justice is in every case for the incorporated in or adopted by the CBA.
deserving, to be dispensed in the light of the established
The decision of the Court of Appeals (CA) under review
facts and the applicable law and doctrine.[39]
summarizes the factual and procedural antecedents, as
follows:

WHEREFORE, the petition is DENIED. The March 18, Complainant Judith Pulido alleged that she was hired by
2010 Decision of the Court of Appeals and its June 7, respondent as proofreader on 10 January 1991; that she
2010 Resolution, in CA-G.R. SP No. 109975, are was receiving a monthly basic salary of P-15,493.66 plus P-
hereby AFFIRMED. 155.00 longevity pay plus other benefits provided by law
and their Collective Bargaining Agreement; that on 21
SO ORDERED.
February 2003, as union president, she sent two letters to
G.R. No. 192601 June 3, 2013 President Gloria Arroyo, regarding their complaint of
mismanagement being committed by PIJ executive; that
PHILIPPINE JOURNALISTS, INC., Petitioner, sometime in May 2003, the union was furnished with a letter
vs. by Secretary Silvestre Afable, Jr. head of Presidential
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION Management Staff (PMS), endorsing their letter-complaint to
MEMBER, MICHAEL ALFANTE, Respondents. Ombudsman Simeon V. Marcelo; that respondents took
DECISION offense and started harassments to complainant union
president; that on 30 May 2003, complainant received a
BERSAMIN, J.: letter from respondent Fundador Soriano, International
Edition managing editor, regarding complainant’s
32
attendance record; that complainant submitted her reply to Management Information System under manager Neri
said memo on 02 June 2003; that on 06 June 2003, Torrecampo on 16 May 2000; that on 15 July 2001, he was
complainant received a memorandum of reprimand; that on regularized receiving a monthly salary of ₱9,070.00 plus
04 July 2003, complainant received another memo from Mr. other monetary benefits; that sometime in 2001, Rico
Soriano, for not wearing her company ID, which she replied Pagkalinawan replaced Torrecampo, which was opposed by
the next day 05 July 2003; that on 04 August 2003, complainant and three other co-employees; that
complainant again received a memo regarding Pagkalinawan took offense of their objection; that on 22
complainant’s tardiness; that on 05 August 2003, October 2002, complainant Alfante received a
complainant received another memorandum asking her to memorandum from Pagkalinawan regarding his excessive
explain why she should not be accused of fraud, which she tardiness; that on 10 June 2003, complainant Alfante
replied to on 07 August 2003; and that on the same day received a memorandum from Executive Vice-President
between 3:00 to 4:00 P.M., Mr. Ernesto "Estong" San Arnold Banares, requiring him to explain his side on the
Agustin, a staff of HRD handed her termination paper. evaluation of his performance submitted by manager
Pagkalinawan; that one week after complainant submitted
Complainant added that in her thirteen (13) years with the
his explanation, he was handed his notice of dismissal on
company and after so many changes in its management
the ground of "poor performance"; and that complainant was
and executives, she had never done anything that will cause
dismissed effective 28 July 2003.
them to issue a memorandum against her or her work
attitude, more so, reasons to terminate her services; that Complainant Alfante submitted that he was dismissed
she got dismissed because she was the Union President without just cause.
who was very active in defending and pursuing the rights of
Respondents, in their position paper, averred that
her union members, and in fighting against the abuses of
complainants Pulido and Alfante were dismissed for cause
respondent Corporate Officers; and that she got the ire of
and with due process.
respondents when the employees filed a complaint against
the Corporate Officers before Malacañang and which was With regard to complainant Pulido, respondents averred that
later indorsed to the Office of the Ombudsman. in a memorandum dated 30 May 2003, directed complainant
to explain her habitual tardiness, at least 75 times from
The second complainant Michael L. Alfante alleged that he
January to May of 2003. In a memorandum, dated 06 June
started to work with respondents as computer technician at
33
2003, directed complainant to observe the 3 p.m. rule to In both instances, respondents maintained that they did not
avoid grammatical lapses, use of stale stories just to beat commit any act of unfair labor practices; that they did not
the 10:00 p.m. deadline. In the same memorandum commit acts tantamount to interfering, restraining, or
complainant was given the warning that any repeated coercing employees in the exercise of their right to self-
violation of the rules shall be dealt with more severely. Once organization.
again, in a memorandum, dated 04 August 2003,
Respondents deny liabilities as far as complainants’
complainant Pulido was required to explain why no
monetary claims are concerned. Concerning violations of
disciplinary action should be taken against her for habitual
the provision on wage distortion under Wage Order No. 9,
tardiness – 18 times out of the 23 reporting days during the
respondents stressed that complainants were not affected
period from 27 June – 27 July 2003 and on 05 August 2003,
since their salary is way over the minimum wage.
complainant was directed to explain in writing why
complainant should not be administratively sanctioned for With respect to the alleged non-adjustment of longevity pay
committing fraud or attempting to commit fraud against and burial aid, respondent PJI pointed out that it complies
respondents. Respondents found complainant’s with the provisions of the CBA and that both complainants
explanations unsatisfactory. On 07 August 2003, have not claimed for the burial aid.
respondents dismissed complainant Pulido for habitual
tardiness, gross insubordination, utter disrespect for Respondents put forward the information that the alleged
nonpayment of rest days – every Monday for the past three
superiors, and committing fraud or attempting to commit
(3) years is a matter that is still at issue in NLRC Case No.
fraud which led to the respondents’ loss of confidence upon
02-0402973-93, which case is still pending before this
complainant Pulido.
Commission.
In case of complainant Alfante, respondents averred in
defense that complainant was dismissed for "poor Respondents asserted that the respondents Arturo Dela
performance" after an evaluation by his superior, and after Cruz, Bobby Capco, Arnold Banares, Ruby Ruiz-Bruno and
Fundador Soriano should not be held liable on account of
being forewarned that complainant may be removed if there
complainants’ dismissal as they merely acted as agents of
was no showing of improvement in his skills and knowledge
on current technology. respondent PJI.1

34
Upon the foregoing backdrop, Labor Arbiter Corazon C. appeal in the National Labor Relations Commission
Borbolla rendered her decision on March 29, 2006, (NLRC).3
disposing thusly:
In the meantime, on May 10, 2006, petitioner and Judith
WHEREFORE, foregoing premises considered, judgment is Pulido (Pulido), the other complainant, jointly manifested to
hereby rendered, finding complainant Judith Pulido to have the NLRC that the decision of March 29, 2006 had been
been illegally dismissed. As such, she is entitled to fully satisfied as to Pulido under the following terms,
reinstatement and backwages from 07 August 2003 up to namely: (a) she would be reinstated to her former position
her actual or payroll reinstatement. To date, complainant’s as editorial staffmember, or an equivalent position, without
backwages is ₱294,379.54. loss of seniority rights, effective May 15, 2006; (b) she
would go on maternity leave, and report to work after giving
Respondent Philippine Journalist, Inc. is hereby ordered to
birth; (c) she would be entitled to backwages of
pay complainant Judith Pulido her backwages from 07
₱130,000.00; and (d) she would execute the quitclaim and
August 2003 up to her actual or payroll reinstatement and to
release on May 11, 2006 in favor of petitioner.4 This left
reinstate her to her former position without loss of seniority
Alfante as the remaining complainant.
right.
On January 31, 2007, the NLRC rendered its decision
Respondent is further ordered to submit a report to this
dismissing the partial appeal for lack of merit.
Office on complainant’s reinstatement ten (10) days from
receipt of this decision. JEU and Alfante moved for the reconsideration of the
decision, but the NLRC denied their motion on April 24,
The charge of illegal dismissal by Michael Alfante is hereby
2007.
dismissed for lack of merit.
Thereafter, JEU and Alfante assailed the decision of the
The charge of unfair labor practice is dismissed for lack of
NLRC before the CA on certiorari (C.A.-G.R. SP No.
basis.
99407).
SO ORDERED.2
On February 5, 2010, the CA promulgated its decision in
Complainant Michael Alfante (Alfante), joined by his labor C.A.-G.R. SP No. 99407,7 decreeing:
organization, Journal Employees Union (JEU), filed a partial
35
WHEREFORE, premises considered, the instant petition is On August 18, 2010, the Court denied due course to the
PARTLY GRANTED. petition in G.R. No. 192478 for failure of petitioners to
sufficiently show that the CA had committed any reversible
The twin Resolutions dated January 31, 2007 and April 24,
error to warrant the Court’s exercise of its discretionary
2007, respectively, of the Third Division of the National
appellate jurisdiction.10
Labor Relations Commission (NLRC), in NLRC NCR CA
No. 048785-06 (NLRC NCR Case No. 00-10-11413-04), are The Court denied with finality JEU and Alfante’s ensuing
MODIFIED insofar as the funeral or bereavement aid is motion for reconsideration through the resolution of
concerned, which is hereby GRANTED, but only after December 8, 2010.11 The entry of judgment in G.R. No.
submission of conclusive proofs that the deceased is a 192478 issued in due course on February 1, 2011.12
parent, either father or mother, of the employees concerned,
On its part, petitioner likewise appealed (G.R. No. 192601),
as well as the death certificate to establish the fact of death
seeking the review of the CA’s disposition in the decision of
of the deceased legal dependent.
February 5, 2010 on the granting of the funeral and
The rest of the findings of fact and law in the assailed bereavement aid stipulated in the CBA.
Resolutions are hereby AFFIRMED.
In its petition for review, petitioner maintained that under
SO ORDERED. Section 4, Article XIII of the CBA, funeral and bereavement
aid should be granted upon the death of a legal dependent
Both parties moved for reconsideration, but the CA denied
of a regular employee; that consistent with the definition
their respective motions for reconsideration on June 2,
provided by the Social Security System (SSS), the term
2010.8
legal dependent referred to the spouse and children of a
JEU and Alfante appealed to the Court (G.R. No. 192478) to married regular employee, and to the parents and siblings,
challenge the CA’s dispositions regarding the legality of: (a) 18 years old and below, of a single regular employee;13that
Alfante’s dismissal; (b) the non-compliance with Minimum the CBA considered the term dependents to have the same
Wage Order No. 9; and (c) the non-payment of the rest meaning as beneficiaries, as provided in Section 5, Article
day.9 XIII of the CBA on the payment of death benefits;14 that its
earlier granting of claims for funeral and bereavement aid
without regard to the foregoing definition of the legal
36
dependents of married or single regular employees did not violation of Minimum Wage Order No. 9 shall no longer be
ripen into a company policy whose unilateral withdrawal considered and passed upon.
would constitute a violation of Article 100 of the Labor
The sole remaining issue is whether or not petitioner’s
Code,15 the law disallowing the non-diminution of
denial of respondents’ claims for funeral and bereavement
benefits;16 that it had approved only four claims from 1999
aid granted under Section 4, Article XIII of their CBA
to 2003 based on its mistaken interpretation of the term
constituted a diminution of benefits in violation of Article 100
legal dependents, but later corrected the same in
of the Labor Code.
2000;17 that the grant of funeral and bereavement aid for the
death of an employee’s legal dependent, regardless of the Ruling (yes)
employee’s civil status, did not occur over a long period of
time, was not consistent and deliberate, and was partly due The petition for review lacks merit.
to its mistake in appreciating a doubtful question of law; and The nature and force of a CBA are delineated in Honda
that its denial of subsequent claims did not amount to a Phils., Inc. v. Samahan ng Malayang Manggagawa sa
violation of the law against the non-diminution of benefits.18 Honda,20 thuswise:
In their comment,19 JEU and Alfante countered that the CBA A collective bargaining agreement (or CBA) refers to the
was a bilateral contractual agreement that could not be negotiated contract between a legitimate labor organization
unilaterally changed by any party during its lifetime; and that and the employer concerning wages, hours of work and all
the grant of burial benefits had already become a company other terms and conditions of employment in a bargaining
practice favorable to the employees, and could not anymore unit. As in all contracts, the parties in a CBA may establish
be reduced, diminished, discontinued or eliminated by such stipulations, clauses, terms and conditions as they
petitioner. may deem convenient provided these are not contrary to
law, morals, good customs, public order or public policy.
Issue
Thus, where the CBA is clear and unambiguous, it becomes
In view of the entry of judgment issued in G.R. No. 192478, the law between the parties and compliance therewith is
JEU and Alfante’s submissions on the illegality of his mandated by the express policy of the law.
dismissal, the non-payment of his rest days, and the

37
Accordingly, the stipulations, clauses, terms and conditions and siblings, 18 years old and below; and that the term
of the CBA, being the law between the parties, must be dependents has the same meaning as beneficiaries as used
complied with by them. The literal meaning of the in Section 5, Article XIII of the CBA.
stipulations of the CBA, as with every other contract, control
We cannot agree with petitioner’s insistence.
if they are clear and leave no doubt upon the intention of the
contracting parties.22 Social legislations contemporaneous with the execution of
the CBA have given a meaning to the term legal dependent.
Here, a conflict has arisen regarding the interpretation of the
First of all, Section 8(e) of the Social Security Law provides
term legal dependent in connection with the grant of funeral
that a dependent shall be the following, namely: (a) the legal
and bereavement aid to a regular employee under Section
spouse entitled by law to receive support from the member;
4, Article XIII of the CBA,23 which stipulates as follows:
(b) the legitimate, legitimated, or legally adopted, and
SECTION 4. Funeral/Bereavement Aid. The COMPANY illegitimate child who is unmarried, not gainfully employed
agrees to grant a funeral/bereavement aid in the following and has not reached 21 of age, or, if over 21 years of age,
instances: is congenitally or while still a minor has been permanently
incapacitated and incapable of self-support, physically or
a. Death of a regular employee in line of duty – ₱50,000
mentally; and (c) the parent who is receiving regular support
b. Death of a regular employee not in line of duty – ₱40,000 from the member. Secondly, Section 4(f) of R.A. No. 7875,
as amended by R.A. No. 9241,25 enumerates who are the
c. Death of legal dependent of a regular employee – legal dependents, to wit: (a) the legitimate spouse who is
₱15,000. (Emphasis supplied) not a member; (b) the unmarried and unemployed
Petitioner insists that notwithstanding the silence of the legitimate, legitimated, illegitimate, acknowledged children
CBA, the term legal dependent should follow the definition as appearing in the birth certificate; legally adopted or step-
of it under Republic Act (R.A.) No. 8282 (Social Security children below 21 years of age; (c) children who are 21
Law),24 so that in the case of a married regular employee, years old and order but suffering from congenital disability,
his or her legal dependents include only his or her spouse either physical or mental, or any disability acquired that
and children, and in the case of a single regular employee, renders them totally dependent on the member of our
his or her legal dependents include only his or her parents support; and (d) the parents who are 60 years old or older
whose monthly income is below an amount to be
38
determined by the Philippine Health Insurance Corporation Further, Aguas pointed out that a wife who left her family
in accordance with the guiding principles set forth in Article I until her husband died and lived with other men, was not
of R.A. No. 7875. And, thirdly, Section 2(f) of Presidential dependent upon her husband for support, financial or
Decree No. 1146, as amended by R.A. No. 8291,dependent otherwise, during the entire period.
for support upon the member or pensioner; (b) the
Said the Court:
legitimate, legitimated, legally adopted child, including the
illegitimate child, who is unmarried, not gainfully employed, In a parallel case involving a claim for benefits under the
not over the age of majority, or is over the age of majority GSIS law, the Court defined a dependent as "one who
but incapacitated and incapable of self-support due to a derives his or her main support from another. Meaning,
mental or physical defect acquired prior to age of majority; relying on, or subject to, someone else for support; not able
and (c) the parents dependent upon the member for to exist or sustain oneself, or to perform anything without
support.1âwphi1 the will, power, or aid of someone else." It should be noted
that the GSIS law likewise defines a dependent spouse as
It is clear from these statutory definitions of dependent that
"the legitimate spouse dependent for support upon the
the civil status of the employee as either married or single is
member or pensioner." In that case, the Court found it
not the controlling consideration in order that a person may
obvious that a wife who abandoned the family for more than
qualify as the employee’s legal dependent. What is rather
17 years until her husband died, and lived with other men,
decidedly controlling is the fact that the spouse, child, or
was not dependent on her husband for support, financial or
parent is actually dependent for support upon the employee.
otherwise, during that entire period. Hence, the Court
Indeed, the Court has adopted this understanding of the
denied her claim for death benefits.
term dependent in Social Security System v. De Los
Santos,27 viz: The obvious conclusion then is that a wife who is already
separated de facto from her husband cannot be said to be
Social Security System v. Aguas is instructive in
"dependent for support" upon the husband, absent any
determining the extent of the required "dependency" under
showing to the contrary. Conversely, if it is proved that the
the SS Law. In Aguas, the Court ruled that although a
husband and wife were still living together at the time of his
husband and wife are obliged to support each other,
death, it would be safe to presume that she was dependent
whether one is actually dependent for support upon the
other cannot be presumed from the fact of marriage alone.
39
on the husband for support, unless it is shown that she is granted to its employees. This prohibition against the
capable of providing for herself. diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote
Considering that existing laws always form part of any
their welfare and to afford labor full protection.29 The
contract, and are deemed incorporated in each and every
application of the prohibition against the diminution of
contract,28 the definition of legal dependents under the
benefits presupposes that a company practice, policy or
aforecited social legislations applies herein in the absence
tradition favorable to the employees has been clearly
of a contrary or different definition mutually intended and
established; and that the payments made by the employer
adopted by the parties in the CBA. Accordingly, the
pursuant to the practice, policy, or tradition have ripened
concurrence of a legitimate spouse does not disqualify a
into benefits enjoyed by them.30 To be considered as a
child or a parent of the employee from being a legal
practice, policy or tradition, however, the giving of the
dependent provided substantial evidence is adduced to
benefits should have been done over a long period of time,
prove the actual dependency of the child or parent on the
and must be shown to have been consistent and
support of the employee.
deliberate.31 It is relevant to mention that we have not yet
In this regard, the differentiation among the legal settled on the specific minimum number of years as the
dependents is significant only in the event the CBA has length of time sufficient to ripen the practice, policy or
prescribed a hierarchy among them for the granting of a tradition into a benefit that the employer cannot unilaterally
benefit; hence, the use of the terms primary beneficiaries withdraw.32
and secondary beneficiaries for that purpose. But
The argument of petitioner that the grant of the funeral and
considering that Section 4, Article XIII of the CBA has not
bereavement benefit was not voluntary but resulted from its
included that differentiation, petitioner had no basis to deny
mistaken interpretation as to who was considered a legal
the claim for funeral and bereavement aid of Alfante for the
dependent of a regular employee deserves scant
death of his parent whose death and fact of legal
consideration. To be sure, no doubtful or difficult question of
dependency on him could be substantially proved.
law was involved inasmuch as the several cogent statutes
Pursuant to Article 100 of the Labor Code, petitioner as the existing at the time the CBA was entered into already
employer could not reduce, diminish, discontinue or defined who were qualified as the legal dependents of
eliminate any benefit and supplement being enjoyed by or another. Moreover, the voluntariness of the grant of the
40
benefit became even manifest from petitioner’s admission SO ORDERED.
that, despite the memorandum it issued in 200033 in order to
"correct" the interpretation of the term legal dependent, it G.R. No. 202090
still approved in 2003 the claims for funeral and ICT MARKETING SERVICES, INC. (now known as
bereavement aid of two employees, namely: (a) Cecille SYKES MARKETING SERVICES, INC.), Petitioner,
Bulacan, for the death of her father; and (b) Charito Cartel, vs.
for the death of her mother, based on its supposedly MARIPHIL L. SALES, Respondent.
mistaken interpretation.34
DECISION
It is further worthy to note that petitioner granted claims for
funeral and bereavement aid as early as 1999, then issued DEL CASTILLO, J.:
a memorandum in 2000 to correct its erroneous This Petition for Review on Certiorari1 assails: 1) the
interpretation of legal dependent under Section 4, Article Januruy 10, 2012 Decision2 of the Court of Appeals (CA) in
XIII of the CBA. This notwithstanding, the 2001-2004 CA-G.R. SP No. 109860 nullifying and setting aside the
CBA35 still contained the same provision granting funeral or February 16, 20093 and May 20, 20094 Resolutions of the
bereavement aid in case of the death of a legal dependent National Labor Relations Commission (NLRC) in NLRC LAC
of a regular employee without differentiating the legal CN. 07-002404- 08(7)/(8) and reinstating with modification
dependents according to the employee's civil status as the April 30, 2008 Decision5 of the Labor Arbiter in NLRC-
married or single. The continuity in the grant of the funeral NCR Case No. 10-11004-07; and 2) the CA's May 28, 2012
and bereavement aid to regular employees for the death of Resolution6 denying petitioner's Motion for
their legal dependents has undoubtedly ripened into a 7
Reconsideration of the herein Assailed Decision.
company policy. With that, the denial of Alfante's qualified
claim for such benefit pursuant to Section 4, Article XIII of Factual Antecedents
the CBA violated the law prohibiting the diminution of Petitioner ICT Marketing Services, Inc. (ICT) – now known
benefits. as Sykes Marketing Services, Inc. – is a duly registered
WHEREFORE, the Court AFFIRMS the decision domestic corporation engaged in the business of providing
promulgated on February 5, 201 0; and ORDERS petitioner outsourced customer relations management and business
to pay the costs of suit. process outsourcing solutions to various clients in
41
government and in the financial services, insurance, On the third day of training (August 1), respondent was
telecommunications, health care, information technology, unable to attend. When she reported for training the next
media, energy, and hospitality industries. day, respondent was informed that she could not be
certified to handle calls for Bank of America due to her
On February 22, 2006, petitioner hired respondent Mariphil
failure to complete the training. From then on, respondent
L. Sales as its Customer Service Representative (CSR) or
was placed on "floating status" and was not given any work
Telephone Service Representative (TSR), and assigned her
assignment.
to its Capital One account. On August 21, 2006, respondent
became a regular employee, and her monthly base salary In a September 28, 2007 letter9 to petitioner’s Human
was increased to P16,350.00 and she was given monthly Resource (HR) Manager, respondent tendered her
transportation and meal allowances. resignation from work, effective upon receipt of the letter.
Respondent wrote:
On February 21, 2007, respondent was assigned to the
Washington Mutual account, where she was awarded with a I was forced to resign due to the reason that my
certificate for being the "Top Converter/Seller (Second employment was made on "floating status" effective August
Place)" for the month of April 2007.8 4, 2007 and up to present (almost two months)

On July 3, 2007, respondent wrote to Glen Odom (Odom) – I haven’t receive [sic] any notice from you or the HR
petitioner’s Vice President – complaining about supposed department to report for work despite my repeated follow-up
irregularities in the handling of funds entrusted to petitioner [with] your office thru telephone and mobile phone text
by Washington Mutual which were intended for distribution messages. Hence, I consider your inaction to my follow-up
to outstanding Washington Mutual CSRs and TSRs as as an indirect termination of my work with ICT.
prizes and incentives. However, no action appears to have
The reason I was placed [on] floating status is that, I was
been taken on her complaint.
absent during the third day of my training with Bank of
Respondent was then transferred to the Bank of America America, the account to which I was transferred from
account on July 30, 2007. Without prior notice to Washington Mutual (WaMu). However, my absence during
respondent, petitioner scheduled her for training from July such period was justified by the fact that I was sick and I
30 to August 6, 2007 on the very same day of her transfer. need [sic] to undergo a medical check-up on that date.

42
Furthermore, I see my transfer from WaMu Account to Bank on the part of ICT management is that, all my fellow agents
of America and the continued floating status of my work was who were [placed on floating status] for the same reason
prompted by the fact that I lodged a complaint against were all ordered to return to work except me [sic]. Moreover,
managers/supervisors assigned in WaMu account regarding ICT is continuously hiring TSR’s which only shows that
irregularities in the handling of funds given by ICT clients there are still accounts open or work available in ICT.
which were supposed to be distributed as prizes to TSR’s However despite the availability of work, I was still on
assigned with WaMu. After the filing of the said complaint, floating status.
through your office, I was transferred to another account
Based on the aforementioned facts and circumstance[s], it
(Bank of America) for no apparent reason. I was not even
is very clear that the harassment, pressure, and indefinite
included in the original list of those who were supposed to
floating of my employment with ICT are retaliatory acts
be transferred because my performance record with WaMu
perpetrated by the company because of my complaint/
is satisfactory as proven by the fact that I was even
request for investigation on the irregularities being
awarded with a certificate as "top converter (seller)" for the
committed by certain company officials.
month of April and was supposed to be included again in
the top three highest converter[s] for the month of May, but Thus, I can no longer bear the above-mentioned abuses
unfortunately irregularities were committed, that is why I and discrimination committed against me by ICT
filed the aforementioned complaint [with] your office. management. Therefore, I have no option but to sever my
relationship with the company, as my continued floating
On August 1, 2007, a few days after my transfer [to] Bank of
status had already prejudiced me emotionally and
America, my coach, angelo [sic], informed me that I will be
financially.10
having a training on that same day with Bank of America
which is really unexpected. I was not given a notice in Ruling of the Labor Arbiter
advance about the training. My coach informed me only
three hours before the said training. Later on during my On October 2, 2007, respondent filed a complaint for
constructive dismissal against petitioner and Odom before
training with Bank of America I was [placed on floating
the NLRC NCR, Quezon City, docketed as NLRC-NCR
status] indefinitely due to a single absence even though I
am a regular employee having worked in ICT for almost two Case No. 10-11004-07.
years. Another instance [of] discrimination [sic] and bad faith
43
In her Position Paper,11 Reply,12 Rejoinder,13 and combined moral and exemplary damages, and attorney’s
Surrejoinder,14 respondent claimed that for complaining fees equivalent to 10 per cent (10%) of the total award.
about the supposed irregularities in the Washington Mutual
In its Position Paper,18 Reply,19 Rejoinder,20 and
account, petitioner discriminated against her and unduly
Surrejoinder,21 petitioner prayed for the dismissal of the
punished her. Although she was not included in the original
complaint, arguing that respondent was transferred from the
list of CSRs/TSRs for program transfer, she was transferred
Washington Mutual account as an exercise of management
to another account, and then placed on "floating status,"
initiative or prerogative, and due to infractions22 committed
which is tantamount to suspending her indefinitely without
by her, as well as attendance and punctuality issues that
due process, despite her satisfactory performance.
arose. It claimed that respondent could not be certified for
Respondent averred that petitioner’s claim of multiple
the Bank of America account for failing to complete the
absences is not true, because not once was she penalized
training. It maintained that respondent was placed on
therefor, assuming such charge is true. Respondent also
standby status only, and not suspended or
alleged that her one-day absence during the training for the
constructively dismissed. In fact, she was directed to
Bank of America program cannot justify her being placed on
report to its HR department, but she did not do so. It also
a "floating status" because the "no-absence during training"
insisted that respondent resigned voluntarily. It denied
requirement cited by petitioner – using her employment
committing any act of discrimination or any other act which
contract15 and the "New Hire Training Bay"16 as bases –
rendered respondent’s employment impossible,
applies only to new hires on probationary status, and not to
unreasonable or unlikely. Finally, it claimed that prior notice
regularized employees. In any case, the "New Hire Training
of her transfer to the Bank of America account was made
Bay" used by petitioner was for the Capital One program.
through an electronic mail message sent to her; and that
She also pointed out that during her indefinite suspension or
respondent has no cause of action since she resigned
"floating status," petitioner continued to hire new CSRs, as
voluntarily, and thus could not have been illegally
shown by its newspaper advertisements during the
dismissed.
period.17Finally, she asserted that her resignation was not
voluntary, but was forced upon her by petitioner as a result On April 30, 2008, the Labor Arbiter rendered a
of its unlawful acts. Thus, respondent prayed for the Decision23 finding complainant to have been constructively
recovery of backwages, separation pay, P100,000.00 dismissed and awarding separation pay, moral and

44
exemplary damages, and attorney’s fees to respondent. The amount of P32,700.00, P50,000.00 moral and exemplary
Labor Arbiter held: damages plus 10% of the award as attorney’s fees,
hereunder computed:
x x x Complainant was indeed constructively dismissed from
her employment and she quitted [sic] because her I Separation Pay
continued employment thereat is rendered impossible,
unreasonable or unlikely. 2/21/06 – 8/4/07 = 2 yrs.

Complainant’s resignation was sparked by her transfer of P16,350.00 x 2 yrs. = P32,700.00

assignment and eventual placing her [sic] by the respondent
company of [sic] a "on floating" status. II Damages P50,000.00

x x x [T]here was no x x x evidence x x x that complainant’s

transfer was due to the request of a client. Further, if P82,700.00
complainant was indeed remised of [sic] her duties due to
her punctuality and attendance problem of committing P8,270.00
twelve (12) absences alone incurred in July 2007 [sic], why
10% Attorney’s Fees
was there no disciplinary action taken against her like
reprimand or warning[?] P90,970.00

xxxx SO ORDERED.24
And its effect, complainant is entitled to her claim of Ruling of the National Labor Relations Commission
separation pay, moral and exemplary damages of
P50,000.00 pesos [sic] including an award of attorney’s Petitioner appealed before the NLRC arguing that the Labor
fees. Arbiter erred in ruling that respondent was constructively
dismissed. It also argued that Odom was not personally
WHEREFORE, premises considered, judgment is rendered liable as he was merely acting in good faith and within his
ordering the respondents to pay complainant of [sic] one authority as corporate officer.
month pay per year of service as separation pay in the total

45
Respondent likewise interposed an appeal25 arguing that complainant did not report to Human Resources, and due to
the award of backwages should be computed from the date her derogatory record, the respondent company could not
of her dismissal until finality of the Labor Arbiter’s Decision; find another program where the complainant could be
and that the proportionate share of her 13th month pay transferred.
should be paid to her as well.
From what has been narrated above, We come to the
On February 16, 2009, the NLRC issued a conclusion that the respondent company cannot be faulted
Resolution,26 declaring as follows: for placing the complainant on "floating status." And there
does not appear to be any ill will or bad faith that can be
We reverse.
attributed to the respondent.
Upon an examination of the pleadings on file, We find that in
Finally, it is well to emphasize that the complainant tendered
the past the complainant had been transferred from one
her resignation on October 1, 2007. There is no evidence
program to another without any objection on her part.
that the complainant has presented that would indicate that
Insofar as the instant case is concerned, it appears that the
duress or force has been exerted on her.
complainant, aside from having been given a warning for
wrong disposition of a call, had been absent or usually late All told, We are of the opinion that the findings of the Labor
in reporting for work, constraining the respondent ICT to Arbiter are in stark contrast to the evidence on record.
transfer her to another program/account. Required of the
WHEREFORE, in view of the foregoing, the decision
complainant was for her to undergo Product Training for the
appealed from is hereby reversed and set aside.
program from July 30 to August 6, 2007, and the records
Addordingly [sic], a new one is entered dismissing the
indicate that she attended only two (2) days of training on
complaint for lack of merit.
July 30 and 31, 2007, did not report on August 1, 2007 and
again reported for training on August 2, 2007. It was then SO ORDERED.27
that ICT’s Operations Subject Matter Expert, Ms. Suzette
Lualhati, informed the complainant that she cannot be Respondent filed a Motion for Reconsideration,28 but in a
certified for the program because she failed to complete the May 20, 2009 Resolution,29 the motion was denied.
number of training days, and there was a need for her to Ruling of the Court of Appeals
report to Human Resources for further instructions. As the
46
In a Petition for Certiorari30 filed with the CA and docketed transfer to another account. Prior to her reassignment,
as CA-G.R. SP No. 109860, respondent sought a reversal petitioner’s annual performance merited increase in her
of the February 16, 2009 and May 20, 2009 Resolutions of salary effective February 2007 and was also awarded a
the NLRC. certificate of achievement for performing well in April 2007.
Her transfer was also abrupt as there was no written
Petitioner filed its Comment,31 to which respondent
transfer agreement informing her of the same and its
interposed a Reply.32
requirements unlike her previous transfer from Capital One
On January 10, 2012, the CA issued the assailed Decision to Washington Mutual account. It is therefore difficult to see
containing the following pronouncement: the reasonableness, urgency, or genuine business
necessity to transfer petitioner to a new account. While it
This Court finds the petition meritorious. may be true that petitioner has attendance and punctuality
While it is true that management has the prerogative to issues, her over-all performance as a CSR/TSR cannot be
transfer employees, the exercise of such right should not be said to be below par given the annual merit increase and
motivated by discrimination, made in bad faith, or effected the certificate of achievement awarded to her. If indeed,
as a form of punishment or demotion without sufficient private respondent corporation had trouble transferring the
cause. When the transfer is unreasonable, unlikely, petitioner to another post because of her derogatory record,
inconvenient, impossible, or prejudicial to the employee, it the corporation could just have dismissed her for cause.
already amounts to constructive dismissal. In constructive After petitioner’s unjustified transfer, she was informed by
dismissal, the employer has the burden of proving that the private respondent corporation that she could not be
transfer and demotion of an employee are for just and valid
"certified" or allowed to handle calls for the new account
grounds, such as genuine business necessity. Should the
because of her absence during training. She was later
employer fail to overcome this burden of proof, the
placed on a floating status and was not given another post.
employee’s transfer shall be tantamount to unlawful
constructive dismissal. The Court considers placing the petitioner on a floating
status as another unjustified action of the private
In the case at bench, private respondent corporation failed respondent corporation prejudicial to petitioner as
to discharge this burden of proof considering the
employee. In this case, except for private respondent
circumstances surrounding the petitioner’s July 2007
corporation’s bare assertion that petitioner no longer
47
reported to the human resources department as instructed, "I was forced to resign due to the reason that my
no proof was offered to prove that petitioner intended to employment was made on ‘floating status’ effective August
sever the employer-employee relationship. Private 4, 2007 and up to the present (almost two months) I haven’t
respondent corporation also offered no credible explanation receive [sic] any notice from you or the HR department to
why it failed to provide a new assignment to petitioner. Its report for work despite my repeated follow-up to your office
assertion that it is petitioner’s derogatory record which made thru telephone and mobile phone text
it difficult for the corporation to transfer her to another messages.1avvphi1 Hence, I consider your inaction to my
account despite its efforts is not sufficient to discharge the follow-up as an indirect termination of my work with ICT."
burden of proving that there are no posts or no accounts
Further, petitioner immediately filed a complaint for illegal
available or willing to accept her.
dismissal. Resignation, it has been held, is inconsistent with
In Nationwide Security and Allied Services, Inc. vs. the filing of a complaint. Thus, private respondent
Valderama,33 the Supreme Court declared that due to the corporation’s mere assertion that petitioner voluntarily
grim economic consequences to the employee of being resigned without offering convincing evidence to prove it, is
placed on a floating status, the employer should bear the not sufficient to discharge the burden of proving such
burden of proving that there are no posts available to which assertion. It is worthy to note that the fact of filing a
the employee temporarily out of work can be assigned. resignation letter alone does not shift the burden of proof
and it is still incumbent upon the employer to prove that the
These acts by the private respondent corporation, of
employee voluntarily resigned.
transferring petitioner to another account without sufficient
cause and proper notice and its subsequent failure to Therefore, we believe and so hold that petitioner was
provide a new post for her for two months without credible constructively dismissed from employment. Constructive
explanation, constitute unjustified actions prejudicial to the dismissal exists when the resignation on the part of the
petitioner as an employee, making it unbearable for her to employee was involuntary due to the harsh, hostile and
continue employment. unfavorable conditions set by the employer. The test for
constructive dismissal is whether a reasonable person in the
Thus, petitioner opted to resign, albeit involuntarily. The
employee’s position would feel compelled to give up his
involuntariness of her resignation is evident in her letter
employment under the prevailing circumstances. With the
which states categorically:
decision of the private respondent corporation to transfer
48
and to thereafter placed [sic] her on floating status, constructive dismissal took effect until the finality of this
petitioner felt that she was being discriminated and this decision.
perception compelled her to resign. It is clear from her
WHEREFORE, premises considered, the Resolutions dated
resignation letter that petitioner felt oppressed by the
February 16, 2009 and May 20, 2009 respectively, issued
situation created by the private respondent corporation, and
by the public respondent National Labor Relations
this forced her to surrender her position.
Commission (NLRC) in NLRC CA No. 07-002404-08 are
Under Article 279 of the Labor Code, an employee who is REVERSED and SET ASIDE. The decision of the Labor
unjustly dismissed from work shall be entitled to Arbiter dated April 30, 2008 is REINSTATED with
reinstatement without loss of seniority rights and other MODIFICATION that the petitioner Mariphil L. Sales, be
privileges and to his full backwages, inclusive of allowances, awarded backwages and other monetary benefits from the
and to his other benefits or their monetary equivalent date of her constructive dismissal up to the finality of this
computed from the time his compensation was withheld Decision.
from him up to the time of his actual reinstatement.
SO ORDERED.34
As petitioner did not pray for reinstatement but only sought
Petitioner filed a Motion for Reconsideration, but the same
payment of money claims, the labor arbiter is correct in
was denied in a May 28, 2012 Resolution. Hence, the
awarding separation pay equivalent to one month pay for
present Petition.
every year of service. We also do not find any cogent
reason to disturb the award of damages and attorney’s fees In a November 11, 2013 Resolution,35 this Court resolved to
since we have found bad faith on the part of the private give due course to the Petition.
respondent corporation to abruptly [sic] transfer and place
the petitioner on floating status. Individual respondent Glen Issues
Odom is however, exonerated from any liability as there Petitioner submits that –
was no clear finding that he acted with malice or bad faith.
Backwages and other monetary benefits must also be A.
included in compliance with the above-mentioned provision THE COURT OF APPEALS ERRED WHEN IT HELD THAT
of labor law which shall be reckoned from the time her RESPONDENT’S TRANSFER WAS UNJUSTIFIED

49
NOTWITHSTANDING EVIDENCE TO SHOW THAT Praying that the assailed CA dispositions be set aside and
RESPONDENT WAS NOT DEMOTED AND WAS EVEN that the NLRC’s February 16, 2009 and May 20, 2009
GIVEN THE SAME RANK AND PAY. Resolutions be reinstated instead, petitioner maintains in
the Petition and Reply37 that respondent’s transfer to
B.
another account was done as a valid exercise of
THE COURT OF APPEALS ERRED WHEN IT HELD THAT management prerogative, which allows it to regulate all
RESPONDENT’S PLACEMENT UNDER FLOATING aspects of employment. Her transfer was done in good faith,
STATUS WAS TANTAMOUNT TO CONSTRUCTIVE and without diminution in rank and salary. It contends that
DISMISSAL AS THIS IS CONTRARY TO NUMEROUS respondent knew very well that any CSR/TSR may be
DECISIONS OF THE HONORABLE COURT. transferred to another program/account anytime for
business reasons; in fact, respondent herself was
C. transferred from Capital One to Washington Mutual, and
THE COURT OF APPEALS ERRED WHEN IT she did not complain. Moreover, she knew as well that
REINSTATED LABOR ARBITER MACAM’S DECISION "schedule adherence" or attendance/punctuality is one of
DATED 30 APRIL 2008 WHICH DECLARED THAT the "metrics" or standards by which the performance of a
RESPONDENT WAS CONSTRUCTIVELY DISMISSED, CSR is measured, and that she failed to comply in this
NOTWITHSTANDING EVIDENCE THAT CLEARLY regard. It claims that the decision to place her on "floating
SHOWS THAT RESPONDENT VOLUNTARILY status" instead of dismissing her was an accommodation
RESIGNED. and should not be treated as an illegal or unjustified act; that
being on "floating status" is not tantamount to constructive
D. dismissal, and the failure to place or transfer respondent to
THE COURT OF APPEALS ERRED IN AWARDING another account was due to her derogatory record, and not
RESPONDENT SEPARATION PAY, BACKWAGES, petitioner’s bad faith or inaction. It insists that the placing of
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S an employee on "floating status" for up to six months is
FEES.36 allowed in the event of a bona fide suspension of the
operations or undertaking of a business.38 In any event,
Petitioner’s Arguments respondent’s voluntary resignation prior to the expiration of
the allowable six-month "floating status" period cannot
50
constitute constructive dismissal, and her immediate filing of bona fide suspension of petitioner’s business or undertaking
the labor case thereafter is thus premature. Finally, for a period not exceeding six months, as prescribed under
petitioner posits that since there is no illegal dismissal but Article 286 of the Labor Code,40 which would justify the
rather a voluntary relinquishment of respondent’s post, then suspension of her employment for up to six months. As
there is no basis for the pecuniary awards in her favor. enunciated in the Philippine Industrial Security Agency
Corp. v. Dapiton41 case which petitioner itself cited, Article
Respondent’s Arguments
286 applies only when there is a bona fide suspension of
In her Comment39 praying for dismissal of the Petition and the employer’s operation or undertaking for a period not
the corresponding affirmance of the assailed dispositions, exceeding six months, due to dire exigencies of the
respondent insists that she was illegally dismissed. She business that compel the employer to suspend the
reiterates that her transfer to the Bank of America account employment of its workers. Respondent points out that
was an undue penalty for her complaining about supposed petitioner continued with its business, and worse, it in fact
anomalies in the Washington Mutual account. She avers continued to hire new CSRs/TSRs during the period of
that the documentary evidence of her supposed respondent’s suspension from work. In fine, respondent
unauthorized absences were manufactured to support alleges that she was constructively dismissed and forced to
petitioner’s false allegations and mislead this Court into resign, rather than continue to subject herself to petitioner’s
believing that she was delinquent at work. discrimination, insensibility, harassment, and disdain; and
that for such illegal acts, she is entitled to indemnity from
She argues that assuming that these absences were true,
petitioner.
then they should have merited her dismissal for cause – yet
the fact is she was not dismissed nor punished for these Our Ruling
supposed absences. She asserts that petitioner’s claim that
The Court denies the Petition.
she was transferred on the recommendation of a client is
untrue and self-serving, and is unjustified since the client Respondent’s Transfer
has no authority to order or recommend her transfer. She
Under the doctrine of management prerogative, every
maintains that her being placed on "floating status" was
employer has the inherent right to regulate, according to his
illegal, since a) there is no evidence to prove her alleged
own discretion and judgment, all aspects of employment,
"attendance and punctuality issues," and b) there was no
51
including hiring, work assignments, working methods, the While the prerogative to transfer respondent to another
time, place and manner of work, work supervision, transfer account belonged to petitioner, it wielded the same unfairly.
of employees, lay-off of workers, and discipline, dismissal, The evidence suggests that at the time respondent was
and recall of employees. The only limitations to the exercise transferred from the Washington Mutual account to the
of this prerogative are those imposed by labor laws and the Bank of America program, petitioner was hiring additional
principles of equity and substantial justice. CSRs/TSRs.43 This simply means that if it was then hiring
new CSRs/TSRs, then there should be no need to transfer
While the law imposes many obligations upon the employer,
respondent to the Bank of America program; it could simply
nonetheless, it also protects the employer’s right to expect
train new hires for that program. Transferring respondent –
from its employees not only good performance, adequate
an experienced employee who was already familiar with the
work, and diligence, but also good conduct and loyalty. In
Washington Mutual account, and who even proved to be
fact, the Labor Code does not excuse employees from
outstanding in handling the same – to another account
complying with valid company policies and reasonable
means additional expenses for petitioner: it would have to
regulations for their governance and guidance.
train respondent for the Bank of America account, and train
Concerning the transfer of employees, these are the a new hire to take her place in the Washington Mutual
following jurisprudential guidelines: (a) a transfer is a account. This does not make sense; quite the contrary, it is
movement from one position to another of equivalent rank, impractical and entails more expense on petitioner’s part. If
level or salary without break in the service or a lateral respondent already knew her work at the Washington
movement from one position to another of equivalent rank Mutual account very well, then it is contrary to experience
or salary; (b) the employer has the inherent right to transfer and logic to transfer her to another account which she is not
or reassign an employee for legitimate business purposes; familiar with, there to start from scratch; this could have
(c) a transfer becomes unlawful where it is motivated by been properly relegated to a new hire.
discrimination or bad faith or is effected as a form of
There can be no truth to petitioner’s claim either that
punishment or is a demotion without sufficient cause; (d) the
respondent’s transfer was made upon request of the client.
employer must be able to show that the transfer is not
If she was performing outstanding work and bringing in
unreasonable, inconvenient, or prejudicial to the
good business for the client, there is no reason – indeed it is
employee.42
beyond experience and logic – to conclude that the client
52
would seek her transfer. Such a claim could only be Respondent’s work as a CSR – which is essentially that of a
fabricated. Truly, Experience which is the life of the law — call center agent – is not easy. For one, she was made to
as well as logic and common sense — militates against the work the graveyard shift – that is, from late at night or
petitioners’ cause.44 midnight until dawn or early morning. This certainly takes a
toll on anyone’s physical health. Indeed, call center agents
Moreover, as the appellate court correctly observed, even if
are subjected to conditions that adversely affect their
respondent had attendance and punctuality issues, her
physical, mental and emotional health; exposed to extreme
overall performance as a CSR/TSR was certainly far from
stress and pressure at work by having to address the
mediocre; on the contrary, she proved to be a top
customers’ needs and insure their satisfaction, while
performer. And if it were true that respondent suddenly
simultaneously being conscious of the need to insure
became lax by way of attendance in July 2007, it is not
efficiency at work by improving productivity and a high level
entirely her fault. This may be attributed to petitioner’s
of service; subjected to excessive control and strict
failure to properly address her grievances relative to the
surveillance by management; exposed to verbal abuse from
supposed irregularities in the handling of funds entrusted to
customers; suffer social alienation precisely because they
petitioner by Washington Mutual which were intended for
work the graveyard shift – while family and friends are at
distribution to outstanding Washington Mutual CSRs and
rest, they are working, and when they are at rest, family and
TSRs as prizes and incentives. She wrote petitioner about
friends are up and about; and they work at a quick-paced
her complaint on July 3, 2007; however, no explanation was
environment and under difficult circumstances owing to
forthcoming from petitioner, and it was only during these
progressive demands and ambitious quotas/targets set by
proceedings – or after a case had already been filed – that
management. To top it all, they are not exactly well-paid for
petitioner belatedly and for no other useful purpose
the work they have to do and the conditions they have to
attempted to address her concerns. This may have caused
endure. Respondent’s written query about the prizes and
a bit of disillusionment on the part of respondent, which led
incentives is not exactly baseless and frivolous; the least
her to miss work for a few days in July 2007. Her grievance
petitioner could have done was to timely address it, if it
should have been addressed by petitioner; after all, they
cared about its employee’s welfare. By failing to address
were serious accusations, and have a bearing on the
respondent’s concerns, petitioner exhibited an indifference
CSRs/TSRs’ overall performance in the Washington Mutual
and lack of concern for its employees – qualities that are
account.
diametrically antithetical to the spirit of the labor laws, which
53
aim to protect the welfare of the workingman and foster The managerial prerogative to transfer personnel must be
harmonious relations between capital and labor. By its exercised without grave abuse of discretion, bearing in mind
actions, petitioner betrayed the manner it treats its the basic elements of justice and fair play. Having the right
employees. should not be confused with the manner in which that right
is exercised. Thus, it cannot be used as a subterfuge by the
Thus, the only conceivable reason why petitioner
employer to rid himself of an undesirable worker. In
transferred respondent to another account is the fact that
particular, the employer must be able to show that the
she openly and bravely complained about the supposed
transfer is not unreasonable, inconvenient or prejudicial to
anomalies in the Washington Mutual account; it is not her
the employee; nor does it involve a demotion in rank or a
"derogatory record" or her "attendance and punctuality
diminution of his salaries, privileges and other benefits.
issues", which are insignificant and thus irrelevant to her
Should the employer fail to overcome this burden of proof,
overall performance in the Washington Mutual account.
the employee’s transfer shall be tantamount to constructive
And, as earlier stated, respondent’s "attendance and
dismissal, which has been defined as a quitting because
punctuality issues" were attributable to petitioner’s
continued employment is rendered impossible,
indifference, inaction, and lack of sensitivity in failing to
unreasonable or unlikely; as an offer involving a demotion in
timely address respondent’s complaint. It should share the
rank and diminution in pay.
blame for respondent’s resultant delinquencies.
Likewise, constructive dismissal exists when an act of clear
Thus, in causing respondent’s transfer, petitioner clearly
discrimination, insensibility or disdain by an employer has
acted in bad faith and with discrimination, insensibility and
become so unbearable to the employee leaving him with no
disdain; the transfer was effected as a form of punishment
option but to forego with his continued
for her raising a valid grievance related to her work.
employment.45(Emphasis and underscoring supplied)
Furthermore, said transfer was obviously unreasonable, not
The instant case can be compared to the situation in
to mention contrary to experience, logic, and good business
Veterans Security Agency, Inc. v. Gonzalvo, Jr.,46 where the
sense. This being the case, the transfer amounted to
employee concerned – a security guard who was brave
constructive dismissal.
enough to complain about his employer’s failure to remit its
employees’ Social Security System premiums – was "tossed
around" and finally placed on floating status for no valid
54
reason. Taking the poor employee’s side, this Court The only logical conclusion from the foregoing discussion is
declared: that the VSAI constructively dismissed the respondent. This
ruling is in rhyme with the findings of the Court of Appeals
True, it is the inherent prerogative of an employer to transfer
and the NLRC. Dismissal is the ultimate penalty that can be
and reassign its employees to meet the requirements of its
meted to an employee. Inasmuch as petitioners failed to
business. Be that as it may, the prerogative of the
adduce clear and convincing evidence to support the
management to transfer its employees must be exercised
legality of respondent’s dismissal, the latter is entitled to
without grave abuse of discretion. The exercise of the
reinstatement and back wages as a necessary
prerogative should not defeat an employee’s right to
consequence. However, reinstatement is no longer feasible
security of tenure. The employer’s privilege to transfer its
in this case because of the palpable strained relations, thus,
employees to different workstations cannot be used as a
separation pay is awarded in lieu of reinstatement.
subterfuge to rid itself of an undesirable worker.
xxxx
Here, riled by respondent’s consecutive filing of complaint
against it for nonpayment of SSS contributions, VSAI had Indeed, the Court ought to deny this petition lest the wheels
been tossing respondent to different stations thereafter. of justice for aggrieved workingmen grind to a halt. We
From his assignment at University of Santo Tomas for ought to abate the culture of employers bestowing security
almost a year, he was assigned at the OWWA main [o]ffice of tenure to employees, not on the basis of the latter’s
in Pasig where he served for more than three years. After performance on the job, but on their ability to toe the line set
three years at the OWWA main office, he was transferred to by their employer and endure in silence the flagrant
the OWWA Pasay City parking lot knowing that the security incursion of their rights, zealously protected by our labor
services will end forthwith. VSAI even concocted the reason laws and by the Constitution, no less.47 (Emphasis and
that he had to be assigned somewhere because his spouse underscoring supplied)
was already a lady guard assigned at the OWWA main
Respondent’s Floating Status
office. Inasmuch as respondent was single at that time, this
was obviously a mere facade to [get] rid of respondent who In placing respondent on "floating status," petitioner further
was no longer in VSAIs good graces. acted arbitrarily and unfairly, making life unbearable for her.
In so doing, it treated respondent as if she were a new hire;

55
it improperly disregarded her experience, status, petitioner refused to certify her and instead placed her on
performance, and achievements in the company; and most floating status. Far from being an "accommodation" as
importantly, respondent was illegally deprived of her salary petitioner repeatedly insists, respondent became the victim
and other emoluments. For her single absence during of a series of illegal punitive measures inflicted upon her by
training for the Bank of America account, she was refused the former.
certification, and as a result, she was placed on floating
Besides, as correctly argued by respondent, there is no
status and her salary was withheld. Clearly, this was an act
basis to place her on "floating status" in the first place since
of discrimination and unfairness considering that she was
petitioner continued to hire new CSRs/TSRs during the
not an inexperienced new hire, but a promising and award-
period, as shown by its paid advertisements and
winning employee who was more than eager to succeed
placements in leading newspapers seeking to hire new
within the company. This conclusion is not totally baseless,
CSRs/TSRs and other employees.48 True enough, the
and is rooted in her outstanding performance at the
placing of an employee on "floating status" presupposes,
Washington Mutual account and her complaint regarding
among others, that there is less work than there are
the incentives, which only proves her zeal, positive work
employees;49 but if petitioner continued to hire new
attitude, and drive to achieve financial success through hard
CSRs/TSRs, then surely there is a surplus of work available
work. But instead of rewarding her, petitioner unduly
for its existing employees: there is no need at all to place
punished her; instead of inspiring her, petitioner dashed her
respondent on floating status. If any, respondent – with her
hopes and dreams; in return for her industry, idealism,
experience, knowledge, familiarity with the workings of the
positive outlook and fervor, petitioner left her with a legacy
company, and achievements – should be the first to be
of, and awful examples in, office politicking, intrigue, and
given work or posted with new clients/accounts, and not
internecine schemes.
new hires who have no experience working for petitioner or
In effect, respondent’s transfer to the Bank of America who have no related experience at all. Once more,
account was not only unreasonable, unfair, inconvenient, experience, common sense, and logic go against the
and prejudicial to her; it was effectively a demotion in rank position of petitioner.
and diminution of her salaries, privileges and other benefits.
The CA could not be more correct in its pronouncement that
She was unfairly treated as a new hire, and eventually her
placing an employee on floating status presents dire
salaries, privileges and other benefits were withheld when
consequences for him or her, occasioned by the withholding
56
of wages and benefits while he or she is not reinstated. To reviewed and corrected by the appellate court, should be
restate what the appellate court cited, "[d]ue to the grim accorded finality and deemed binding on this Court.
economic consequences to the employee, the employer
Settled is the rule that an employee who is unjustly
should bear the burden of proving that there are no posts
dismissed from work shall be entitled to reinstatement
available to which the employee temporarily out of work can
without loss of seniority rights and other privileges, and to
be assigned."50 However, petitioner has failed miserably in
his full backwages, inclusive of allowances and to his other
this regard.
benefits or their monetary equivalent computed from the
Resignation time his compensation was withheld up to the time of actual
reinstatement. If reinstatement is not possible, however, the
While this Court agrees with the appellate court’s
award of separation pay is proper.
observation that respondent’s resignation was involuntary
as it became unbearable for her to continue with her Backwages and reinstatement are separate and distinct
employment, expounding on the issue at length is reliefs given to an illegally dismissed employee in order to
unnecessary. alleviate the economic damage brought about by the
employee’s dismissal. "Reinstatement is a restoration to a
Because she is deemed constructively dismissed from the
state from which one has been removed or separated" while
time of her illegal transfer, her subsequent resignation
"the payment of backwages is a form of relief that restores
became unnecessary and irrelevant. There was no longer
the income that was lost by reason of the unlawful
any position to relinquish at the time of her resignation.
dismissal." Therefore, the award of one does not bar the
Pecuniary Awards other.

With the foregoing pronouncements, an award of indemnity In the case of Aliling v. Feliciano, citing Golden Ace Builders
in favor of respondent should be forthcoming. In case of v. Talde, the Court explained:
constructive dismissal, the employee is entitled to full
Thus, an illegally dismissed employee is entitled to two
backwages, inclusive of allowances, and other benefits or
reliefs: backwages and reinstatement. The two reliefs
their monetary equivalent, as well as separation pay in lieu
provided are separate and distinct. In instances where
of reinstatement. The readily determinable amounts, as
reinstatement is no longer feasible because of strained
computed by the Labor Arbiter and correspondingly
57
relations between the employee and the employer, 3) Moral and exemplary damages in the amount of
separation pay is granted. In effect, an illegally dismissed P50,000.00;
employee is entitled to either reinstatement, if viable, or
4) Attorney's fees equivalent to ten percent (10%) of the
separation pay if reinstatement is no longer viable, and
total monetary award; and
backwages.
5) Interest of twelve per cent (12%) per annum of the total
The normal consequences of respondents’ illegal dismissal,
monetary awards, computed from July 30, 2007 up to June
then, are reinstatement without loss of seniority rights, and
30, 2013, and thereafter, six percent (6%) per annum from
payment of backwages computed from the time
July 1, 2013 until their full satisfaction.
compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as The appropriate Computation Division of the National Labor
an option, separation pay equivalent to one (1) month salary Relations Commission is hereby ordered to COMPUTE and
for every year of service should be awarded as an UPDATE the award as herein determined WITII DISPATCH.
alternative. The payment of separation pay is in addition to
SO ORDERED.
payment of backwages.51

WHEREFORE, the Petition is DENIED. The assailed G.R. No. 174184 January 28, 2015
January 10, 2012 Decision and May 28, 2012 Resolution of
G.J.T. REBUILDERS MACHINE SHOP, GODO FREDO
the Court of Appeals in CA-G.R. SP No. 109860 are
TRILLANA, and JULIANA TRILLANA, Petitioners,
AFFIRMED, with MODIFICATIONS, in that petitioner ICT vs.
Marketing Services, Inc., now known as Sykes Marketing RICARDO AMBOS, BENJAMIN PUTIAN, and RUSSELL
Services, Inc., is ordered to PAY respondent Mariphil L. AMBOS, Respondents.
Sales the following:
DECISION
1) Backwages and all other benefits from July 30, 2007 until
finality of this Decision; LEONEN, J.:

2) Separation pay equivalent to one (1) month salary for To prove serious business losses, employers must present
every year of service; in evidence financial statements showing the net losses
suffered by the business within a sufficient period of time.
58
Generally, it cannot be based on a single financial Despite the building owner’s notice to vacate, G.J.T.
statement showing losses. Absent this proof, employers Rebuilders continued its business in the condemned
closing their businesses must pay the dismissed employees building. When the building owner finally refused to
separation pay equivalent to one-month pay or to at least accommodate it, G.J.T. Rebuilders left its rented space and
one-half-month pay for every year of service, whichever is closed the machine shop on December 15, 1997.8 It then
higher. filed an Affidavit of Closure before the Department of Labor
and Employment on February 16, 1998 and a sworn
This is a Petition for Review on Certiorari 1 of the Court of application to retire its business operations before the
Appeals' Decision,2 granting Ricardo Ambos, Russell Mandaluyong City Treasurer’s Office on February 25, 1998.9
Ambos,3 and Benjamin Putian's Petition for Certiorari. The
Court of Appeals found that G.J.T. Rebuilders Machine Having lost their employment without receiving separation
Shop (G.J.T. Rebuilders) failed to prove its alleged serious pay, Ricardo, Russell, and Benjamin filed a Complaint for
business losses. Thus, when it closed its establishment on illegal dismissal before the Labor Arbiter. They prayed for
December 15, 1997, G.J.T. Rebuilders should have paid the payment of allowance, separation pay, and attorney’s
affected employees separation pay.4 fees.10

G.J.T. Rebuilders is a single proprietorship owned by the In their defense, G.J.T. Rebuilders and the Trillana spouses
Spouses Godofredo and Juliana Trillana (Trillana spouses). argued that G.J.T. Rebuilders suffered serious business
It was engaged in steel works and metal fabrication, losses and financial reverses, forcing it to close its machine
employing Ricardo Ambos (Ricardo), Russell Ambos shop. Therefore, Ricardo, Russell, and Benjamin were not
(Russell), and Benjamin Putian (Benjamin) as machinists.5 entitled to separation pay.11

G.J.T. Rebuilders rented space in the Far East Asia (FEA) Labor Arbiter Facundo L. Leda (Labor Arbiter Leda) decided
Building in Shaw Boulevard, Mandaluyong City, which the Complaint, finding no convincing proof of G.J.T.
served as the site of its machine shop. On September 8, Rebuilders’ alleged serious business losses. Labor Arbiter
1996, a fire partially destroyed the FEA Building.6 Leda, in the Decision12 dated December 28, 1999, found
that Ricardo, Russell, and Benjamin were entitled to
Due to the damage sustained by the building, its owner separation pay under Article 283 of the Labor Code.13 In
notified its tenants to vacate their rented units by the end of addition, they were awarded attorney’s fees, having been
September 1996 "to avoid any unforeseen accidents which constrained to litigate their claims.14
may arise due to the damage."7

59
Even assuming that G.J.T. Rebuilders’ closure was due to Ricardo, Russell, and Benjamin filed a Motion for
serious business losses, Labor Arbiter Leda held that the Reconsideration, which the National Labor Relations
employees affected were still entitled to separation pay Commission denied in the Resolution21 dated March 5,
"based on social justice and equity."15 2001.

G.J.T. Rebuilders and the Trillana spouses appealed Labor Because of the alleged grave abuse of discretion of the
Arbiter Leda’s Decision before the National Labor Relations National Labor Relations Commission, a Petition for
Commission.16 Certiorari was filed before the Court of Appeals.22

In contrast with the Labor Arbiter’s finding, the National The Court of Appeals reversed the National Labor Relations
Labor Relations Commission found G.J.T. Rebuilders to Commission’s Decision, agreeing with Labor Arbiter Leda
have suffered serious business losses. Because of the fire that G.J.T. Rebuilders failed to prove its alleged serious
that destroyed the building where G.J.T. Rebuilders was business losses. The Court of Appeals conceded that G.J.T.
renting space, the demand for its services allegedly Rebuilders had to close the machine shop for reasons
declined as "no same customer would dare to entrust connected with the fire that partially destroyed the building
machine works to be done for them in a machine shop lying where it was renting space. Nevertheless, G.J.T. Rebuilders
in a ruined and condemned building."17 The National Labor continued its business for more than one year after the fire.
Relations Commission then concluded that the fire Thus, according to the Court of Appeals, G.J.T. Rebuilders
"proximately caused"18 G.J.T. Rebuilders’ serious business did not suffer from serious business losses but closed the
losses, with its financial statement for the fiscal year 1997 machine shop to prevent losses.23
showing a net loss of 316,210.00.19
With respect to G.J.T. Rebuilders’ financial statement
20
In the Decision dated January 25, 2001, the National showing an alleged net loss in 1997, the Court of Appeals
Labor Relations Commission vacated and set aside Labor refused to admit it in evidence since it was not subscribed
Arbiter Leda’s Decision and dismissed the Complaint for under oath by the Certified Public Accountant who prepared
lack of merit. Since the Commission found that G.J.T. it. According to the Court of Appeals, the financial statement
Rebuilders ceased operations due to serious business was subscribed under oath only after G.J.T. Rebuilders had
losses, it held that G.J.T. Rebuilders and the Trillana submitted it to Labor Arbiter Leda as an annex to its Motion
spouses need not pay Ricardo, Russell, and Benjamin to re-open proceedings and to submit additional evidence.
separation pay. Thus, the Court of Appeals gave G.J.T. Rebuilders’ financial
statement "scant consideration."24

60
In the Decision25 dated January 17, 2006, the Court of As for respondents, they contend that G.J.T. Rebuilders
Appeals granted the Petition for Certiorari, vacating and failed to prove its alleged serious business losses. They
setting aside the National Labor Relations Commission’s argue that the financial statement showing a net loss for the
Decision. It reinstated Labor Arbiter Leda’s Decision dated year 1997 was not credible, having been belatedly
December 28, 1999. subscribed under oath by the Certified Public Accountant
who prepared it.33
G.J.T. Rebuilders and the Trillana spouses filed a Motion for
Reconsideration, which the Court of Appeals denied in the With no credible proof of G.J.T. Rebuilders’ supposed
Resolution26 dated August 11, 2006. serious business losses, respondents argue that petitioners
must pay them separation pay under Article 283 of the
Petitioners G.J.T. Rebuilders and the Trillana spouses filed Labor Code.34
before this court a Petition for Review on
27
Certiorari. Respondents Ricardo, Russell, and Benjamin The issue for our resolution is whether petitioners
commented28 on the Petition, after which petitioners filed a sufficiently proved that G.J.T. Rebuilders suffered from
Reply.29 serious business losses.

In their Petition for Review on Certiorari, petitioners maintain This petition should be denied.
that G.J.T. Rebuilders suffered serious business losses as
evidenced by its financial statement covering the years I
1996 and 1997. Petitioners admit that the financial
statement was belatedly subscribed under G.J.T. Rebuilders must pay respondents
30
oath. Nevertheless, "the credibility or veracity of the their separation pay for failure to prove
entries"31 in the financial statement was not affected since its alleged serious business losses
the Bureau of Internal Revenue received the same
unsubscribed financial statement when G.J.T. Rebuilders Article 283 of the Labor Code allows an employer to dismiss
allegedly filed its income tax return on April 15, 1998.32 an employee due to the cessation of operation or closure of
its establishment or undertaking, thus:
Considering that petitioners sufficiently proved G.J.T.
Rebuilders’ serious business losses, petitioners argue that Art. 283. Closure of establishment and reduction of
respondents are not entitled to separation pay. personnel. – The employer may also terminate the
employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment
61
or undertaking unless the closing is for the purpose of However, despite this management prerogative, employers
circumventing the provisions of this Title, by serving a closing their businesses must pay the affected workers
written notice on the workers and the Department of Labor separation pay equivalent to one-month pay or to at least
and Employment at least one (1) month before the intended one-half-month pay for every year of service, whichever is
date thereof. In case of termination due to installation of higher.40 The reason is that an employee dismissed, even
labor saving devices or redundancy, the worker affected for an authorized cause, loses his or her means of
thereby shall be entitled to a separation pay equivalent to at livelihood.41
least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of The only time employers are not compelled to pay
retrenchment to prevent losses and in cases of closures or separation pay is when they closed their establishments or
cessation of operations of establishment or undertaking not undertaking due to serious business losses or financial
due to serious business losses or financial reverses, the reverses.42
separation pay shall be equivalent to one (1) month pay or
to at least one-half (1/2) month pay for every year of Serious business losses are substantial losses, not de
service, whichever is higher. A fraction of at least six (6) minimis.43 "Losses" means that the business must have
months shall be considered one (1) whole year. operated at a loss for a period of time for the employer "to
[have] perceived objectively and in good faith"44 that the
The decision to close one’s business is a management business’ financial standing is unlikely to improve in the
prerogative that courts cannot interfere with.35 Employers future.
can "lawfully close shop at anytime,"36 even for reasons of
their own. "Just as no law forces anyone to go into The burden of proving serious business losses is with the
business, no law can compel anybody to continue in it."37 In employer.45 The employer must show losses on the basis of
Mac Adams Metal Engineering Workers Union-Independent financial statements covering a sufficient period of time. The
v. Mac Adams Metal Engineering,38 this court said: period covered must be sufficient for the National Labor
Relations Commission and this court to appreciate the
It would indeed be stretching the intent and spirit of the law nature and vagaries of the business.
if [courts] were to unjustly interfere with the management’s
prerogative to close or cease its business operations just In North Davao Mining Corporation v. NLRC,46 North Davao
because [the] business operation or undertaking is not Mining Corporation presented in evidence financial
suffering from any loss or simply to provide the workers statements showing a continuing pattern of loss from 1988
continued employment.39 until its closure in 1992. The company suffered net losses
averaging 3 billion a year, with an aggregate loss of 20
62
billion by the time of its closure.47 This court found that We uphold G.J.T. Rebuilders’ decision to close its
North Davao suffered serious business losses.48 establishment as a valid exercise of its management
prerogative. G.J.T. Rebuilders closed its machine shop,
In Manatad v. Philippine Telegraph and Telephone believing that its "former customers . . . seriously doubted
Corporation,49 the Philippine Telegraph and Telephone [its] capacity . . . to perform the same quality [of
Corporation presented in evidence financial statements service]"56 after the fire had partially damaged the building
showing a continuing pattern of loss from 1995 to where it was renting space.
1999.50 By 2000, the corporation suffered an aggregate loss
of 2.169 billion, constraining it to retrench some of its Nevertheless, we find that G.J.T. Rebuilders failed to
employees. This court held that the Philippine Telegraph sufficiently prove its alleged serious business losses.
and Telephone Corporation was "fully justified in
implementing a retrenchment program since it was The financial statement G.J.T. Rebuilders submitted in
undergoing business reverses, not only for a single fiscal evidence covers the fiscal years 1996 and 1997. Based on
year, but for several years prior to and even after the the financial statement, G.J.T. Rebuilders earned a net
program."51 income of 61,157.00 in 1996 and incurred a net loss of
316,210.00 in 1997.57
In LVN Pictures Employees and Workers Association (NLU)
v. LVN Pictures, Inc.,52 a case G.J.T. Rebuilders cited, LVN We find the two-year period covered by the financial
Pictures, Inc. presented in evidence financial statements statement insufficient for G.J.T. Rebuilders to have
showing a continuing pattern of loss from 1957 to 1961. By objectively perceived that the business would not recover
the time the corporation closed its business, it had suffered from the loss. Unlike in North Davao Mining Corporation,
an aggregate loss of 1,560,985.14.53 This court found that Manatad, and LVN Pictures Employees and Workers
LVN Pictures, Inc. suffered serious business losses.54 Association (NLU), no continuing pattern of loss within a
sufficient period of time is present in this case. In fact, in
Aside from the obligation to pay separation pay, employers one of the two fiscal years covered by the financial
must comply with the notice requirement under Article 283 statement presented in evidence, G.J.T. Rebuilders earned
of the Labor Code. Employers must serve a written notice a net income. We, therefore, agree with the Labor Arbiter
on the affected employees and on the Department of Labor and the Court of Appeals that G.J.T. Rebuilders closed its
and Employment at least one month before the intended machine shop to prevent losses, not because of serious
date of closure. Failure to comply with this requirement business losses.58
renders the employer liable for nominal damages.55

63
Considering that G.J.T. Rebuilders failed to prove its alleged service is equal to 7,312.50. The latter amount being higher,
serious business losses, it must pay respondents their Russell must receive 7,312.50 as separation pay.
separation pay equivalent to one-month pay or at least one-
half-month pay for every year of service, whichever is As for Benjamin, he began working as a machinist on
higher. In computing the period of service, a fraction of at February 1, 1994.66 Since he last worked for G.J.T.
least six months is considered a year.59 Rebuilders on December 15, 1997, he worked a total of
three years, 10 months, and 14 days. This period is rounded
Ricardo began working as a machinist on February 9, off to four years, with the last 10 months and 14 days being
1978.60 Since he last worked for G.J.T. Rebuilders on considered a year.67
December 15, 1997, he worked a total of 19 years, 10
months, and six days. This period is rounded off to 20 Benjamin had a daily salary of 225.00 and worked 13 days
years, with the last 10 months and six days being a month.68 His one-month pay, therefore, is equal to
considered a year.61 2,925.00. On the other hand, his one-half-month pay for
every year of service is equal to 5,850.00. The latter amount
Ricardo had a daily salary of 230.00 and worked 13 days a being higher, Benjamin must receive 5,850.00 as separation
month.62 His one-month pay, therefore, is equal to 2,990.00. pay.
On the other hand, his one-half-month pay for every year of
service is equal to 29,250.00. The latter amount being II
higher, Ricardo must receive 29,250.00 as separation pay.
G.J.T. Rebuilders must pay respondents
With respect to Russell, he began his employment on nominal damages for failure to comply
September 1, 1992.63 Since he last worked for G.J.T. with the procedural requirements for
Rebuilders on December 15, 1997, he worked a total of five closing its business
years, three months, and 14 days. This period is rounded off
to five years, not six years, since the last three months and In addition to separation pay, G.J.T. Rebuilders must pay
14 days are less than the six months required to be each of the respondents nominal damages for failure to
considered a year.64 comply with the notice requirement under Article 283 of the
Labor Code.
Russell had a daily salary of 225.00 and worked 13 days a
month.65 His one-month pay, therefore, is equal to 2,925.00. Notice of the eventual closure of establishment is a
On the other hand, his one-half-month pay for every year of "personal right of the employee to be personally informed of
his [or her] proposed dismissal as well as the reasons

64
therefor."69 The reason for this requirement is to "give the allegedly submitted an Affidavit of Closure to the
employee some time to prepare for the eventual loss of his Department of Labor and Employment on February 16,
[or her] job."70 1998.78

The requirement "is not a mere technicality or formality "Conferring with employees" is not the notice required under
which the employer may dispense with."71 Should Article 283 of the Labor Code.1âwphi1 The law requires a
employers fail to properly notify their employees, they shall written notice of closure served on the affected employees.
be liable for nominal damages even if they validly closed As to when the written notice should be served on the
their businesses.72 Department of Labor and Employment, the law requires that
it be served at least one month before the intended date of
Generally, employers that validly closed their businesses closure. G.J.T. Rebuilders served the written notice on the
but failed to comply with the notice requirement are liable in Department of Labor and Employment on February 16,
the amount of 50,000.00.73 This amount of nominal 1998, two months after it had closed its business on
damages, however, may be reduced depending on "the December 15, 1997.
sound discretion of the court."74 In Sangwoo Philippines,
Inc. v. Sangwoo Philippines, Inc. Employees Union- With G.J.T. Rebuilders failing to comply with the notice
OLALIA,75 we said that: requirement under Article 283 of the Labor Code, we find
that it deprived respondents of due process. However,
[i]n the determination of the amount of nominal damages considering that G.J.T. Rebuilders attempted to comply with
which is addressed to the sound discretion of the court, the notice requirement, we find the nominal damages of
several factors are taken into account: (1) the authorized 10,000.00 for each of the respondents sufficient.79
cause invoked . . .; (2) the number of employees to be
awarded; (3) the capacity of the employers to satisfy the III
awards, taking into account their prevailing financial status
as borne by the records; (4) the employer’s grant of other Respondents are not entitled to attorney’s fees
termination benefits in favor of the employees; and (5)
whether there was bona fide attempt to comply with the Attorney’s fees "represent the reasonable compensation [a
notice requirements as opposed to giving no notice at all.76 client pays his or her lawyer] [for legal service
rendered]."80 The award of attorney’s fees is the exception
G.J.T. Rebuilders allegedly "conferred with all [of its rather than the rule.81 Specifically in labor cases, attorney’s
employees] of [its] intention to cease business fees are awarded only when there is unlawful withholding of
operations"77 one month before closing its business. It wages82 or when the attorney’s fees arise from collective
65
bargaining negotiations that may be charged against union Ricardo Ambos ₱29,250.00
funds in an amount to be agreed upon by the parties.83 For
courts and tribunals to properly award attorney’s fees, they Russell Ambos ₱7,312.50
must make "an express finding of fact and [citation] of
applicable law"84 in their decisions. Benjamin Putian ₱5,850.00.

In the present case, there is no unlawful withholding of Furthermore, petitioners shall PAY each of the respondents
wages or an award of attorney’s fees arising from collective ₱10,000.00 as nominal damages with 6% legal interest88
bargaining negotiations. Neither did the Labor Arbiter nor from the finality of this Decision until full payment.
the Court of Appeals make findings of fact or cite the
applicable law in awarding attorney’s fees. That The award of attorney's fees is DELETED.
respondents were "constrained to engage the services of
SO ORDERED.
counsel to prosecute their claims"85 is not enough
justification since "no premium should be placed on the right
G.R. No. 181490 April 23, 2014
to litigate."86
MIRANT (PHILIPPINES) CORPORATION AND EDGARDO
For these reasons, we delete the award of attorney’s fees.
A. BAUTISTA, Petitioners,
All told, G.J.T. Rebuilders failed to prove that it closed its vs.
machine shop due to serious business losses. Moreover, it JOSELITO A. CARO, Respondent.
failed to comply with Article 283 of the Labor Code on the
DECISION
notice requirement. Therefore, petitioners must pay
respondents Ricardo Ambos, Russell Ambos, and Benjamin VILLARAMA, JR., J.:
Putian separation pay and nominal damages.
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil
WHEREFORE, the Petition for Review on Certiorari is Procedure, as amended, assailing the Decision2 and
DENIED. The Court of Appeals’ Decision dated January 17, Resolution3 of the Court of Appeals (CA) dated June 26,
2006 is AFFIRMED with MODIFICATION. 2007 and January 11, 2008, respectively, which reversed
and set aside the Decision4 of the National Labor Relations
Petitioners are ordered to PAY respondents their separation
Commission (NLRC) in NLRC NCR CA No. 046551-05
pay with 6% legal interest87 from the finality of this Decision
(NCR-00-03-02511-05). The NLRC decision vacated and
until full payment:
set aside the Decision5 of the Labor Arbiter which found that
66
respondent Joselito A. Caro (Caro) was illegally dismissed Department of petitioner corporation and its staff, and the
by petitioner Mirant (Philippines) Corporation (Mirant). suppliers and service contractors in order to ensure that
procurement is carried out in conformity with set policies,
Petitioner corporation is organized and operating under and procedures and practices. In addition, respondent was put
by virtue of the laws of the Republic of the Philippines. It is a incharge of ensuring the timely, economical, safe and
holding company that owns shares in project companies expeditious delivery of materials at the right quality and
such as Mirant Sual Corporation and Mirant Pagbilao quantity to petitioner corporation’s plant. Respondent was
Corporation (Mirant Pagbilao) which operate and maintain also responsible for guiding and overseeing the welfare and
power stations located in Sual, Pangasinan and Pagbilao, training needs of the staff of the Materials Management
Quezon, respectively. Petitioner corporation and its related Department. Due to the nature of respondent’s functions,
companies maintain around 2,000 employees detailed in its petitioner corporation considers his position as confidential.9
main office and other sites. Petitioner corporation had
changed its name to CEPA Operations in 1996 and to The antecedent facts follow:
Southern Company in 2001. In 2002, Southern Company
was sold to petitioner Mirant whose corporate parent is an Respondent filed a complaint10 for illegal dismissal and
Atlanta-based power producer in the United States of money claims for 13th and 14th month pay, bonuses and
America.6 Petitioner corporation is now known as Team other benefits, as well as the payment of moral and
Energy Corporation.7 exemplary damages and attorney’s fees. Respondent posits
the following allegations in his Position Paper:11
Petitioner Edgardo A. Bautista (Bautista) was the President
of petitioner corporation when respondent was terminated On January 3, 1994, respondent was hired by petitioner
from employment.8 corporation as its Logistics Officer and was assigned at
petitioner corporation’s corporate office in Pasay City. At the
Respondent was hired by Mirant Pagbilao on January 3, time of the filing of the complaint, respondent was already a
1994 as its Logistics Officer. In 2002, when Southern Supervisor at the Logistics and Purchasing Department with
Company was sold to Mirant, respondent was already a a monthly salary of ₱39,815.00.
Supervisor of the Logistics and Purchasing Department of
petitioner. At the time of the severance of his employment, On November 3, 2004, petitioner corporation conducted a
respondent was the Procurement Supervisor of Mirant random drug test where respondent was randomly chosen
Pagbilao assigned at petitioner corporation’s corporate among its employees who would be tested for illegal drug
office. As Procurement Supervisor, his main task was to use. Through an Intracompany Correspondence,12 these
serve as the link between the Materials Management employees were informed that they were selected for
67
random drug testing to be conducted on the same day that On that same day, at around 6:15 p.m., respondent returned
they received the correspondence. Respondent was duly to petitioner corporation’s office. When he was finally able to
notified that he was scheduled to be tested after lunch on charge his cellphone at the office, he received a text
that day. His receipt of the notice was evidenced by his message from Tina Cecilia (Cecilia), a member of the Drug
signature on the correspondence. Watch Committee that conducted the drug test, informing
him to participate in the said drug test. He immediately
Respondent avers that at around 11:30 a.m. of the same called up Cecilia to explain the reasons for his failure to
day, he received a phone call from his wife’s colleague who submit himself to the random drug test that day. He also
informed him that a bombing incident occurred near his proposed that he would submit to a drug test the following
wife’s work station in Tel Aviv, Israel where his wife was day at his own expense. Respondent never heard from
then working as a caregiver. Respondent attached to his Cecilia again.
Position Paper a Press Release13 of the Department of
Foreign Affairs (DFA) in Manila to prove the occurrence of On November 8, 2004, respondent received a Show Cause
the bombing incident and a letter14 from the colleague of his Notice15 from petitioner corporation through Jaime Dulot
wife who allegedly gave him a phone call from Tel Aviv. (Dulot), his immediate supervisor, requiring him to explain in
writing why he should not be charged with "unjustified
Respondent claims that after the said phone call, he refusal to submit to random drug testing." Respondent
proceeded to the Israeli Embassy to confirm the news on submitted his written explanation16 on November 11, 2004.
the alleged bombing incident. Respondent further claims Petitioner corporation further required respondent on
that before he left the office on the day of the random drug December 14, 2004 to submit additional pieces of
test, he first informed the secretary of his Department, Irene supporting documents to prove that respondent was at the
Torres (Torres), at around 12:30 p.m. that he will give Israeli Embassy in the afternoon of November 3, 2004 and
preferential attention to the emergency phone call that he that the said bombing incident actually occurred.
just received. He also told Torres that he would be back at Respondent requested for a hearing to explain that he could
the office as soon as he has resolved his predicament. not submit proof that he was indeed present at the Israeli
Respondent recounts that he tried to contact his wife by Embassy during the said day because he was not allegedly
phone but he could not reach her. He then had to go to the allowed entry by the embassy due to security reasons. On
Israeli Embassy to confirm the bombing incident. However, January 3, 2005, respondent submitted the required
he was told by Eveth Salvador (Salvador), a lobby attendant additional supporting documents.17
at the Israeli Embassy, that he could not be allowed entry
due to security reasons. On January 13, 2005, petitioner corporation’s Investigating
Panel issued an Investigating Report18 finding respondent
68
guilty of "unjustified refusal to submit to random drug required under the law which should have accorded
testing" and recommended a penalty of four working weeks respondent the opportunity to be heard.
suspension without pay, instead of termination, due to the
presence of mitigating circumstances. In the same Report, Respondent further asserts that he was illegally dismissed
the Investigating Panel also recommended that petitioner due to the following circumstances:
corporation should review its policy on random drug testing,
especially of the ambiguities cast by the term "unjustified 1. He signed the notice that he was randomly selected
refusal." as a participant to the company drug testing;

On January 19, 2005, petitioner corporation’s Asst. Vice 2. Even the Investigating Panel was at a loss in
President for Material Management Department, George K. interpreting the charge because it believed that the
Lamela, Jr. (Lamela), recommended19 that respondent be term "refusal" was ambiguous, and therefore such
terminated from employment instead of merely being doubt must be construed in his favor; and
suspended. Lamela argued that even if respondent did not
outrightly refuse to take the random drug test, he avoided 3. He agreed to take the drug test the following day at
the same. Lamela averred that "avoidance" was his own expense, which he says was clearly not an
synonymous with "refusal." indication of evasion from the drug test.

On February 14, 2005, respondent received a letter20 from Petitioner corporation counters with the following
petitioner corporation’s Vice President for Operations, allegations:
Tommy J. Sliman (Sliman), terminating him on the same
On November 3, 2004, a random drug test was conducted
date. Respondent filed a Motion to Appeal21 his termination
on petitioner corporation’s employees at its Corporate Office
on February 23, 2005. The motion was denied by petitioner
at the CTC Bldg. in Roxas Blvd., Pasay City. The random
corporation on March 1, 2005.
drug test was conducted pursuant to Republic Act No. 9165,
It is the contention of respondent that he was illegally otherwise known as the "Comprehensive Dangerous Drugs
dismissed by petitioner corporation due to the latter’s non- Act of 2002." Respondent was randomly selected among
compliance with the twin requirements of notice and petitioner’s employees to undergo the said drug test which
hearing. He asserts that while there was a notice charging was to be carried out by Drug Check Philippines, Inc.22
him of "unjustified refusal to submit to random drug testing,"
When respondent failed to appear at the scheduled drug
there was no notice of hearing and petitioner corporation’s
test, Cecilia prepared an incident report addressed to Dulot,
investigation was not the equivalent of the "hearing"
the Logistics Manager of the Materials Management
69
Department.23 Since it was stated under petitioner A cursory examination of the pleadings of petitioner
corporation’s Mirant Drugs Policy Employee Handbook to corporation would show that it concurs with the narration of
terminate an employee for "unjustified refusal to submit to a facts of respondent on material events from the time that
random drug test" for the first offense, Dulot sent Cecilia sent an electronic mail at about 9:23 a.m. on
respondent a Show Cause Notice24 dated November 8, November 3, 2004 to all employees of petitioner corporation
2004, requiring him to explain why no disciplinary action assigned at its Corporate Office advising them of the details
should be imposed for his failure to take the random drug of the drug test – up to the time of respondent’s missing his
test. Respondent, in a letter dated November 11, 2004, schedule to take the drug test. Petitioner corporation and
explained that he attended to an emergency call from his respondent’s point of disagreement, however, is whether
wife’s colleague and apologized for the inconvenience he respondent’s proffered reasons for not being able to take
had caused. He offered to submit to a drug test the next day the drug test on the scheduled day constituted valid
even at his expense.25 Finding respondent’s explanation defenses that would have taken his failure to undergo the
unsatisfactory, petitioner corporation formed a panel to drug test out of the category of "unjustified refusal."
investigate and recommend the penalty to be imposed on Petitioner corporation argues that respondent’s omission
respondent.26 The Investigating Panel found respondent’s amounted to "unjustified refusal" to submit to the random
explanations as to his whereabouts on that day to be drug test as he could not proffer a satisfactory explanation
inconsistent, and recommended that he be suspended for why he failed to submit to the drug test:
four weeks without pay. The Investigating Panel took into
account that respondent did not directly refuse to be 1. Petitioner corporation is not convinced that there
subjected to the drug test and that he had been serving the was indeed such a phone call at noon of November 3,
company for ten years without any record of violation of its 2004 as respondent could not even tell who called him
policies. The Investigating Panel further recommended that up.
the Mirant Drug Policy be reviewed to clearly define the
phrase "unjustified refusal to submit to random drug 2. Respondent could not even tell if he received the
testing."27 Petitioner corporation’s Vice-President for call via the landline telephone service at petitioner
Operations, Sliman, however disagreed with the corporation’s office or at his mobile phone.
Investigating Panel’s recommendations and terminated the
services of respondent in accordance with the subject drug 3. Petitioner corporation was also of the opinion that
policy. Sliman likewise stated that respondent’s violation of granting there was such a phone call, there was no
the policy amounted to willful breach of trust and loss of compelling reason for respondent to act on it at the
confidence.28 expense of his scheduled drug testing. Petitioner
corporation principally pointed out that the call merely
70
 stated that a bomb exploded near his wife’s work In a decision dated August 31, 2005, Labor Arbiter Aliman
station without stating that his wife was affected. D. Mangandog found respondent to have been illegally
Hence, it found no point in confirming it with dismissed. The Labor Arbiter also found that the quitclaim
extraordinary haste and forego the drug test which purportedly executed by respondent was not a bona fide
would have taken only a few minutes to accomplish. If quitclaim which effectively discharged petitioners of all the
at all, respondent should have undergone the drug claims of respondent in the case at bar. If at all, the Labor
testing first before proceeding to confirm the news so Arbiter considered the execution of the quitclaim as a clear
as to leave his mind free from this obligation. attempt on the part of petitioners to mislead its office into
thinking that respondent no longer had any cause of action
4. Petitioner corporation maintained that respondent against petitioner corporation. The decision stated, viz.:
could have easily asked permission from the Drug
Watch Committee that he was leaving the office since WHEREFORE, premises considered, this Office finds
the place where the activity was conducted was very respondents GUILTY of illegal dismissal, and hereby
close to his work station.29 ordered to jointly and severally reinstate complainant back
to his former position without loss on seniority rights and
To the mind of petitioners, they are not liable for illegal benefits and to pay him his backwages and other benefits
dismissal because all of these circumstances prove that from the date he was illegally dismissed up to the time he is
respondent really eluded the random drug test and was actually reinstated, partially computed as of this date in the
therefore validly terminated for cause after being properly amount of ₱258,797.50 (₱39,815.00 x 6.5 mos.) plus his
accorded with due process. Petitioners further argue that 13th and 14th month pay in the amount of ₱43,132.91 or in
they have already fully settled the claim of respondent as the total amount of ₱301,930.41.
evidenced by a Quitclaim which he duly executed. Lastly,
petitioners maintain that they are not guilty of unfair labor Respondents are also ordered to pay complainant the
practice as respondent’s dismissal was not intended to amount of ₱3,000,000.00 as and by way of moral and
curtail his right to self-organization; that respondent is not exemplary damages, and to pay complainant the amount
entitled to the payment of his 13th and 14th month bonuses equivalent to ten percent (10%) of the total awards as and
and other incentives as he failed to show that he is entitled by way of attorney’s fees.
to these amounts according to company policy; that
respondent is not entitled to reinstatement, payment of full SO ORDERED.30
back wages, moral and exemplary damages and attorney’s
fees due to his termination for cause. The Labor Arbiter stated that while petitioner corporation
observed the proper procedure in the termination of an
71
employee for a purported authorized cause, such just cause x x x [Respondent] was duly notified as shown by copy of
did not exist in the case at bar. The decision did not agree the notice x x x which he signed to acknowledge receipt
with the conclusions reached by petitioner corporation’s own thereof on the said date. [Respondent] did not refute
Investigating Panel that while respondent did not refuse to [petitioner corporation’s] allegation that he was also
submit to the questioned drug test and merely "avoided" it personally reminded of said drug test on the same day by
on the designated day, "avoidance" and "refusal" are one Ms. Cecilia of [petitioner corporation’s] drug watch
and the same. It also held that the terms "avoidance" and committee. However, [respondent] was nowhere to be found
"refusal" are separate and distinct and that "the two words at [petitioner corporation’s] premises at the time when he
are not even synonymous with each other."31 The Labor was supposed to be tested. Due to his failure to take part in
Arbiter considered as more tenable the stance of the random drug test, an incident report x x x was prepared
respondent that his omission merely resulted to a "failure" to by the Drug Cause Notice x x x to explain in writing why no
submit to the said drug test – and not an "unjustified disciplinary action should be taken against him for his
refusal." Even if respondent’s omission is to be considered unjustified refusal to submit to random drug test, a type D
as refusal, the Labor Arbiter opined that it was not offense punishable with termination. Pursuant to said
tantamount to "unjustified refusal" which constitutes as just directive, [respondent] submitted an explanation x x x on 11
cause for his termination. Finally, the Labor Arbiter found November 2004, pertinent portions of which read:
that respondent was entitled to moral and exemplary
damages and attorney’s fees. "I was scheduled for drug test after lunch that day of
November 3, 2004 as confirmed with Tina Cecilia. I was
On appeal to the NLRC, petitioners alleged that the decision having my lunch when a colleague of my wife abroad called
of the Labor Arbiter was rendered with grave abuse of up informing me that there was something wrong [that]
discretion for being contrary to law, rules and established happened in their neighborhood, where a bomb exploded
jurisprudence, and contained serious errors in the findings near her workstation. Immediately, I [left] the office to
of facts which, if not corrected, would cause grave and confirm said information but at around 12:30 P.M. that day, I
irreparable damage or injury to petitioners. The NLRC, informed MS. IRENE TORRES, our Department Secretary[,]
giving weight and emphasis to the inconsistencies in that I would be attending to this emergency call. Did even
respondent’s explanations, considered his omission as [inform] her that I’ll try to be back as soon as possible but
"unjustified refusal" in violation of petitioner corporation’s unfortunately, I was able to return at 6:15 P.M. I didn’t know
drug policy. Thus, in a decision dated May 31, 2006, the that Tina was the one calling me on my cell that day. Did
NLRC ruled, viz.: only receive her message after I charged my cell at the
office that night. I was able to call back Tina Cecilia later
[that] night if it’s possible to have it (drug test) the next day.
72
My apology [for] any inconvenience to the Drug Watch was he attended to by any member of said embassy on 3
Committee, that I forgot everything that day including my November 2004. Ms. Zandueta further informed Mr. Bailon
scheduled drug test due to confusion of what had that no bombing occurred in Tel Aviv on 3 November 2004
happened. It [was] not my intention not to undergo nor and that the only reported incident of such nature occurred
refuse to have a drug test knowing well that it’s a company on 1 November 2004. A letter x x x to this effect was written
policy and it’s mandated by law." by Consul Ziva Samech of the Embassy of Israel. A press
release x x x of the Department of Foreign Affairs
In the course of the investigation, [respondent] was confirm[ed] that the bombing occurred on 1 November
requested to present proof pertaining to the alleged call he 2004.
received on 3 November 2004 from a colleague of his wife
regarding the bomb explosion in Tel Aviv, his presence at In his explanation, the [respondent] stated that the reason
the Israel Embassy also on 3 November 2004. why he had to leave the office on 3 November 2004 was to
[Respondent], thereafter, submitted a facsimile which he verify an information at the Israel Embassy of the alleged
allegedly received from his wife's colleague confirming that bombing incident on the same day. However, [petitioners] in
she called and informed him of the bombing incident. their position paper alleged that Ms. Torres of [petitioner]
However, a perusal of said facsimile x x x reveals that the company received a text message from him at around 12:47
same cannot be given any probative value because, as p.m. informing her that he will try to be back since he had a
correctly observed by [petitioners], it can barely be read and lot of things to do and asking her if there was a signatory on
upon inquiry with PLDT, the international area code of Israel that day. [Respondent] did not deny sending said text
which is 00972 should appear on the face of the facsimile if messages to Ms. Torres in his reply and rejoinder x x x. He
indeed said facsimile originated from Israel. [Respondent] actually confirmed that he was involved in the CIIS
also could not present proof of his presence at the Israel registration with all companies that was involved with
Embassy on said time and date. He instead provided the [petitioner] company and worked on the registration of
name of a certain Ms. Eveth Salvador of said embassy who [petitioner] company’s vehicles with TRO.
could certify that he was present thereat. Accordingly, Mr.
Bailon, a member of the investigation panel, verified with It is also herein noted that [respondent] had initially reported
Ms. Salvador who told him that she is only the telephone to Ms. Torres that it was his mother in law who informed him
operator of the Israel Embassy and that she was not in a about the problem concerning his wife. However, in his
position to validate [respondent’s] presence at the Embassy. written explanation x x x, the [respondent] stated that it was
Mr. Bailon was then referred to a certain Ms. Aimee a friend of his wife, whom he could not even identify, who
Zandueta, also of said embassy, who confirmed that based informed him of the alleged bombing incident in Tel Aviv,
on their records, [respondent] did not visit the embassy nor Israel. [Respondent] also did not deny receiving a cellphone
73
call from Ms. Cecilia that day. He merely stated that he did While the NLRC acknowledged that it was petitioner
not know that it was Ms. Cecilia calling him up in a corporation’s own Investigating Panel that considered
cellphone and it was only after he charged his cellphone at respondent’s failure to take the required drug test as mere
the office that night that he received her message. In effect, "avoidance" and not "unjustified refusal," it concluded that
[respondent] asserted that his cellphone battery was such finding was merely recommendatory to guide top
running low or drained. [Petitioners] were able to refute management on what action to take.
[these] averments of [respondent] when they presented
[respondent’s] Smart Billing Statement The NLRC also found that petitioner corporation’s denial of
respondent’s motion to reconsider his termination was in
x x x showing that he was able to make a cellphone call at order. Petitioner corporation’s reasons for such denial are
5:29 p.m. to [petitioner corporation’s] supplier, Mutico for a quoted in the NLRC decision, viz.:
duration of two (2) minutes.32
"Your appeal is anchored on your claim that you responded
Given the foregoing facts, the NLRC stated that the offer of to an emergency call from someone abroad informing you
respondent to submit to another drug test the following day, that a bomb exploded near the work station of your wife
even at his expense, cannot operate to free him from making you unable to undergo the scheduled drug testing.
liability. The NLRC opined that taking the drug test on the This claim is groundless taking into account the following:
day following the scheduled random drug test would affect
both the integrity and the accuracy of the specimen which We are not convinced that there was indeed that call which
was supposed to be taken from a randomly selected you claim to have received noon of November 3, 2004. On
employee who was notified of his/her selection on the same the contrary, our belief is based on the fact that you could
day that the drug test was to be administered. The NLRC not tell who called you up or how the call got to you. If you
further asserted that a drug test, conducted many hours or a forgot to ask the name of the person who called you up,
day after the employee was notified, would compromise its surely you would have known how the call came to you. You
results because the employee may have possibly taken said you were having lunch at the third floor of the CTC
remedial measures to metabolize or eradicate whatever building when you received the call. There were only two
drugs s/he may have ingested prior to the drug test. means of communication available to you then: the land line
telephone service in your office and your mobile phone. If
The NLRC further stated that these circumstances have your claim were (sic) not fabricated, you would be able to
clearly established the falsity of respondent’s claims and tell which of these two was used.
found no justifiable reason for respondent to refuse to
submit to the petitioner corporation’s random drug test.
74
Granting that you indeed received that alleged call, from 1. On November 8, 2004, respondent was given a
your own account, there was no compelling reason for you show-cause notice requiring him to explain in writing
to act on it at the expense of your scheduled drug testing. within three days why no disciplinary action should be
The call, as it were, merely stated that ‘something wrong taken against him for violation of company policy on
happened (sic) in their neighborhood, where a bomb unjustified refusal to submit to random drug testing – a
exploded near her workstation.’ Nothing was said if your type D offense which results in termination.
wife was affected. There is no point in confirming it with
extraordinary haste and forego the drug test which would 2. Respondent submitted his explanation on
have taken only a few minutes to accomplish. If at all, you November 11, 2004.
should have undergone the drug testing first before
proceeding to confirm the news so as to leave your mind 3. On December 9, 2004, respondent was given a
free from this obligation. notice of investigation34 informing him of a meeting on
December 13, 2004 at 9:00 a.m. In this meeting,
Additionally, if it was indeed necessary that you skip the respondent was allowed to explain his side, present
scheduled drug testing to verify that call, why did you not his evidences and witnesses, and confront the
ask permission from the Drug Watch [C]ommittee that you witnesses presented against him.
were leaving? The place where the activity was being
conducted was very close to your workstation. It was 4. On February 14, 2005, respondent was served a
absolutely within your reach to inform any of its members letter of termination which clearly stated the reasons
that you were attending to an emergency call. Why did you therefor.35
not do so?
The NLRC, notwithstanding its finding that respondent was
All this undisputedly proves that you merely eluded the drug dismissed for cause and with due process, granted financial
testing. Your claim that you did not refuse to be screened assistance to respondent on equitable grounds. It invoked
carries no value. Your act was a negation of your words."33 the past decisions of this Court which allowed the award of
financial assistance due to factors such as long years of
The NLRC found that respondent was not only validly service or the Court’s concern and compassion towards
dismissed for cause – he was also properly accorded his labor where the infraction was not so serious. Thus,
constitutional right to due process as shown by the following considering respondent’s 10 years of service with petitioner
succession of events: corporation without any record of violation of company
policies, the NLRC ordered petitioner corporation to pay
respondent financial assistance equivalent to one-half (1/2)
75
month pay for every year of service in the amount of One "avoidance" or "refusal" so as to mean "unjustified refusal"
Hundred Ninety-Nine Thousand Seventy-Five Pesos in order to be meted the penalty of termination.41
(₱199,075.00). The NLRC decision states thus:
The CA disagreed with the NLRC and ruled that it was
WHEREFORE, the decision dated 31 August 2005 is immaterial whether respondent failed, refused, or avoided
VACATED and SET ASIDE. The instant complaint is being tested. To the appellate court, the singular fact
dismissed for lack of merit. However, respondent Mirant material to this case was that respondent did not get himself
[Philippines] Corp. is ordered to pay complainant financial tested in clear disobedience of company instructions and
assistance in the amount of one hundred ninety-nine policy. Despite such disobedience, however, the appellate
thousand seventy five pesos (₱199,075.00). court considered the penalty of dismissal to be too harsh to
be imposed on respondent, viz.:
SO ORDERED.36
x x x While it is a management prerogative to terminate its
37
Respondent filed a motion for reconsideration, while erring employee for willful disobedience, the Supreme Court
petitioners filed a motion for partial reconsideration38 of the has recognized that such penalty is too harsh depending on
NLRC decision. In a Resolution39 dated June 30, 2006, the the circumstances of each case. "There must be reasonable
NLRC denied both motions. proportionality between, on the one hand, the willful
disobedience by the employee and, on the other hand, the
In a petition for certiorari before the CA, respondent raised penalty imposed therefor" x x x.
the following issues: whether the NLRC acted without or in
excess of its jurisdiction, or with grave abuse of discretion In this case, [petitioner corporation’s] own investigating
amounting to lack or excess of its jurisdiction when it panel has revealed that the penalty of dismissal is too harsh
construed that the terms "failure," "avoidance," "refusal" and to impose on [respondent], considering that this was the first
"unjustified refusal" have similar meanings; reversed the time in his 10-year employment that the latter violated its
factual findings of the Labor Arbiter; and held that company policies. The investigating panel even suggested
respondent deliberately breached petitioner’s Anti-Drugs that a review be had of the company policy on the term
Policy.40 Respondent further argued before the appellate "unjustified refusal" to clearly define what constitutes a
court that his failure to submit himself to the random drug violation thereof. The recommendation of the investigating
test was justified because he merely responded to an panel is partially reproduced as follows:
emergency call regarding his wife’s safety in Tel Aviv, and
that such failure cannot be considered synonymous with "VII. Recommendation

76
However, despite having violated the company policy, the submit to random drug testing.’ The Panel believes that the
panel recommends 4 working weeks suspension without term refusal casts certain ambiguities and should be clearly
pay (twice the company policy’s maximum of 2 working defined."42
weeks suspension) instead of termination due to the
following mitigating circumstances. The CA however found that award of moral and exemplary
damages is without basis due to lack of bad faith on the part
1. Mr. Joselito A. Caro did not directly refuse to be of the petitioner corporation which merely acted within its
subjected to the random drug test scheduled on management prerogative. In its assailed Decision dated
November 3, 2004. June 26, 2007, the CA ruled, viz.:

2. In the case of Mr. Joselito A. Caro, the two IN VIEW OF ALL THE FOREGOING, the instant petition is
conditions for termination (Unjustified and Refusal) GRANTED. The assailed Decision dated May 31, 2006 and
were not fully met as he expressly agreed to undergo Resolution dated June 30, 2006 rendered by the National
drug test. Labor Relations Commission (NLRC) in NLRC NCR CA No.
046551-05 (NCR-00-03-02511-05) are REVERSED and
3. Mr. Joselito A. Caro voluntarily offered himself to SET ASIDE. The Labor Arbiter’s Decision dated August 31,
undergo drug test the following day at his own 2005 is hereby REINSTATED with MODIFICATION by
expense. omitting the award of moral and exemplary damages as well
as attorney’s fees, and that the petitioner’s salary equivalent
Doubling the maximum of 2 weeks suspension to 4 weeks is to four (4) working weeks at the time he was terminated be
indicative of the gravity of the offense committed. The panel deducted from his backwages. No cost.
believes that although mitigating factors partially offset
reasons for termination, the 2 weeks maximum suspension SO ORDERED.43
is too lenient penalty for such an offense.
Petitioner moved for reconsideration. In its assailed
The Panel also took into consideration that Mr. Joselito A. Resolution dated January 11, 2008, the CA denied
Caro has served the company for ten (10) years without any petitioners’ motion for reconsideration for lack of merit. It
record of violation of the company policies. ruled that the arguments in the motion for reconsideration
were already raised in their past pleadings.
xxxx
In this instant Petition, petitioners raise the following
The Panel also recommends that Management review the grounds:
Mirant Drug Policy specifically ‘Unjustified [R]efusal to
77
I. THE COURT OF APPEALS COMMITTED REVERSIBLE B. THE PENALTY OF TERMINATION SHOULD
ERROR WHEN IT FAILED TO CONSIDER THAT: HAVE BEEN SUSTAINED BY THE COURT OF
APPEALS GIVEN ITS POSITIVE FINDING THAT
A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO DELIBERATELY AND
RESPONDENT CARO SHOULD HAVE BEEN WILLFULLY DISOBEYED PETITIONER MIRANT’S
SUMMARILY DISMISSED CONSIDERING THAT IT ANTI-DRUGS POLICY.
LACKED THE REQUISITE VERIFICATION AND
CERTIFICATION AGAINST FORUM SHOPPING C. IN INVALIDATING RESPONDENT CARO’S
REQUIRED BY THE RULES OF COURT; OR DISMISSAL, THE COURT OF APPEALS
SUBSTITUTED WITH ITS OWN DISCRETION A
B. AT THE VERY LEAST, THE SAID PETITION FOR CLEAR MANAGEMENT PREROGATIVE
CERTIORARI FILED BY RESPONDENT CARO BELONGING ONLY TO PETITIONER MIRANT IN
SHOULD HAVE BEEN CONSIDERED MOOT SINCE THE INSTANT CASE.
RESPONDENT CARO HAD ALREADY PREVIOUSLY
EXECUTED A QUITCLAIM DISCHARGING THE D. THE WILLFUL AND DELIBERATE VIOLATION OF
PETITIONERS FROM ALL HIS MONETARY CLAIMS. PETITIONER MIRANT’S ANTI-DRUGS POLICY
AGGRAVATED RESPONDENT CARO’S
II. THE COURT OF APPEALS COMMITTED REVERSIBLE WRONGFUL CONDUCT WHICH JUSTIFIED HIS
ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN TERMINATION.
A WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT, E. IN INVALIDATING RESPONDENT CARO’S
CONSIDERING THAT: DISMISSAL, THE COURT OF APPEALS, IN
EFFECT, BELITTLED THE IMPORTANCE AND
A. THE COURT OF APPEALS REVERSED THE SERIOUSNESS OF PETITIONER MIRANT’S ANTI-
DECISION DATED 31 MAY 2006 OF THE NLRC ON DRUGS POLICY AND CONSEQUENTLY
THE GROUND THAT THERE WAS GRAVE ABUSE HAMPERED THE EFFECTIVE IMPLEMENTATION
OF DISCRETION AMOUNTING TO LACK OR OF THE SAME.
EXCESS OF JURISDICTION NOTWITHSTANDING
THE FACT THAT IT AFFIRMED THE NLRC’S F. THE EXISTENCE OF OTHER GROUNDS FOR
FINDINGS THAT RESPONDENT CARO CARO’S DISMISSAL, SUCH AS WILLFUL
DELIBERATELY DISOBEYED PETITIONER DISOBEDIENCE AND [LOSS] OF TRUST AND
MIRANT’S ANTI-DRUGS POLICY.
78
 CONFIDENCE, JUSTIFIED HIS TERMINATION A pleading is verified by an affidavit that the affiant has read
FROM EMPLOYMENT. the pleading and that the allegations therein are true and
correct of his knowledge and belief.
III. NONETHELESS, THE AWARD OF FINANCIAL
ASSISTANCE IN FAVOR OF RESPONDENT CARO IS A pleading required to be verified which contains a
NOT WARRANTED CONSIDERING THAT RESPONDENT verification based on "information and belief," or upon
CARO’S WILLFUL AND DELIBERATE REFUSAL TO "knowledge, information and belief," or lacks a proper
SUBJECT HIMSELF TO PETITIONER MIRANT’S DRUG verification, shall be treated as an unsigned pleading.
TEST AND HIS SUBSEQUENT EFFORTS TO CONCEAL
THE SAME SHOWS HIS DEPRAVED MORAL SEC. 5. Certification against forum shopping. – The plaintiff
CHARACTER. or principal party shall certify under oath in the complaint or
other initiatory pleading asserting a claim for relief, or in a
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED sworn certification annexed thereto and simultaneously filed
WHEN IT HELD PETITIONER BAUTISTA PERSONALLY therewith: (a) that he has not theretofore commenced any
LIABLE FOR [RESPONDENT] CARO’S UNFOUNDED action or filed any claim involving the same issues in any
CLAIMS CONSIDERING THAT, ASIDE FROM court, tribunal or quasi-judicial agency and, to the best of his
RESPONDENT CARO’S DISMISSAL BEING LAWFUL, knowledge, no such other action or claim is pending therein;
PETITIONER BAUTISTA MERELY ACTED WITHIN THE (b) if there is such other pending action or claim, a complete
SCOPE OF HIS FUNCTIONS IN GOOD FAITH.44 statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has
We shall first rule on the issue raised by petitioners that the been filed or is pending, he shall report that fact within five
petition for certiorari filed by respondent with the CA should (5) days therefrom to the court wherein his aforesaid
have been summarily dismissed as it lacked the requisite complaint or initiatory pleading has been filed.
verification and certification against forum shopping under
Sections 4 and 5, Rule 7 of the Rules, viz.: Failure to comply with the foregoing requirements shall not
be curable by mere amendment of the complaint or other
SEC. 4. Verification. – Except when otherwise specifically initiatory pleading but shall be cause for the dismissal of the
required by law or rule, pleadings need not be under oath, case without prejudice, unless otherwise provided, upon
verified or accompanied by affidavit. motion and after hearing. The submission of a false
certification or noncompliance with any of the undertakings
therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal
79
actions. If the acts of the party or his counsel clearly prerogative. It is also a conceded fact that respondent
constitute willful and deliberate forum shopping, the same "failed" to take the random drug test as scheduled, and
shall be ground for summary dismissal with prejudice and under the said company policy, such failure metes the
shall constitute direct contempt, as well as a cause for penalty of termination for the first offense. A plain, simple
administrative sanctions. and literal application of the said policy to the omission of
respondent would have warranted his outright dismissal
It is the contention of petitioners that due to respondent’s from employment – if the facts were that simple in the case
failure to subscribe the Verification and Certification of Non- at bar. Beyond debate – the facts of this case are not – and
Forum Shopping before a Notary Public, the said verification this disables the Court from permitting a straight application
and certification cannot be considered to have been made of an otherwise prima facie straightforward rule if the ends
under oath. Accordingly, such omission is fatal to the entire of substantial justice have to be served.
petition for not being properly verified and certified. The CA
therefore erred when it did not dismiss the petition. It is the crux of petitioners’ argument that respondent’s
omission amounted to "unjust refusal" because he could not
This jurisdiction has adopted in the field of labor protection a sufficiently support with convincing proof and evidence his
liberal stance towards the construction of the rules of defenses for failing to take the random drug test. For
procedure in order to serve the ends of substantial justice. petitioners, the inconsistencies in respondent’s explanations
This liberal construction in labor law emanates from the likewise operated to cast doubt on his real reasons and
mandate that the workingman’s welfare should be the motives for not submitting to the random drug test on
primordial and paramount consideration.45 Thus, if the rules schedule. In recognition of these inconsistencies and the
of procedure will stunt courts from fulfilling this mandate, the lack of convincing proof from the point of view of petitioners,
rules of procedure shall be relaxed if the circumstances of a the NLRC reversed the decision of the Labor Arbiter. The
case warrant the exercise of such liberality. If we sustain the CA found the ruling of the Labor Arbiter to be more in
argument of petitioners in the case at bar that the petition accord with the facts, law and existing jurisprudence.
for certiorari should have been dismissed outright by the
CA, the NLRC decision would have reached finality and We agree with the disposition of the appellate court that
respondent would have lost his remedy and denied his right there was illegal dismissal in the case at bar.
to be protected against illegal dismissal under the Labor
Code, as amended. While the adoption and enforcement by petitioner
corporation of its Anti-Drugs Policy is recognized as a valid
It is beyond debate that petitioner corporation’s enforcement exercise of its management prerogative as an employer,
of its Anti-Drugs Policy is an exercise of its management such exercise is not absolute and unbridled. Managerial
80
prerogatives are subject to limitations provided by law, term "refusal" casts certain ambiguities and should be
collective bargaining agreements, and the general principles clearly defined.48
of fair play and justice.46 In the exercise of its management
prerogative, an employer must therefore ensure that the The fact that petitioner corporation’s own Investigating
policies, rules and regulations on work-related activities of Panel and its Vice President for Operations, Sliman, differed
the employees must always be fair and reasonable and the in their recommendations regarding respondent’s case are
corresponding penalties, when prescribed, commensurate first-hand proof that there, indeed, is ambiguity in the
to the offense involved and to the degree of the interpretation and application of the subject drug policy. The
infraction.47 The Anti-Drugs Policy of Mirant fell short of fact that petitioner corporation’s own personnel had to
these requirements. dissect the intended meaning of "unjustified refusal" is
further proof that it is not clear on what context the term
Petitioner corporation’s subject Anti-Drugs Policy fell short "unjustified refusal" applies to. It is therefore not a surprise
of being fair and reasonable. that the Labor Arbiter, the NLRC and the CA have perceived
the term "unjustified refusal" on different prisms due to the
First. The policy was not clear on what constitutes lack of parameters as to what comes under its purview. To
"unjustified refusal" when the subject drug policy prescribed be sure, the fact that the courts and entities involved in this
that an employee’s "unjustified refusal" to submit to a case had to engage in semantics – and come up with
random drug test shall be punishable by the penalty of different constructions – is yet another glaring proof that the
termination for the first offense. To be sure, the term subject policy is not clear creating doubt that respondent’s
"unjustified refusal" could not possibly cover all forms of dismissal was a result of petitioner corporation’s valid
"refusal" as the employee’s resistance, to be punishable by exercise of its management prerogative.
termination, must be "unjustified." To the mind of the Court,
it is on this area where petitioner corporation had fallen It is not a mere jurisprudential principle, but an enshrined
short of making it clear to its employees – as well as to provision of law, that all doubts shall be resolved in favor of
management – as to what types of acts would fall under the labor. Thus, in Article 4 of the Labor Code, as amended,
purview of "unjustified refusal." Even petitioner corporation’s "[a]ll doubts in the implementation and interpretation of the
own Investigating Panel recognized this ambiguity, viz.: provisions of [the Labor] Code, including its implementing
rules and regulations, shall be resolved in favor of labor." In
The Panel also recommends that Management review the Article 1702 of the New Civil Code, a similar provision states
Mirant Drug Policy specifically "Unjustified [R]efusal to that "[i]n case of doubt, all labor legislation and all labor
submit to random drug testing." The Panel believes that the contracts shall be construed in favor of the safety and
decent living for the laborer." Applying these provisions of
81
law to the circumstances in the case at bar, it is not fair for be imposed on [respondent] for his disobedience. x x
this Court to allow an ambiguous policy to prejudice the x51 (Additional emphasis supplied.)
rights of an employee against illegal dismissal. To hold
otherwise and sustain the stance of petitioner corporation To be sure, the unreasonableness of the penalty of
would be to adopt an interpretation that goes against the termination as imposed in this case is further highlighted by
very grain of labor protection in this jurisdiction. As correctly a fact admitted by petitioner corporation itself: that for the
stated by the Labor Arbiter, "when a conflicting interest of ten-year period that respondent had been employed by
labor and capital are weighed on the scales of social justice, petitioner corporation, he did not have any record of a
the heavier influence of the latter must be counter-balanced violation of its company policies.
by the sympathy and compassion the law must accord the
underprivileged worker."49 As to the other issue relentlessly being raised by petitioner
corporation that respondent’s petition for certiorari before
Second. The penalty of termination imposed by petitioner the CA should have been considered moot as respondent
corporation upon respondent fell short of being reasonable. had already previously executed a quitclaim discharging
Company policies and regulations are generally valid and petitioner corporation from all his monetary claims, we
binding between the employer and the employee unless cannot agree. Quitclaims executed by laborers are
shown to be grossly oppressive or contrary to law50 – as in ineffective to bar claims for the full measure of their legal
the case at bar. Recognizing the ambiguity in the subject rights,52 especially in this case where the evidence on
policy, the CA was more inclined to adopt the record shows that the amount stated in the quitclaim exactly
recommendation of petitioner corporation’s own corresponds to the amount claimed as unpaid wages by
Investigating Panel over that of Sliman and the NLRC. The respondent under Annex A53 of his Reply54 filed with the
appellate court succinctly but incisively pointed out, viz.: Labor Arbiter. Prima facie, this creates a false impression
that respondent’s claims have already been settled by
x x x We find, as correctly pointed out by the investigating petitioner corporation – discharging the latter from all of
panel, that the [petitioner corporation’s] Anti-Drug Policy is respondent’s monetary claims. In truth and in fact, however,
excessive in terminating an employee for his "unjustified the amount paid under the subject quitclaim represented the
refusal" to subject himself to the random drug test on first salaries of respondent that remained unpaid at the time of
offense, without clearly defining what amounts to an his termination – not the amounts being claimed in the case
"unjustified refusal." at bar.

Thus, We find that the recommended four (4) working

weeks’ suspension without pay as the reasonable penalty to
82
We believe that this issue was extensively discussed by liability of petitioner Bautista, and yet the dispositive portion
both the Labor Arbiter and the CA and we find no reversible of the decision of the Labor Arbiter - which was affirmed by
error on the disposition of this issue, viz.: the appellate court - held him jointly and severally liable with
petitioner corporation, viz.:
A review of the records show that the alluded quitclaim,
which was undated and not even notarized although signed WHEREFORE, premises considered, this Office finds
by the petitioner, was for the amount of ₱59,630.05. The respondents GUILTY of illegal dismissal, and hereby
said quitclaim was attached as Annex 26 in the [petitioners’] ordered to jointly and severally reinstate complainant back
Position Paper filed before the Labor Arbiter. As fully to his former position without loss on seniority rights and
explained by [respondent] in his Reply filed with the Labor benefits and to pay him his backwages and other benefits
Arbiter, the amount stated therein was his last pay due to from the date he was illegally dismissed up to the time he is
him when he was terminated, not the amount representing actually reinstated, partially computed as of this date in the
his legitimate claims in this labor suit x x x. To bolster his amount of ₱258,797.50 (₱39,815.00 x 6.5 mos.) plus his
defense, [respondent] submitted the pay form issued to him 13th and 14th month pay in the amount of ₱43,132.91 or in
by the [petitioner corporation], showing his net pay at the total amount of ₱301,930.41. Respondents are also
₱59,630.05 exactly the amount stated in the quitclaim x x x. ordered to pay complainant the amount of ₱3,000,000.00 as
Then, too, as stated on the quitclaim itself, the intention of and by way of moral and exemplary damages, and to pay
the waiver executed by the [respondent] was to release complainant the amount equivalent to ten percent (10%) of
[petitioner corporation] from any liability only on the said the total awards as and by way of attorney's fees.
amount representing [respondent’s] "full and final payment
of [his] last salary/separation pay" x x x. It did not in any way SO ORDERED.56 (Emphasis supplied.)
waive [respondent’s] right to pursue his legitimate claims
regarding his dismissal in a labor suit. Thus, We gave no A corporation has a personality separate and distinct from
credence to [petitioners’] private defense that alleged its officers and board of directors who may only be held
quitclaim rendered the instant petition moot.55 personally liable for damages if it is proven that they acted
with malice or bad faith in the dismissal of an
Finally, the petition avers that petitioner Bautista should not employee.57 Absent any evidence on record that petitioner
be held personally liable for respondent’s dismissal as he Bautista acted maliciously or in bad faith in effecting the
acted in good faith and within the scope of his official termination of respondent, plus the apparent lack of
functions as then president of petitioner corporation. We allegation in the pleadings of respondent that petitioner
agree with petitioners.1âwphi1 Both decisions of the Labor Bautista acted in such manner, the doctrine of corporate
Arbiter and the CA did not discuss the basis of the personal
83
fiction dictates that only petitioner corporation should be case involving the removal of chairs in the bottling plant of
held liable for the illegal dismissal of respondent. Coca-Cola Bottlers Philippines, Inc. (CCBPI).

WHEREFORE, the petition for review on certiorari is The Factual and Procedural
DENIED. The assailed Decision dated June 26, 2007 and
the Resolution dated January 11, 2008 in CA-G.R. SP No. Antecedents
96153 are AFFIRMED with the MODIFICATION that only
petitioner corporation is found GUILTY of the illegal The factual and procedural antecedents have been
dismissal of respondent Joselito A. Caro. Petitioner Edgardo accurately recited in the May 24, 2011 CA decision as
A. Bautista is not held personally liable as then President of follows:
petitioner corporation at the time of the illegal dismissal.
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a
No pronouncement as to costs. domestic corporation engaged in the manufacture, sale and
distribution of softdrink products. It has several bottling
SO ORDERED. plants all over the country, one of which is located in Cebu
City. Under the employ of each bottling plant are bottling
G.R. No. 198783 April 15, 2013 operators. In the case of the plant in Cebu City, there are 20
bottling operators who work for its Bottling Line 1 while there
ROYAL PLANT WORKERS UNION, Petitioner, are 12-14 bottling operators who man its Bottling Line 2. All
vs. of them are male and they are members of herein
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU respondent Royal Plant Workers Union (ROPWU).
PLANT, Respondent.
The bottling operators work in two shifts. The first shift is
DECISION from 8 a.m. to 5 p.m. and the second shift is from 5 p.m. up
to the time production operations is finished. Thus, the
MENDOZA, J.: second shift varies and may end beyond eight (8) hours.
However, the bottling operators are compensated with
Assailed in this petition is the May 24, 2011 Decision1 and overtime pay if the shift extends beyond eight (8) hours. For
the September 2, 2011 Resolution2 of the Court of Appeals Bottling Line 1, 10 bottling operators work for each shift
(CA) in CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers while 6 to 7 bottling operators work for each shift for Bottling
Philippines, Inc.-Cebu Plant v. Royal Plant Workers Union, Line 2.
which nullified and set aside the June 11, 2010 Decision3 of
the Voluntary Arbitration Panel (Arbitration Committee) in a
84
Each shift has rotations of work time and break time. Prior efficient flow of operations as the bottling operators would
to September 2008, the rotation is this: after two and a half be unable to perform their duties competently.
(2 ½) hours of work, the bottling operators are given a 30-
minute break and this goes on until the shift ends. In The bottling operators took issue with the removal of the
September 2008 and up to the present, the rotation has chairs. Through the representation of herein respondent,
changed and bottling operators are now given a 30-minute they initiated the grievance machinery of the Collective
break after one and one half (1 ½) hours of work. Bargaining Agreement (CBA) in November 2008. Even after
exhausting the remedies contained in the grievance
In 1974, the bottling operators of then Bottling Line 2 were machinery, the parties were still at a deadlock with petitioner
provided with chairs upon their request. In 1988, the bottling still insisting on the removal of the chairs and respondent
operators of then Bottling Line 1 followed suit and asked to still against such measure. As such, respondent sent a
be provided also with chairs. Their request was likewise Notice to Arbitrate, dated 16 July 2009, to petitioner stating
granted. Sometime in September 2008, the chairs provided its position to submit the issue on the removal of the chairs
for the operators were removed pursuant to a national for arbitration. Nevertheless, before submitting to arbitration
directive of petitioner. This directive is in line with the "I the issue, both parties availed of the conciliation/mediation
Operate, I Maintain, I Clean" program of petitioner for proceedings before the National Conciliation and Mediation
bottling operators, wherein every bottling operator is given Board (NCMB) Regional Branch No. VII. They failed to
the responsibility to keep the machinery and equipment arrive at an amicable settlement.
assigned to him clean and safe. The program reinforces the
task of bottling operators to constantly move about in the Thus, the process of arbitration continued and the parties
performance of their duties and responsibilities. appointed the chairperson and members of the Arbitration
Committee as outlined in the CBA. Petitioner and
With this task of moving constantly to check on the respondent respectively appointed as members to the
machinery and equipment assigned to him, a bottling Arbitration Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis
operator does not need a chair anymore, hence, petitioner’s Ruiz while they both chose Atty. Alice Morada as
directive to remove them. Furthermore, CCBPI rationalized chairperson thereof. They then executed a Submission
that the removal of the chairs is implemented so that the Agreement which was accepted by the Arbitration
bottling operators will avoid sleeping, thus, prevent injuries Committee on 01 October 2009. As contained in the
to their persons. As bottling operators are working with Submission Agreement, the sole issue for arbitration is
machines which consist of moving parts, it is imperative that whether the removal of chairs of the operators assigned at
they should not fall asleep as to do so would expose them the production/manufacturing line while performing their
to hazards and injuries. In addition, sleeping will hamper the duties and responsibilities is valid or not.
85
Both parties submitted their position papers and other favorable to the Union; that it ripened into a benefit after it
subsequent pleadings in amplification of their respective had been enjoyed by it; that any benefit being enjoyed by
stands. Petitioner argued that the removal of the chairs is the employees could not be reduced, diminished,
valid as it is a legitimate exercise of management discontinued, or eliminated by the employer in accordance
prerogative, it does not violate the Labor Code and it does with Article 100 of the Labor Code, which prohibited the
not violate the CBA it contracted with respondent. On the diminution or elimination by the employer of the employees’
other hand, respondent espoused the contrary view. It benefit; and that jurisprudence had not laid down any rule
contended that the bottling operators have been performing requiring a specific minimum number of years before a
their assigned duties satisfactorily with the presence of the benefit would constitute a voluntary company practice which
chairs; the removal of the chairs constitutes a violation of could not be unilaterally withdrawn by the employer.
the Occupational Health and Safety Standards, the policy of
the State to assure the right of workers to just and humane The Arbitration Committee further stated that, although the
conditions of work as stated in Article 3 of the Labor Code removal of the chairs was done in good faith, CCBPI failed
and the Global Workplace Rights Policy. to present evidence regarding instances of sleeping while
on duty. There were no specific details as to the number of
Ruling of the Arbtration Committee incidents of sleeping on duty, who were involved, when
these incidents happened, and what actions were taken.
On June 11, 2010, the Arbitration Committee rendered a There was no evidence either of any accident or injury in the
decision in favor of the Royal Plant Workers Union (the many years that the bottling operators used chairs. To the
Union) and against CCBPI, the dispositive portion of which Arbitration Committee, it was puzzling why it took 34 and 20
reads, as follows: years for CCBPI to be so solicitous of the bottling operators’
safety that it removed their chairs so that they would not fall
Wherefore, the undersigned rules in favor of ROPWU asleep and injure themselves.
declaring that the removal of the operators chairs is not
valid. CCBPI is hereby ordered to restore the same for the Finally, the Arbitration Committee was of the view that,
use of the operators as before their removal in 2008.4 contrary to CCBPI’s position, line efficiency was the result of
many factors and it could not be attributed solely to one
The Arbitration Committee ruled, among others, that the use such as the removal of the chairs.
of chairs by the operators had been a company practice for
34 years in Bottling Line 2, from 1974 to 2008, and 20 years Not contented with the Arbitration Committee’s decision,
in Bottling Line 1, from 1988 to 2008; that the use of the CCBPI filed a petition for review under Rule 43 before the
chairs by the operators constituted a company practice CA.
86
Ruling of the CA and equipment assigned to him clean and safe. The
program would reinforce the task of bottling operators to
On May 24, 2011, the CA rendered a contrasting decision constantly move about in the performance of their duties
which nullified and set aside the decision of the Arbitration and responsibilities. Without the chairs, the bottling
Committee. The dispositive portion of the CA decision operators could efficiently supervise these machineries’
reads: operations and maintenance. It would also be beneficial for
them because the working time before the break in each
WHEREFORE, premises considered, the petition is hereby rotation for each shift was substantially reduced from two
GRANTED and the Decision, dated 11 June 2010, of the and a half hours (2 ½ ) to one and a half hours (1 ½) before
Arbitration Committee in AC389-VII-09-10-2009D is the 30-minute break. This scheme was clearly
NULLIFIED and SET ASIDE. A new one is entered in its advantageous to the bottling operators as the number of
stead SUSTAINING the removal of the chairs of the bottling resting periods was increased. CCBPI had the best
operators from the manufacturing/production line.5 intentions in removing the chairs because some bottling
operators had the propensity to fall asleep while on the job
The CA held, among others, that the removal of the chairs and sleeping on the job ran the risk of injury exposure and
from the manufacturing/production lines by CCBPI is within removing them reduced the risk.
the province of management prerogatives; that it was part of
its inherent right to control and manage its enterprise The CA added that the decision of CCBPI to remove the
effectively; and that since it was the employer’s discretion to chairs was not done for the purpose of defeating or
constantly develop measures or means to optimize the circumventing the rights of its employees under the special
efficiency of its employees and to keep its machineries and laws, the Collective Bargaining Agreement (CBA) or the
equipment in the best of conditions, it was only appropriate general principles of justice and fair play. It opined that the
that it should be given wide latitude in exercising it. principles of justice and fair play were not violated because,
when the chairs were removed, there was a commensurate
The CA stated that CCBPI complied with the conditions of a reduction of the working time for each rotation in each shift.
valid exercise of a management prerogative when it decided The provision of chairs for the bottling operators was never
to remove the chairs used by the bottling operators in the part of the CBAs contracted between the Union and CCBPI.
manufacturing/production lines. The removal of the chairs The chairs were not provided as a benefit because such
was solely motivated by the best intentions for both the matter was dependent upon the exigencies of the work of
Union and CCBPI, in line with the "I Operate, I Maintain, I the bottling operators. As such, CCBPI could withdraw this
Clean" program for bottling operators, wherein every bottling provision if it was not necessary in the exigencies of the
operator was given the responsibility to keep the machinery work, if it was not contributing to the efficiency of the bottling
87
operators or if it would expose them to some hazards. In advocacy of its positions, the Union argues that the
Lastly, the CA explained that the provision of chairs to the proper remedy in challenging the decision of the Arbitration
bottling operators cannot be covered by Article 100 of the Committee before the CA is a petition for certiorari under
Labor Code on elimination or diminution of benefits because Rule 65. The petition for review under Rule 43 resorted to
the employee’s benefits referred to therein mainly involved by CCBPI should have been dismissed for being an
monetary considerations or privileges converted to their improper remedy. The Union points out that the parties
monetary equivalent. agreed to submit the unresolved grievance involving the
removal of chairs to voluntary arbitration pursuant to the
Disgruntled with the adverse CA decision, the Union has provisions of Article V of the existing CBA. Hence, the
come to this Court praying for its reversal on the following assailed decision of the Arbitration Committee is a judgment
GROUNDS or final order issued under the Labor Code of the
Philippines. Section 2, Rule 43 of the 1997 Rules of Civil
I Procedure, expressly states that the said rule does not
cover cases under the Labor Code of the Philippines. The
THAT WITH DUE RESPECT, THE COURT OF APPEALS judgments or final orders of the Voluntary Arbitrator or Panel
COMMITTED REVERSIBLE ERROR IN HOLDING THAT A of Voluntary Arbitrators are governed by the provisions of
PETITION FOR REVIEW UNDER RULE 43 OF THE Articles 260, 261, 262, 262-A, and 262-B of the Labor Code
RULES OF COURT IS THE PROPER REMEDY OF of the Philippines.
CHALLENGING BEFORE SAID COURT THE DECISION
OF THE VOLUNTARY ARBITRATOR OR PANEL OF On the substantive aspect, the Union argues that there is no
VOLUNTARY ARBITRATORS UNDER THE LABOR connection between CCBPI’s "I Operate, I Maintain, I Clean"
CODE. program and the removal of the chairs because the
implementation of the program was in 2006 and the removal
II of the chairs was done in 2008. The 30-minute break is part
of an operator’s working hours and does not make any
THAT WITH DUE RESPECT, THE COURT OF APPEALS
difference. The frequency of the break period is not
GRAVELY ABUSED ITS DISCRETION IN NULLIFYING
advantageous to the operators because it cannot
AND SETTING ASIDE THE DECISION OF THE PANEL OF
compensate for the time they are made to stand throughout
VOLUNTARY ARBITRATORS WHICH DECLARED AS
their working time. The bottling operators get tired and
NOT VALID THE REMOVAL OF THE CHAIRS OF THE
exhausted after their tour of duty even with chairs around.
OPERATORS IN THE MANUFACTURING AND/OR
How much more if the chairs are removed?
PRODUCTION LINE.
88
The Union further claims that management prerogatives are the chairs, which have been in existence for more than 30
not absolute but subject to certain limitations found in law, a years, constitutes a violation of existing practice.
collective bargaining agreement, or general principles of fair
play and justice. The operators have been performing their The respondent’s position
assigned duties and responsibilities satisfactorily for thirty
(30) years using chairs. There is no record of poor CCBPI reiterates the ruling of the CA that a petition for
performance because the operators are sitting all the time. review under Rule 43 of the Rules of Court was the proper
There is no single incident when the attention of an operator remedy to question the decision of the Arbitration
was called for failure to carry out his assigned tasks. CCBPI Committee. It likewise echoes the ruling of the CA that the
has not submitted any evidence to prove that the removal of the chairs was a legitimate exercise of
performance of the operators was poor before the removal management prerogative; that it was done not to harm the
of the chairs and that it has improved after the chairs were bottling operators but for the purpose of optimizing their
removed. The presence of chairs for more than 30 years efficiency and CCBPI’s machineries and equipment; and
made the operators awake and alert as they could relax that the exercise of its management prerogative was done
from time to time. There are sanctions for those caught in good faith and not for the purpose of circumventing the
sleeping while on duty. Before the removal of the chairs, the rights of the employees under the special laws, the CBA or
efficiency of the operators was much better and there was the general principles of justice and fair play.
no recorded accident. After the removal of the chairs, the
efficiency of the operators diminished considerably, The Court’s Ruling
resulting in the drastic decline of line efficiency.
The decision in this case rests on the resolution of two basic
Finally, the Union asserts that the removal of the chairs questions. First, is an appeal to the CA via a petition for
constitutes violation of the Occupational Health and Safety review under Rule 43 of the 1997 Rules of Civil Procedure a
Standards, which provide that every company shall keep proper remedy to question the decision of the Arbitration
and maintain its workplace free from hazards that are likely Committee? Second, was the removal of the bottling
to cause physical harm to the workers or damage to operators’ chairs from CCBPI’s production/manufacturing
property. The removal of the chairs constitutes a violation of lines a valid exercise of a management prerogative?
the State policy to assure the right of workers to a just and
The Court sustains the ruling of the CA on both issues.
humane condition of work pursuant to Article 3 of the Labor
Code and of CCBPI’s Global Workplace Rights Policy. Regarding the first issue, the Union insists that the CA erred
Hence, the unilateral withdrawal, elimination or removal of in ruling that the recourse taken by CCBPI in appealing the

89
decision of the Arbitration Committee was proper. It argues is appealable to the CA via petition for review under Rule
that the proper remedy in challenging the decision of the 43. We held that:
Voluntary Arbitrator before the CA is by filing a petition for
certiorari under Rule 65 of the Rules of Court, not a petition "The question on the proper recourse to assail a decision of
for review under Rule 43. a voluntary arbitrator has already been settled in Luzon
Development Bank v. Association of Luzon Development
CCBPI counters that the CA was correct in ruling that the Bank Employees, where the Court held that the decision or
recourse it took in appealing the decision of the Arbitration award of the voluntary arbitrator or panel of arbitrators
Committee to the CA via a petition for review under Rule 43 should likewise be appealable to the Court of Appeals, in
of the Rules of Court was proper and in conformity with the line with the procedure outlined in Revised Administrative
rules and prevailing jurisprudence. Circular No. 1-95 (now embodied in Rule 43 of the 1997
Rules of Civil Procedure), just like those of the quasi-judicial
A Petition for Review agencies, boards and commissions enumerated therein,
and consistent with the original purpose to provide a uniform
under Rule 43 is the procedure for the appellate review of adjudications of all
quasi-judicial entities.
proper remedy
Subsequently, in Alcantara, Jr. v. Court of Appeals, and
CCBPI is correct. This procedural issue being debated upon Nippon Paint Employees Union-Olalia v. Court of Appeals,
is not novel. The Court has already ruled in a number of the Court reiterated the aforequoted ruling. In Alcantara, the
cases that a decision or award of a voluntary arbitrator is Court held that notwithstanding Section 2 of Rule 43, the
appealable to the CA via a petition for review under Rule 43. ruling in Luzon Development Bank still stands. The Court
The recent case of Samahan Ng Mga Manggagawa Sa explained, thus:
Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary Arbitrator
Buenaventura C. Magsalin and Hotel Enterprises of the ‘The provisions may be new to the Rules of Court but it is
Philippines6 reiterated the well-settled doctrine on this issue, far from being a new law. Section 2, Rules 42 of the 1997
to wit: Rules of Civil Procedure, as presently worded, is nothing
more but a reiteration of the exception to the exclusive
In the case of Samahan ng mga Manggagawa sa Hyatt- appellate jurisdiction of the Court of Appeals, as provided
NUWHRAIN-APL v. Bacungan,7 we repeated the well- for in Section 9, Batas Pambansa Blg. 129, as amended by
settled rule that a decision or award of a voluntary arbitrator Republic Act No. 7902:

90
(3) Exclusive appellate jurisdiction over all final judgments, manner therein provided, whether the appeal involves
decisions, resolutions, orders or awards of Regional Trial questions of fact, of law, or mixed questions of fact and law.
Courts and quasi-judicial agencies, instrumentalities, boards
or commissions, including the Securities and Exchange SEC. 4. Period of appeal. - The appeal shall be taken within
Commission, the Employees’ Compensation Commission fifteen (15) days from notice of the award, judgment, final
and the Civil Service Commission, except those falling order or resolution, or from the date of its last publication, if
within the appellate jurisdiction of the Supreme Court in publication is required by law for its effectivity, or of the
accordance with the Constitution, the Labor Code of the denial of petitioner’s motion for new trial or reconsideration
Philippines under Presidential Decree No. 442, as duly filed in accordance with the governing law of the court
amended, the provisions of this Act and of subparagraph (1) or agency a quo. x x x. (Emphasis supplied.)’
of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.’ Hence, upon receipt on May 26, 2003 of the Voluntary
Arbitrator’s Resolution denying petitioner’s motion for
The Court took into account this exception in Luzon reconsideration, petitioner should have filed with the CA,
Development Bank but, nevertheless, held that the within the fifteen (15)-day reglementary period, a petition for
decisions of voluntary arbitrators issued pursuant to the review, not a petition for certiorari.
Labor Code do not come within its ambit x x x."
On the second issue, the Union basically claims that the
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 CCBPI’s decision to unilaterally remove the operators’
Rules of Civil Procedure, as amended, provide: chairs from the production/manufacturing lines of its bottling
plants is not valid because it violates some fundamental
"SECTION 1. Scope. - This Rule shall apply to appeals from labor policies. According to the Union, such removal
judgments or final orders of the Court of Tax Appeals and constitutes a violation of the 1) Occupational Health and
from awards, judgments, final orders or resolutions of or Safety Standards which provide that every worker is entitled
authorized by any quasi-judicial agency in the exercise of its to be provided by the employer with appropriate seats,
quasi-judicial functions. Among these agencies are the x x among others; 2) policy of the State to assure the right of
x, and voluntary arbitrators authorized by law. workers to a just and humane condition of work as provided
for in Article 3 of the Labor Code;8 3) Global Workplace
xxxx Rights Policy of CCBPI which provides for a safe and
healthy workplace by maintaining a productive workplace
SEC. 3. Where to appeal. - An appeal under this Rule may and by minimizing the risk of accident, injury and exposure
be taken to the Court of Appeals within the period and in the
91
to health risks; and 4) diminution of benefits provided in duties and responsibilities more efficiently. The chairs were
Article 100 of the Labor Code.9 not removed indiscriminately. They were carefully studied
with due regard to the welfare of the members of the Union.
Opposing the Union’s argument, CCBPI mainly contends The removal of the chairs was compensated by: a) a
that the removal of the subject chairs is a valid exercise of reduction of the operating hours of the bottling operators
management prerogative. The management decision to from a two-and-one-half (2 ½)-hour rotation period to a one-
remove the subject chairs was made in good faith and did and-a-half (1 ½) hour rotation period; and b) an increase of
not intend to defeat or circumvent the rights of the Union the break period from 15 to 30 minutes between rotations.
under the special laws, the CBA and the general principles
of justice and fair play. Apparently, the decision to remove the chairs was done with
good intentions as CCBPI wanted to avoid instances of
Again, the Court agrees with CCBPI on the matter. operators sleeping on the job while in the performance of
their duties and responsibilities and because of the fact that
A Valid Exercise of the chairs were not necessary considering that the
operators constantly move about while working. In short, the
Management Prerogative removal of the chairs was designed to increase work
efficiency. Hence, CCBPI’s exercise of its management
The Court has held that management is free to regulate,
prerogative was made in good faith without doing any harm
according to its own discretion and judgment, all aspects of
to the workers’ rights.
employment, including hiring, work assignments, working
methods, time, place, and manner of work, processes to be The fact that there is no proof of any operator sleeping on
followed, supervision of workers, working regulations, the job is of no moment. There is no guarantee that such
transfer of employees, work supervision, lay-off of workers, incident would never happen as sitting on a chair is relaxing.
and discipline, dismissal and recall of workers. The exercise Besides, the operators constantly move about while doing
of management prerogative, however, is not absolute as it their job. The ultimate purpose is to promote work efficiency.
must be exercised in good faith and with due regard to the
rights of labor.10 No Violation of Labor Laws
In the present controversy, it cannot be denied that CCBPI The rights of the Union under any labor law were not
removed the operators’ chairs pursuant to a national violated. There is no law that requires employers to provide
directive and in line with its "I Operate, I Maintain, I Clean" chairs for bottling operators. The CA correctly ruled that the
program, launched to enable the Union to perform their Labor Code, specifically Article 13211 thereof, only requires
92
employers to provide seats for women. No similar The most common injuries occur in the muscles, bones,
requirement is mandated for men or male workers. It must tendons and ligaments, affecting the neck and lower back
be stressed that all concerned bottling operators in this case regions. Prolonged sitting:
are men.
● reduces body movement making muscles more likely to
There was no violation either of the Health, Safety and pull, cramp or strain when stretched suddenly, causes
Social Welfare Benefit provisions under Book IV of the fatigue in the back and neck muscles by slowing the blood
Labor Code of the Philippines. As shown in the foregoing, supply and puts high tension on the spine, especially in the
the removal of the chairs was compensated by the reduction low back or neck, and
of the working hours and increase in the rest period. The
directive did not expose the bottling operators to safety and ● causes a steady compression on the spinal discs that
health hazards. hinders their nutrition and can contribute to their premature
degeneration.
The Union should not complain too much about standing
and moving about for one and one-half (1 ½) hours because Sedentary employees may also face a gradual deterioration
studies show that sitting in workplaces for a long time is in health if they do not exercise or do not lead an otherwise
hazardous to one’s health. The report of VicHealth, physically active life. The most common health problems
Australia,12 disclosed that "prolonged workplace sitting is an that these employees experience are disorders in blood
emerging public health and occupational health issue with circulation and injuries affecting their ability to move. Deep
serious implications for the health of our working population. Vein Thrombosis (DVT), where a clot forms in a large vein
Importantly, prolonged sitting is a risk factor for poor health after prolonged sitting (eg after a long flight) has also been
and early death, even among those who meet, or exceed, shown to be a risk.
national13 activity guidelines." In another report,14 it was
written: Workers who spend most of their working time seated may
also experience other, less specific adverse health effects.
Workers needing to spend long periods in a seated position Common effects include decreased fitness, reduced heart
on the job such as taxi drivers, call centre and office and lung efficiency, and digestive problems. Recent
workers, are at risk for injury and a variety of adverse health research has identified too much sitting as an important part
effects. of the physical activity and health equation, and suggests
we should focus on the harm caused by daily inactivity such
as prolonged sitting.
Associate professor David Dunstan leads a team at the
93
Baker IDI in Melbourne which is specifically researching Article I
sitting and physical activity. He has found that people who
spend long periods of time seated (more than four hours per SCOPE
day) were at risk of:
SECTION 2. Scope of the Agreement. All the terms and
● higher blood levels of sugar and fats, conditions of employment of employees and workers within
the appropriate bargaining unit (as defined in Section 1
● larger waistlines, and hereof) are embodied in this Agreement and the same shall
govern the relationship between the COMPANY and such
● higher risk of metabolic syndrome employees and/or workers. On the other hand, all such
benefits and/or privileges as are not expressly provided for
regardless of how much moderate to vigorous exercise they in this Agreement but which are now being accorded, may
had. in the future be accorded, or might have previously been
accorded, to the employees and/or workers, shall be
In addition, people who interrupted their sitting time more deemed as purely voluntary acts on the part of the
often just by standing or with light activities such as COMPANY in each case, and the continuance and
housework, shopping, and moving about the office had repetition thereof now or in the future, no matter how long or
healthier blood sugar and fat levels, and smaller waistlines how often, shall not be construed as establishing an
than those whose sitting time was not broken up. obligation on the part of the COMPANY. It is however
understood that any benefits that are agreed upon by and
Of course, in this case, if the chairs would be returned, no
between the COMPANY and the UNION in the Labor-
risks would be involved because of the shorter period of
Management Committee Meetings regarding the terms and
working time. The study was cited just to show that there is
conditions of employment outside the CBA that have
a health risk in prolonged sitting.
general application to employees who are similarly situated
No Violation of the CBA in a Department or in the Plant shall be implemented.
[emphasis and underscoring supplied]
The CBA15 between the Union and CCBPI contains no
provision whatsoever requiring the management to provide As can be gleaned from the aforecited provision, the CBA
chairs for the operators in the production/manufacturing line expressly provides that benefits and/or privileges, not
while performing their duties and responsibilities. On the expressly given therein but which are presently being
contrary, Section 2 of Article 1 of the CBA expressly granted by the company and enjoyed by the employees,
provides as follows: shall be considered as purely voluntary acts by the
94
management and that the continuance of such benefits Code. In the Court’s view, the term "benefits" mentioned in
and/or privileges, no matter how long or how often, shall not the non-diminution rule refers to monetary benefits or
be understood as establishing an obligation on the privileges given to the employee with monetary equivalents.
company’s part. Since the matter of the chairs is not
expressly stated in the CBA, it is understood that it was a Such benefits or privileges form part of the employees’
purely voluntary act on the part of CCBPI and the long wage, salary or compensation making them enforceable
practice did not convert it into an obligation or a vested right obligations.
in favor of the Union.
This Court has already decided several cases regarding the
No Violation of the general principles non-diminution rule where the benefits or privileges involved
in those cases mainly concern monetary considerations or
of justice and fair play privileges with monetary equivalents. Some of these cases
are: Eastern Telecommunication Phils. Inc. v. Eastern
The Court completely agrees with the CA ruling that the Telecoms Employees Union,17 where the case involves the
removal of the chairs did not violate the general principles of payment of 14th, 15th and 16th month bonuses; Central
justice and fair play because the bottling operators’ working Azucarera De Tarlac v. Central Azucarera De Tarlac Labor
time was considerably reduced from two and a half (2 ½) Union-NLU,18 regarding the 13th month pay, legal/special
hours to just one and a half (1 ½) hours and the break holiday pay, night premium pay and vacation and sick
period, when they could sit down, was increased to 30 leaves; TSPIC Corp. v. TSPIC Employees
minutes between rotations. The bottling operators’ new work 19
Union, regarding salary wage increases; and American
schedule is certainly advantageous to them because it Wire and Cable Daily Employees Union vs. American Wire
greatly increases their rest period and significantly and Cable Company, Inc.,20 involving service awards with
decreases their working time. A break time of thirty (30) cash incentives, premium pay, Christmas party with
minutes after working for only one and a half (1 ½) hours is incidental benefits and promotional increase.
a just and fair work schedule.
In this regard, the Court agrees with the CA when it
No Violation of Article 100 resolved the matter and wrote:
of the Labor Code Let it be stressed that the aforequoted article speaks of non-
diminution of supplements and other employee benefits.
The operators’ chairs cannot be considered as one of the Supplements arc privileges given to an employee which
employee benefits covered in Article 10016 of the Labor constitute as extra remuneration besides his or her basic
95
ordinary earnings and wages. From this definition, We can UNIVERSIDAD DE STA. ISABEL, Petitioner,
only deduce that the other employee benefits spoken of by vs.
Article 100 pertain only to those which are susceptible of MARVIN-JULIAN L. SAMBAJON, JR., Respondent.
monetary considerations. Indeed, this could only be the
most plausible conclusion because the cases tackling DECISION
Article 100 involve mainly with monetary considerations or
privileges converted to their monetary equivalents. VILLARAMA, JR., J.:

xxxx Before us is a petition for review on certiorari under Rule 45

urging this Court to set aside the Decision1 dated March 25,
Without a doubt, equating the provision of chairs to the 2011 of the Court of Appeals (CA) in CA-GR. SP Nos.
bottling operators Ds something within the ambit of 108103 and 108168 which affirmed with modification the
"benefits'' in the context of Article 100 of the Labor Code is Decision2 dated August 1, 2008 of the National Labor
unduly stretching the coverage of the law. The Relations Commission (NLRC). The NLRC affirmed the
interpretations of Article 100 of the Labor Code do not show Decision3 dated August 22, 2006 of the Labor Arbiter in
even with the slightest hint that such provision of chairs for NLRC Sub-RAB V-05-04-00053-05) declaring petitioner
the bottling operators may be sheltered under its mantle.21 liable for illegal dismissal of respondent.

Jurisprudence recognizes the exercise of management The Facts

prerogatives. Labor Jaws also discourage interference with
an employer's judgment in the conduct of its business. For Universidad de Sta. Isabel (petitioner) is a non-stock, non-
this reason, the Court often declines to interfere in legitimate profit religious educational institution in Naga City. Petitioner
business decisions of employers. The law must protect not hired Marvin-Julian L. Sambajon, Jr. (respondent) as a full-
only the welfare of the employees, but also the right of the time college faculty member with the rank of Assistant
employers.22 Professor on probationary status, as evidenced by an
Appointment Contract4 dated November 1, 2002, effective
WHEREFORE, the petition is DENIED. November 1, 2002 up to March 30, 2003.

SO ORDERED. After the aforesaid contract expired, petitioner continued to

give teaching loads to respondent who remained a full-time
G.R. Nos. 196280 & 196286 April 2, 2014 faculty member of the Department of Religious Education
for the two semesters of school-year (SY) 2003-2004 (June

96
1, 2003 to March 31, 2004); and two semesters of SY 2004- Your personnel file shows that you were hired as a
2005 (June 2004 to March 31, 2005).5 probationary teacher in the second semester of school year
2002-2003. By October 2004, you will be completing four (4)
Sometime in June 2003, after respondent completed his semesters (two school years) of service. Even permanent
course in Master of Arts in Education, major in Guidance teachers are re-ranked only every two years, and you are
and Counseling, he submitted the corresponding Special not even a permanent teacher. I am informed that you have
Order from the Commission on Higher Education (CHED), been told several times and made to read the Provision in
together with his credentials for the said master’s degree, to the Faculty Manual by the personnel office that you cannot
the Human Resources Department of petitioner for the be re-ranked because you are still a probationary teacher.
purpose of salary adjustment/increase. Subsequently,
respondent’s salary was increased, as reflected in his pay x x x x8
slips starting October 1-15, 2004.6 He was likewise re-
ranked from Assistant Professor to Associate Professor. Respondent insisted on his demand for retroactive pay. In a
letter dated January 10, 2005, Sr. Evidente reiterated the
In a letter dated October 15, 2004 addressed to the school policy on re-ranking of teachers, viz:
President of petitioner, Sr. Ma. Asuncion G. Evidente, D.C.,
respondent vigorously argued that his salary increase xxx
should be made effective as of June 2003 and demanded
the payment of his salary differential. The school Under the Faculty Manual a permanent teacher is not
administration thru Sr. Purita Gatongay, D.C., replied by entitled to re-ranking oftener than once every two years.
explaining its policy on re-ranking of faculty members7, viz: From this it should be obvious that, with all the more reason,
a probationary teacher would not be entitled to "evaluation,"
xxxx which could result in re-ranking or "adjustment in salary"
oftener than once every two years.
Please be informed that teachers in the Universidad are not
re-ranked during their probationary period. The Faculty Since you are a probationary teacher, the University is
Manual as revised for school year 2002-2003 provides under no obligation to re-rank you or adjust your salary after
(page 38) "Re-ranking is done every two years, hence the what you refer to as "evaluation." Nevertheless, considering
personnel hold their present rank for two years. Those that in October 2004 you were completing two years of
undergoing probationary period and those on part-time service, the University adjusted your salary in the light of the
basis of employment are not covered by this provision." This CHED Special Order you submitted showing that you had
provision is found also in the 2000-2001 Operations Manual. obtained the degree of Master of Arts in Education. Instead
97
of being grateful for the adjustment, you insist that the Professor did not affect his status as a probationary
adjustment be made retroactive to June 2003. Simply employee" and that petitioner "was not and did not exercise
stated, you want your salary adjusted after one semester of its prerogative to shorten his probationary period to only two
probationary service. We do not think a probationary years." Sr. Stella O. Real, D.C., who issued a Certificate of
teacher has better rights than a permanent teacher in the Employment to respondent, likewise denied that she
matter of re-ranking or "evaluation."9 confirmed to respondent that petitioner has shortened his
probationary employment.12
However, respondent found the above explanation
insufficient and not clear enough. In his letter dated January On February 26, 2005, respondent received his letter of
12, 2005, he pointed out the case of another faculty termination which stated:
member -- whom he did not name -- also on probationary
status whose salary was supposedly adjusted by petitioner Greetings of Peace in the Lord!
at the start of school year (June) after he/she had
completed his/her master’s degree in March. Respondent We regret to inform your good self that your full time
thus pleaded for the release of his salary differential, or at probationary appointment will not be renewed when it
the very least, that petitioner give him categorical answers expires at the end of this coming March 31, 2005.
to his questions.10
Thank you so much for the services that you have rendered
Apparently, to resolve the issue, a dialogue was held to USI and to her clientele the past several semesters. We
between respondent and Sr. Evidente. As to the outcome of strongly and sincerely encourage you to pursue your desire
this conversation, the parties gave conflicting accounts. to complete your Post Graduate studies in the University of
Respondent claimed that Sr. Evidente told him that the your choice as soon as you are able.
school administration had decided to shorten his
probationary period to two years on the basis of his God bless you in all your future endeavors.
satisfactory performance.11 This was categorically denied by
Godspeed!13
Sr. Evidente though the latter admitted having informed
respondent "that he was made Associate Professor on On April 14, 2005, respondent filed a complaint for illegal
account of his incessant requests for a salary increase dismissal against the petitioner.
which the Universidad de Santa Isabel eventually
accommodated…considering that [respondent] had In his Decision dated August 22, 2006, Labor Arbiter Jesus
obtained a Master’s Degree in June 2003." She further Orlando M. Quinones ruled that there was no just or
informed respondent that "his appointment as Associate authorized cause in the termination of respondent’s
98
probationary employment. Consequently, petitioner was on a cause of action/issue not raised by the complainant
found liable for illegal dismissal, thus: (respondent) in his position paper.

WHEREFORE, in view of the foregoing, judgment is hereby On August 1, 2008, the NLRC rendered its Decision
rendered finding respondent school UNIVERSIDAD DE affirming the Labor Arbiter and holding that respondent had
SANTA ISABEL liable for the illegal dismissal of acquired a permanent status pursuant to Sections 91, 92
complainant MARVIN-JULIAN L. SAMBAJON, JR. and 93 of the 1992 Manual of Regulations for Private
Schools, in relation to Article 281 of the Labor Code, as
Accordingly, and consistent with Article 279 of the Labor amended. Thus:
Code, respondent school is hereby directed to pay
complainant full backwages covering the period/duration of In the instant case, the first contract (records, pp. 36; 92)
the 1st semester of academic year 2005-2006. executed by the parties provides that he was hired on a
Reinstatement being rendered moot by the expiration of the probationary status effective November 1, 2002 to March
probationary period, respondent school is directed to pay 30, 2003. While his employment continued beyond the
complainant separation pay in lieu of reinstatement above-mentioned period and lasted for a total of five (5)
computed at one (1) month’s pay for every year of service. consecutive semesters, it appears that the only other
An award of 10% attorney’s fees in favor of complainant is contract he signed is the one (records, p. 103) for the
also held in order. second semester of SY 2003-2004. A portion of this
contract reads:
(please see attached computation of monetary award as
integral part of this decision). "I am pleased to inform you that you are designated and
commissioned to be an Apostle of Love and Service, Unity
All other claims and charges are DISMISSED for lack of and Peace as you dedicate and commit yourself in the
legal and factual basis. exercise of your duties and responsibilities as a:
SO ORDERED.14 FULL-TIME FACULTY MEMBER
of the Religious Education Department from November 1,
Petitioner appealed to the NLRC raising the issue of the 2003 to March 31, 2004.
correct interpretation of Section 92 of the Manual of
Regulations for Private Schools and DOLE-DECS-CHED- Unless otherwise renewed in writing this designation
TESDA Order No. 01, series of 1996, and alleging grave automatically terminates as of the date expiration above
abuse of discretion committed by the Labor Arbiter in ruling stated without further notice."
99
There is no showing that the complainant signed a contract rules for the acquisition of permanent status by private
for the first and second semesters of SY 2004-2005. school teachers, these rules applied to them and overrode
their mistaken beliefs. As to respondent’s plea for back
Under the circumstances, it must be concluded that the wages, the NLRC said the award of back wages was not
complainant has acquired permanent status. The last done in this case because respondent did not appeal the
paragraph of Article 281 of the Labor Code provides that "an Labor Arbiter’s decision.
employee who is allowed to work after a probationary period
shall be considered a regular employee." Based thereon, Both parties filed separate appeals before the CA. On
the complainant required [sic] permanent status on the first motion by respondent, the two cases were consolidated
day of the first semester of SY 2003-2004. (CA-G.R. SP Nos. 108103 and 108168).16

As presently worded, Section 92 of the revised Manual of By Decision dated March 25, 2011, the CA sustained the
Regulations for Private Schools merely provides for the conclusion of the NLRC that respondent had already
maximum lengths of the probationary periods of academic acquired permanent status when he was allowed to
personnel of private schools in the three (3) levels of continue teaching after the expiration of his first
education (elementary, secondary, tertiary). The periods appointment-contract on March 30, 2003. However, the CA
provided therein are not requirements for the acquisition, by found it necessary to modify the decision of the NLRC to
them, of permanent status. include the award of back wages to respondent. The
dispositive portion of the said decision reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED. WHEREFORE, premises considered, the petition docketed
as CA-G.R. SP No. 108103 is GRANTED. The challenged
SO ORDERED.15 Decision of the NLRC dated August 1, 2008 in NLRC NCR
CA No. 050481-06 (NLRC Sub-RAB V-05-04-00053-05) is
Petitioner and respondent sought reconsideration of the AFFIRMED with MODIFICATION in that Universidad de
above decision, with the former contending that the NLRC Sta. Isabel is directed to reinstate Marvin-Julian L.
resolved an issue not raised in the appeal memorandum, Sambajon, Jr. to his former position without loss of seniority
while the latter asserted that the NLRC erred in not rights and to pay him full backwages computed from the
awarding him full back wages so as to conform to the time his compensation was withheld from him up to the time
finding that he had acquired a permanent status. Both of his actual reinstatement. All other aspects are
motions were denied by the NLRC which ruled that AFFIRMED.
regardless of whether or not the parties were aware of the
100
As regards CA-G.R. SP No. 108168, the petition is DENIED Section 4(d), Rule VI of the 2005 Revised Rules of
for lack of merit. Procedure of the NLRC, which was in force at the time
petitioner appealed the Labor Arbiter’s decision, expressly
SO ORDERED.17 provided that, on appeal, the NLRC shall limit itself only to
the specific issues that were elevated for review, to wit:
The Petition/Issues
Section 4. Requisites for perfection of appeal. x x x.
Before this Court, petitioner ascribes grave error on the part
of the CA in sustaining the NLRC which ruled that xxxx
respondent was dismissed without just or authorized cause
at the time he had already acquired permanent or regular (d) Subject to the provisions of Article 218 of the Labor
status since petitioner allowed him to continue teaching Code, once the appeal is perfected in accordance with
despite the expiration of the first contract of probationary these Rules, the Commission shall limit itself to reviewing
employment for the second semester of SY 2002-2003. and deciding only the specific issues that were elevated on
Petitioner at the outset underscores the fact that the NLRC appeal.
decided an issue which was not raised on appeal, i.e.,
whether respondent had attained regular status. It points out We have clarified that the clear import of the
that the Labor Arbiter’s finding that respondent was aforementioned procedural rule is that the NLRC shall, in
dismissed while still a probationary employee was not cases of perfected appeals, limit itself to reviewing those
appealed by him, and hence such finding had already issues which are raised on appeal. As a consequence
become final. thereof, any other issues which were not included in the
appeal shall become final and executory.18
In fine, petitioner asks this Court to rule on the following
issues: (1) whether the NLRC correctly resolved an issue In this case, petitioner sets forth the following issues in its
not raised in petitioner’s appeal memorandum; and (2) appeal memorandum:
whether respondent’s probationary employment was validly
terminated by petitioner. 5.01

Our Ruling WHETHER THE MARVIN JULIAN L. SAMBAJON, JR.

WAS ILLEGALLY DISMISSED FROM THE UNIVERSIDAD
The petition is partly meritorious. DE STA. ISABEL.

Issues on Appeal before the NLRC 5.02

101
WHETHER THE UNIVERSIDAD DE STA. ISABEL Commission shall, in cases of perfected appeals, limits itself
SHORTENED THE PROBATIONARY PERIOD OF to reviewing those issues which were raised on appeal.
MARVIN JULIAN L. SAMBAJON. Consequently, those which were not raised on appeal shall
be final and executory.
5.03
There is no merit to this contention. The records show that
WHETHER RESPONDENTS-APPELLANTS ARE the petitioners elevated the issues regarding the
ENTITLED TO DAMAGES.19 correctness of the award of damages, reinstatement with
backpay, retirement benefits and the cost-saving bonus to
Specifically, petitioner sought the correct interpretation of the respondent Commission in their appeal. This opened
the Manual of Regulations for Private School Teachers and the said issues for review and any action taken thereon by
DOLE-DECS-CHED-TESDA Order No. 01, series of 1996, the Commission was well within the parameters of its
insofar as the probationary period for teachers. jurisdiction. (Emphasis supplied.)
In reviewing the Labor Arbiter’s finding of illegal dismissal, Probationary Employment Period
the NLRC concluded that respondent had already attained
regular status after the expiration of his first appointment A probationary employee is one who is on trial by the
contract as probationary employee. Such conclusion was employer during which the employer determines whether or
but a logical result of the NLRC’s own interpretation of the not said employee is qualified for permanent employment. A
law. Since petitioner elevated the questions of the validity of probationary appointment is made to afford the employer an
respondent’s dismissal and the applicable probationary opportunity to observe the fitness of a probationary
period under the aforesaid regulations, the NLRC did not employee while at work, and to ascertain whether he will
gravely abuse its discretion in fully resolving the said issues. become a proper and efficient employee. The word
probationary as used to describe the period of employment
As the Court held in Roche (Phils.) v. NLRC20: implies the purpose of the term or period, but not its
length.21
Petitioners then suggest that the respondent Commission
abused its discretion in awarding reliefs in excess of those It is well settled that the employer has the right or is at
stated in the decision of the labor arbiter despite the liberty to choose who will be hired and who will be denied
absence of an appeal by Villareal. To stress this point, they employment. In that sense, it is within the exercise of the
cited Section 5(c) of the Rules of Procedure of the National right to select his employees that the employer may set or
Labor Relations Commission which provides that the fix a probationary period within which the latter may test and
102
observe the conduct of the former before hiring him requirements, the probationary period for academic
permanently.22 The law, however, regulates the exercise of personnel shall not be more than three (3) consecutive
this prerogative to fix the period of probationary years of satisfactory service for those in the elementary and
employment. While there is no statutory cap on the secondary levels, six (6) consecutive regular semesters of
minimum term of probation, the law sets a maximum "trial satisfactory service for those in the tertiary level, and nine
period" during which the employer may test the fitness and (9) consecutive trimesters of satisfactory service for those in
efficiency of the employee.23 the tertiary level where collegiate courses are offered on a
trimester basis. (Emphasis supplied.)
Article 281 of the Labor Code provides:
Thus, it is the Manual of Regulations for Private Schools,
ART. 281. Probationary Employment.–Probationary and not the Labor Code, that determines whether or not a
employment shall not exceed six (6) months from the date faculty member in an educational institution has attained
the employee started working, unless it is covered by an regular or permanent status.25 Section 9326 of the 1992
apprenticeship agreement stipulating a longer period. The Manual of Regulations for Private Schools provides that full-
services of an employee who has been engaged on a time teachers who have satisfactorily completed their
probationary basis may be terminated for a just cause or probationary period shall be considered regular or
when he fails to qualify as a regular employee in permanent.
accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. In this case, the CA sustained the NLRC’s ruling that
An employee who is allowed to work after a probationary respondent was illegally dismissed considering that he had
period shall be considered a regular employee. become a regular employee when petitioner allowed him to
work beyond the date specified in his first probationary
The probationary employment of teachers in private schools appointment contract which expired on March 30, 2003.
is not governed purely by the Labor Code. The Labor Code According to the CA:
is supplemented with respect to the period of probation by
special rules found in the Manual of Regulations for Private … As can be gleaned from Section 92 of the 1992 Manual
Schools.24 On the matter of probationary period, Section 92 of Regulations for Private Schools, the probationary period
of the 1992 Manual of Regulations for Private Schools applicable in this case is not more than six (6) consecutive
regulations states: regular semesters of satisfactory service. In other words,
the probationary period for academic personnel in the
Section 92. Probationary Period. – Subject in all instances tertiary level runs from one (1) semester to six (6)
to compliance with the Department and school consecutive regular semesters of satisfactory service. In the
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instant case, records reveal that Sambajon, Jr. only signed Date Contract Period
two appointment contracts. The first appointment-contract
which he signed was dated November 2002 for the period
November 1, 2002 to March 30, 2003, as Assistant November 1, 2002-March 30,
November 1, 2002
Professor 10 on probationary status. x x x The second 2003
appointment-contract which Sambajon, Jr. executed was
dated February 26, 2004, for the period November 1, 2003 September 28,
to March 31, 2004. x x x Compared with the first June 1, 2003-October 31, 2003
2003
appointment-contract, it was not indicated in the February
26, 2004 appointment-contract that Sambajon, Jr. was hired
on probationary status, which explains the NLRC’s November 1, 2003-March 31,
February 26, 2004
conclusion that Sambajon, Jr. already attained permanent 2004
status. At this juncture, it is worthy to emphasize that other
than the period provided under Article 281 of the Labor September 30,
Code, the following quoted portion of Article 281 of the June 1, 2004-October 31, 2004
2004
Labor Code still applies:

"ART. 281. PROBATIONARY EMPLOYMENT. – November 3, 2004-March 31,

October 28, 2004
2005
x x x x An employee who is allowed to work after a
probationary period shall be considered a regular
employee." Only the first and third contracts were signed by the
respondent. However, such lack of signature in the second
Thus, We sustain the NLRC’s conclusion that Sambajon, Jr. contract appears not to be the crucial element considered
acquired permanent status on the first day of the first by the CA but the fact that the third contract dated February
semester of SY 2003-2004 when he was allowed to 26, 2004, unlike the previous contracts, does not indicate
continue with his teaching stint after the expiration of his first the nature of the appointment as probationary employment.
appointment-contract on March 30, 2003.27 According to the CA, this implies, as concluded by the
NLRC, that respondent was already a regular employee.
On record are five appointment contracts28 of respondent:
We disagree.

104
The third appointment contract dated February 26, 2004 God bless
reads:
In Christ,
February 26, 2004
Sr. Ma. Asuncion G. Evidente, D.C.
MR. MARVIN JULIAN SAMBAJON USI President
Religious Education Department
Witness:
Dear Mr. Sambajon,
Sr. Stella O. Real, D.C.
I am pleased to inform you that you are designated and HR Officer
commissioned to be an Apostle of Love and Service, Unity
and Peace as you dedicate and commit yourself in the I, ______________________ understand that unless
exercise of your duties and responsibilities as a: renewed in writing, my services as ________________
expires automatically on the specific date above stated.
FULL TIME FACULTY MEMBER
of the Religious Education Department from November 1, Furthermore, I fully accept this appointment to help build the
2003 to March 31, 2004. Kingdom of God here and now and to facilitate the living of
the Core Values and the attainment of the Vision-Mission
Unless otherwise renewed in writing, this designation and the goals and objectives of the University.
automatically terminates as of the date expiration above
states without further notice. Received and Conforme:

As a member of the academic/clinical community, you are (SGD.) MARVIN-JULIAN L. SAMBAJON, JR.29
expected to live by and give your full support to the
promotion and attainment of the Vision-Mission, goals and Since it was explicitly provided in the above contract that
objectives, the rules and regulations, the Core Values which unless renewed in writing respondent’s appointment
the University professes to believe and live by. automatically expires at the end of the stipulated period of
employment, the CA erred in concluding that simply
Congratulations and keep your work full in the spirit of the because the word "probationary" no longer appears below
Lord for the Charity of Christ urges us to live life to the the designation (Full-Time Faculty Member), respondent
fullest. had already become a permanent employee. Noteworthy is
respondent’s admission of being still under probationary
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period in his January 12, 2005 letter to Sr. Evidente The three (3)-year period of service mentioned in paragraph
reiterating his demand for salary differential, which letter 75 [of the Manual of Regulations for Private Schools] is of
was sent almost one year after he signed the February 26, course the maximum period or upper limit, so to speak, of
2004 appointment contract, to wit: probationary employment allowed in the case of private
school teachers. This necessarily implies that a regular or
The problem is that your good office has never categorically permanent employment status may, under certain
resolved whether or not probationary teachers can also be conditions, be attained in less than three (3) years. By and
evaluated for salary adjustment. Nevertheless, inferring large, however, whether or not one has indeed attained
from your statement that evaluation precedes re-ranking permanent status in one’s employment, before the passage
and in fact is the basis for re-ranking, may I categorically of three (3) years, is a matter of proof. (Emphasis supplied.)
ask: does it really mean that since, it precedes re-ranking,
evaluation should not take place among probationary There can be no dispute that the period of probation may be
teachers for they can not yet be re-ranked? If so, then how reduced if the employer, convinced of the fitness and
pitiful are we, probationary teachers for our credentials are efficiency of a probationary employee, voluntarily extends a
never evaluated since we cannot yet be re-ranked. Oh my permanent appointment even before the three-year period
goodness! Can your good office not give me a clearer and ends. Conversely, if the purpose sought by the employer is
more convincing argument shedding light on this matter?30 neither attained nor attainable within the said period, the law
does not preclude the employer from terminating the
Respondent nonetheless claims that subsequently, the probationary employment on justifiable ground; or, a shorter
probationary period of three years under the regulations probationary period may be incorporated in a collective
was shortened by petitioner as relayed to him by Sr. bargaining agreement. But absent any circumstances which
Evidente herself. However, the latter, together with Sr. Real, unmistakably show that an abbreviated probationary period
categorically denied having informed respondent that his has been agreed upon, the three-year probationary term
probationary period was abbreviated, allegedly the reason governs.32
his salary adjustment was not made retroactive. Apart from
his bare assertion, respondent has not adduced proof of any As to the Certificate of Employment33 issued by Sr. Real on
decision of the school administration to shorten his January 31, 2005, it simply stated that respondent "was a
probationary period. full time faculty member in the Religious Education
Department of this same institution" and that he holds the
In Rev. Fr. Labajo v. Alejandro,31 we held that: rank of Associate Professor. There was no description or
qualification of respondent’s employment as regular or
permanent. Neither did the similar Certification34 also issued
106
by Sr. Real on March 18, 2005 prove respondent’s status as 3. Teachers or academic personnel who have served
a permanent faculty member of petitioner. the probationary period as provided for in the
immediately preceding paragraph shall be made
It bears stressing that full-time teaching primarily refers to regular or permanent if allowed to work after such
the extent of services rendered by the teacher to the probationary period. The educational institution,
employer school and not to the nature of his appointment. however, may shorten the probationary period after
Its significance lies in the rule that only full-time teaching taking into account the qualifications and performance
personnel can acquire regular or permanent status. The of the probationary teachers and academic personnel.
provisions of DOLE-DECS-CHED-TESDA Order No. 01,
series of 1996, "Guidelines on Status of Employment of Full-time teaching or academic personnel are those
Teachers and of Academic Personnel in Private Educational meeting all the following requirements:
Institutions" are herein reproduced:
3.1. Who possess at least the minimum
2. Subject in all instances to compliance with the academic qualifications prescribed by the
concerned agency and school requirements, the Department of Education, Culture and Sports for
probationary period for teaching or academic Basic Education, the Commission on Higher
personnel shall not be more than three (3) Education for Tertiary Education, and the
consecutive school years of satisfactory service for Technical Education and Skills Development
those in the elementary and secondary levels; six (6) Authority for Technical and Vocational Education
consecutive regular semesters of satisfactory service under their respective Manual of Regulations
for those in the tertiary and graduate levels, and nine governing said personnel;
(9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are 3.2 Who are paid monthly or hourly, based on
offered on a trimester basis. the normal or regular teaching loads as provided
for in the policies, rules and standards of the
Unless otherwise provided by contract, school agency concerned;
academic personnel who are under probationary
employment cannot be dismissed during the 3.3 Whose regular working day of not more than
applicable probationary period, unless dismissal is eight (8) hours a day is devoted to the school;
compelled by a just cause or causes.
3.4 Who have no other remunerative occupation
elsewhere requiring regular hours of work that
107
 will conflict with the working hours in the school; semesters. In Magis Young Achievers’ Learning
and Center37 the Court explained the three years probationary
period rule in this wise:
3.5 Who are not teaching full-time in any other
educational institution. The common practice is for the employer and the teacher to
enter into a contract, effective for one school year. At the
All teaching or academic personnel who do not meet end of the school year, the employer has the option not to
the foregoing qualifications are considered part time. renew the contract, particularly considering the teacher’s
performance. If the contract is not renewed, the employment
4. Part-time teaching or academic personnel cannot relationship terminates. If the contract is renewed, usually
acquire regular or permanent employment status. for another school year, the probationary employment
continues. Again, at the end of that period, the parties may
5. Teaching or academic personnel who do not meet opt to renew or not to renew the contract. If renewed, this
the minimum academic qualifications shall not acquire second renewal of the contract for another school year
tenure or regular status. The school may terminate would then be the last year – since it would be the third
their services when a qualified teacher becomes school year – of probationary employment. At the end of this
available.35 third year, the employer may now decide whether to extend
a permanent appointment to the employee, primarily on the
In this case, petitioner applied the maximum three-year
basis of the employee having met the reasonable standards
probationary period – equivalent to six consecutive
of competence and efficiency set by the employer. For the
semesters – provided in the Manual of Regulations. This
entire duration of this three-year period, the teacher remains
can be gleaned from the letter dated March 24, 2004 of Sr.
under probation. Upon the expiration of his contract of
Grace Namocancat, D.C. addressed to respondent,
employment, being simply on probation, he cannot
informing the latter of the result of evaluation of his
automatically claim security of tenure and compel the
performance for SY 2003-2004 and stating that November
employer to renew his employment contract. It is when the
2004 marks his second year of full-time teaching, which
yearly contract is renewed for the third time that Section 93
means he had one more year to become a permanent
of the Manual becomes operative, and the teacher then is
employee.36
entitled to regular or permanent employment
38
The circumstance that respondent’s services were hired on status. (Emphasis supplied.)
semester basis did not negate the applicable probationary
Petitioner argues that respondent’s probationary period
period, which is three school years or six consecutive
expires after each semester he was contracted to teach and
108
hence it was not obligated to renew his services at the end that they were on probationary status – not permanent or
of the fifth semester (March 2005) of his probationary regular status – from the time they were employed on May
employment. It asserts that the practice of issuing 25, 1998 and until the expiration of their Teaching Contracts
appointment contracts for every semester was legal and on September 7, 2000. As the CA correctly found, their
therefore respondent was not terminated when petitioner did teaching stints only covered a period of at least seven (7)
not renew his contract for another semester as his consecutive trimesters or two (2) years and three (3)
probationary contract merely expired. Plainly, petitioner months of service. This case, however, brings to the fore
considered the subject appointment contracts as fixed-term the essential question of which, between the two factors
contracts such that it can validly dismiss respondent at the affecting employment, should prevail given AMACC’s
end of each semester for the reason that his contract had position that the teachers contracts expired and it had the
expired. right not to renew them. In other words, should the teachers’
probationary status be disregarded simply because the
The Court finds no merit in petitioner’s interpretation of the contracts were fixed-term?
Manual of Regulations, supplemented by DOLE-DECS-
CHED-TESDA Order No. 01, series of 1996. As we made The provision on employment on probationary status under
clear in the afore-cited case of Magis Young Achievers’ the Labor Code is a primary example of the fine balancing
Learning Center, the teacher remains under probation for of interests between labor and management that the Code
the entire duration of the three-year period. Subsequently, in has institutionalized pursuant to the underlying intent of the
the case of Mercado v. AMA Computer College-Parañaque Constitution.
City, Inc.39 the Court, speaking through Justice Arturo D.
Brion, recognized the right of respondent school to On the one hand, employment on probationary status
determine for itself that it shall use fixed-term employment affords management the chance to fully scrutinize the true
contracts as its medium for hiring its teachers. worth of hired personnel before the full force of the security
Nevertheless, the Court held that the teachers’ probationary of tenure guarantee of the Constitution comes into play.
status should not be disregarded simply because their Based on the standards set at the start of the probationary
contracts were fixed-term. Thus: period, management is given the widest opportunity during
the probationary period to reject hirees who fail to meet its
The Conflict: Probationary Status own adopted but reasonable standards. These standards,
and Fixed-term Employment together with the just and authorized causes for termination
of employment the Labor Code expressly provides, are the
The existence of the term-to-term contracts covering the grounds available to terminate the employment of a teacher
petitioners’ employment is not disputed, nor is it disputed on probationary status. For example, the school may
109
impose reasonably stricter attendance or report compliance tenure guarantee the law extends to probationary
records on teachers on probation, and reject a probationary employees.
teacher for failing in this regard, although the same
attendance or compliance record may not be required for a When fixed-term employment is brought into play under the
teacher already on permanent status. At the same time, the above probationary period rules, the situation – as in the
same just and authorize[d] causes for dismissal under the present case – may at first blush look muddled as fixed-term
Labor Code apply to probationary teachers, so that they employment is in itself a valid employment mode under
may be the first to be laid-off if the school does not have Philippine law and jurisprudence. The conflict, however, is
enough students for a given semester or trimester. more apparent than real when the respective nature of
Termination of employment on this basis is an authorized fixed-term employment and of employment on probationary
cause under the Labor Code. status are closely examined.

Labor, for its part, is given the protection during the The fixed-term character of employment essentially refers to
probationary period of knowing the company standards the the period agreed upon between the employer and the
new hires have to meet during the probationary period, and employee; employment exists only for the duration of the
to be judged on the basis of these standards, aside from the term and ends on its own when the term expires. In a
usual standards applicable to employees after they achieve sense, employment on probationary status also refers to a
permanent status. Under the terms of the Labor Code, period because of the technical meaning "probation" carries
these standards should be made known to the teachers on in Philippine labor law – a maximum period of six months, or
probationary status at the start of their probationary period, in the academe, a period of three years for those engaged
or at the very least under the circumstances of the present in teaching jobs. Their similarity ends there, however,
case, at the start of the semester or the trimester during because of the overriding meaning that being "on probation"
which the probationary standards are to be applied. Of connotes, i.e., a process of testing and observing the
critical importance in invoking a failure to meet the character or abilities of a person who is new to a role or job.
probationary standards, is that the school should show – as
a matter of due process – how these standards have been Understood in the above sense, the essentially protective
applied. This is effectively the second notice in a dismissal character of probationary status for management can
situation that the law requires as a due process guarantee readily be appreciated. But this same protective character
supporting the security of tenure provision, and is in gives rise to the countervailing but equally protective rule
furtherance, too, of the basic rule in employee dismissal that that the probationary period can only last for a specific
the employer carries the burden of justifying a dismissal. maximum period and under reasonable, well-laid and
These rules ensure compliance with the limited security of properly communicated standards. Otherwise stated, within
110
the period of the probation, any employer move based on probationary status overlaps with a fixed-term contract not
the probationary standards and affecting the continuity of specifically used for the fixed term it offers, Article 281
the employment must strictly conform to the probationary should assume primacy and the fixed-period character of
rules. the contract must give way. This conclusion is
immeasurably strengthened by the petitioners’ and the
Under the given facts where the school year is divided into AMACC’s hardly concealed expectation that the
trimesters, the school apparently utilizes its fixed-term employment on probation could lead to permanent status,
contracts as a convenient arrangement dictated by the and that the contracts are renewable unless the petitioners
trimestral system and not because the workplace parties fail to pass the school’s standards.40 (Additional emphasis
really intended to limit the period of their relationship to any supplied.)
fixed term and to finish this relationship at the end of that
term. If we pierce the veil, so to speak, of the parties’ so- Illegal Dismissal
called fixed-term employment contracts, what undeniably
comes out at the core is a fixed-term contract conveniently Notwithstanding the limited engagement of probationary
used by the school to define and regulate its relations with employees, they are entitled to constitutional protection of
its teachers during their probationary period. security of tenure during and before the end of the
probationary period.41 The services of an employee who has
To be sure, nothing is illegitimate in defining the school- been engaged on probationary basis may be terminated for
teacher relationship in this manner. The school, however, any of the following: (a) a just or (b) an authorized cause;
cannot forget that its system of fixed-term contract is a and (c) when he fails to qualify as a regular employee in
system that operates during the probationary period and for accordance with reasonable standards prescribed by the
this reason is subject to the terms of Article 281 of the Labor employer.42
Code. Unless this reconciliation is made, the requirements
of this Article on probationary status would be fully negated Thus, while no vested right to a permanent appointment had
as the school may freely choose not to renew contracts as yet accrued in favor of respondent since he had not
simply because their terms have expired. The inevitable completed the prerequisite three-year period (six
effect of course is to wreck the scheme that the Constitution consecutive semesters) necessary for the acquisition of
and the Labor Code established to balance relationships permanent status as required by the Manual of Regulations
between labor and management. for Private Schools43 -- which has the force of law44 -- he
enjoys a limited tenure. During the said probationary period,
Given the clear constitutional and statutory intents, we he cannot be terminated except for just or authorized
cannot but conclude that in a situation where the causes, or if he fails to qualify in accordance with
111
reasonable standards prescribed by petitioner for the the acrimony between the parties which must have been
acquisition of permanent status of its teaching personnel. generated by this controversy, it can be said unequivocally
that petitioner had opted not to extend respondent's
In a letter dated February 26, 2005, petitioner terminated employment beyond this period. Therefore, the award of
the services of respondent stating that his probationary backwages as a consequence of the finding of illegal
employment as teacher will no longer be renewed upon its dismissal in favor of respondent should be confined to the
expiry on March 31, 2005, respondent’s fifth semester of three-year probationary period. Computing her monthly
teaching. No just or authorized cause was given by salary of F15,000.00 for the next two school years
petitioner. Prior to this, respondent had consistently (F15,000.00 x 10 months x 2), respondent already having
achieved above average rating based on evaluation by received her full salaries for the year 2002-2003, she is
petitioner’s officials and students. He had also been entitled to a total amount of F300,000.00. Moreover,
promoted to the rank of Associate Professor after finishing respondent is also entitled to receive her 13th month pay
his master’s degree course on his third semester of correspondent to the said two school years, computed as
teaching. Clearly, respondent’s termination after five yearly salary, divided by 12 months in a year, multiplied by
semesters of satisfactory service was illegal. 2, corresponding to the school years 2003-2004 and 2004-
2005, or F150,000.00 I 12 months x 2 = F25,000.00. Thus,
Respondent therefore is entitled to continue his three-year the NLRC was correct in awarding respondent the amount
probationary period, such that from March 31, 2005, his of F325,000.00 as backwages, inclusive of 13th month pay
probationary employment is deemed renewed for the for the school years 2003-2004 and 2004-2005, and the
following semester (1st semester of SY 2005-2006). amount of ₱3,750.00 as pro-rated 13th month pay.
However, given the discordant relations that had arisen from
the parties’ dispute, it can be inferred with certainty that WHEREFORE, the petition for review on certiorari is
petitioner had opted not to retain respondent in its employ PARTLY GRANTED. The Decision dated March 25, 2011 of
beyond the three-year period. the Court of Appeals in CA-G.R. SP Nos. 108103 & 108168
is hereby MODIFIED. Petitioner Universidad de Sta. Isabel
On the appropriate relief and damages, we adhere to our is hereby DIRECTED to PAY respondent Marvin-Julian L.
disposition in Magis Young Achievers’ Learning Center45: Sambajon, Jr. back wages corresponding to his full monthly
salaries for one semester (1st semester of SY 2005-2006)
Finally, we rule on the propriety of the monetary and pro-rated 13th month pay.
awards.1âwphi1 Petitioner, as employer, is entitled to
decide whether to extend respondent a permanent status by
renewing her contract beyond the three-year period. Given
112
The case is REMANDED to the Labor Arbiter for a On June 27, 2004, petitioner Abbott Laboratories,
recomputation of the amounts due to respondent in Philippines (Abbott) caused the publication in a major
conformity with this Decision. broadsheet newspaper of its need for a Medical and
No pronouncement as to costs. Regulatory Affairs Manager (Regulatory Affairs Manager)
who would: (a) be responsible for drug safety surveillance
SO ORDERED. operations, staffing, and budget; (b) lead the development
and implementation of standard operating
G.R. No. 192571 July 23, 2013 procedures/policies for drug safety surveillance and
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. vigilance; and (c) act as the primary interface with internal
TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T. and external customers regarding safety operations and
YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G. queries.4 Alcaraz - who was then a Regulatory Affairs and
ALMAZAR, Petitioners, Information Manager at Aventis Pasteur Philippines,
vs. Incorporated (another pharmaceutical company like Abbott)
PEARLIE ANN F. ALCARAZ, Respondent. – showed interest and submitted her application on October
4, 2004.5
DECISION
On December 7, 2004, Abbott formally offered Alcaraz the
PERLAS-BERNABE, J.: abovementioned position which was an item under the
Assailed in this petition for review on certiorari1 are the company’s Hospira Affiliate Local Surveillance Unit (ALSU)
Decision2 dated December 10,2009 and Resolution3 dated department.6 In Abbott’s offer sheet.7 it was stated that
June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP Alcaraz was to be employed on a probationary basis.8 Later
No. 101045 which pronounced that the National Labor that day, she accepted the said offer and received an
Relations Commission (NLRC) did not gravely abuse its electronic mail (e-mail) from Abbott’s Recruitment Officer,
discretion when it ruled that respondent Pearlie Ann F. petitioner Teresita C. Bernardo (Bernardo), confirming the
Alcaraz (Alcaraz) was illegally dismissed from her same. Attached to Bernardo’s e-mail were Abbott’s
employment. organizational chart and a job description of Alcaraz’s work.9

The Facts On February 12, 2005, Alcaraz signed an employment

contract which stated, inter alia, that she was to be placed
113
on probation for a period of six (6) months beginning If you agree to the terms and conditions of your
February 15, 2005 to August 14, 2005. The said contract employment, please signify your conformity below and
was also signed by Abbott’s General Manager, petitioner return a copy to HRD.
Edwin Feist (Feist):10
Welcome to Abbott!
PROBATIONARY EMPLOYMENT
Very truly yours,
Dear Pearl,
Sgd.
After having successfully passed the pre-employment EDWIN D. FEIST
requirements, you are hereby appointed as follows: General Manager

Position Title : Regulatory Affairs Manager CONFORME:

Department : Hospira Sgd.

PEARLIE ANN FERRER-ALCARAZ
The terms of your employment are:
During Alcaraz’s pre-employment orientation, petitioner
Nature of Employment : Probationary
Allan G. Almazar (Almazar), Hospira’s Country Transition
Effectivity : February 15, 2005 to August 14, 2005 Manager, briefed her on her duties and responsibilities as
Regulatory Affairs Manager, stating that: (a) she will handle
Basic Salary : ₱110,000.00/ month the staff of Hospira ALSU and will directly report to Almazar
It is understood that you agree to abide by all existing on matters regarding Hopira’s local operations, operational
policies, rules and regulations of the company, as well as budget, and performance evaluation of the Hospira ALSU
those, which may be hereinafter promulgated. Staff who are on probationary status; (b) she must
implement Abbott’s Code of Good Corporate Conduct
Unless renewed, probationary appointment expires on the (Code of Conduct), office policies on human resources and
date indicated subject to earlier termination by the Company finance, and ensure that Abbott will hire people who are fit
for any justifiable reason. in the organizational discipline; (c) petitioner Kelly Walsh
(Walsh), Manager of the Literature Drug Surveillance Drug

114
Safety of Hospira, will be her immediate supervisor; (d) she Abbott’s PPSE procedure mandates that the job
should always coordinate with Abbott’s human resource performance of a probationary employee should be formally
officers in the management and discipline of the staff; (e) reviewed and discussed with the employee at least twice:
Hospira ALSU will spin off from Abbott in early 2006 and will first on the third month and second on the fifth month from
be officially incorporated and known as Hospira, Philippines. the date of employment. The necessary Performance
In the interim, Hospira ALSU operations will still be under Improvement Plan should also be made during the third-
Abbott’s management, excluding the technical aspects of month review in case of a gap between the employee’s
the operations which is under the control and supervision of performance and the standards set. These performance
Walsh; and (f) the processing of information and/or raw standards should be discussed in detail with the employee
material data subject of Hospira ALSU operations will be within the first two (2) weeks on the job. It was equally
strictly confined and controlled under the computer system required that a signed copy of the PPSE form must be
and network being maintained and operated from the United submitted to Abbott’s Human Resources Department (HRD)
States. For this purpose, all those involved in Hospira ALSU and shall serve as documentation of the employee’s
are required to use two identification cards: one, to identify performance during his/her probationary period. This shall
them as Abbott’s employees and another, to identify them form the basis for recommending the confirmation or
as Hospira employees.11 termination of the probationary employment.13

On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa During the course of her employment, Alcaraz noticed that
(Misa), Abbott’s Human Resources (HR) Director, sent some of the staff had disciplinary problems. Thus, she
Alcaraz an e-mail which contained an explanation of the would reprimand them for their unprofessional behavior
procedure for evaluating the performance of probationary such as non-observance of the dress code, moonlighting,
employees and further indicated that Abbott had only one and disrespect of Abbott officers. However, Alcaraz’s
evaluation system for all of its employees. Alcaraz was also method of management was considered by Walsh to be "too
given copies of Abbott’s Code of Conduct and Probationary strict."14 Alcaraz approached Misa to discuss these
Performance Standards and Evaluation (PPSE) and concerns and was told to "lie low" and let Walsh handle the
Performance Excellence Orientation Modules (Performance matter. Misa even assured her that Abbott’s HRD would
Modules) which she had to apply in line with her task of support her in all her management decisions.15
evaluating the Hospira ALSU staff.12
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On April 12, 2005, Alcaraz received an e-mail from Misa Terrible already announced to the whole Hospira ALSU staff
requesting immediate action on the staff’s performance that Alcaraz already resigned due to health reasons.20
evaluation as their probationary periods were about to end.
On May 23, 2005, Walsh, Almazar, and Bernardo personally
This Alcaraz eventually submitted.16
handed to Alcaraz a letter stating that her services had been
On April 20, 2005, Alcaraz had a meeting with petitioner terminated effective May 19, 2005.21 The letter detailed the
Cecille Terrible (Terrible), Abbott’s former HR Director, to reasons for Alcaraz’s termination – particularly, that Alcaraz:
discuss certain issues regarding staff performance (a) did not manage her time effectively; (b) failed to gain the
standards. In the course thereof, Alcaraz accidentally saw a trust of her staff and to build an effective rapport with them;
printed copy of an e-mail sent by Walsh to some staff (c) failed to train her staff effectively; and (d) was not able to
members which essentially contained queries regarding the obtain the knowledge and ability to make sound judgments
former’s job performance. Alcaraz asked if Walsh’s action on case processing and article review which were
was the normal process of evaluation. Terrible said that it necessary for the proper performance of her duties.22 On
was not.17 May 27, 2005, Alcaraz received another copy of the said
termination letter via registered mail.23
On May 16, 2005, Alcaraz was called to a meeting with
Walsh and Terrible where she was informed that she failed Alcaraz felt that she was unjustly terminated from her
to meet the regularization standards for the position of employment and thus, filed a complaint for illegal dismissal
Regulatory Affairs Manager.18 Thereafter, Walsh and and damages against Abbott and its officers, namely, Misa,
Terrible requested Alcaraz to tender her resignation, else Bernardo, Almazar, Walsh, Terrible, and Feist.24 She
they be forced to terminate her services. She was also told claimed that she should have already been considered as a
that, regardless of her choice, she should no longer report regular and not a probationary employee given Abbott’s
for work and was asked to surrender her office identification failure to inform her of the reasonable standards for her
cards. She requested to be given one week to decide on the regularization upon her engagement as required under
same, but to no avail.19 Article 29525 of the Labor Code. In this relation, she
contended that while her employment contract stated that
On May 17, 2005, Alcaraz told her administrative assistant,
she was to be engaged on a probationary status, the same
Claude Gonzales (Gonzales), that she would be on leave
did not indicate the standards on which her regularization
for that day. However, Gonzales told her that Walsh and
would be based.26 She further averred that the individual
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petitioners maliciously connived to illegally dismiss her to conclude that Abbott’s officers and employees acted in
when: (a) they threatened her with termination; (b) she was bad faith in terminating Alcaraz’s employment.33
ordered not to enter company premises even if she was still
Displeased with the LA’s ruling, Alcaraz filed an appeal with
an employee thereof; and (c) they publicly announced that
the National Labor Relations Commission (NLRC).
she already resigned in order to humiliate her.27
The NLRC Ruling
On the contrary, petitioners maintained that Alcaraz was
validly terminated from her probationary employment given On September 15, 2006, the NLRC rendered a
her failure to satisfy the prescribed standards for her Decision,34 annulling and setting aside the LA’s ruling, the
regularization which were made known to her at the time of dispositive portion of which reads:
her engagement.28
WHEREFORE, the Decision of the Labor Arbiter dated 31
The LA Ruling March 2006 [sic] is hereby reversed, annulled and set aside
and judgment is hereby rendered:
In a Decision dated March 30, 2006,29 the LA dismissed
Alcaraz’s complaint for lack of merit. 1. Finding respondents Abbot [sic] and individual
respondents to have committed illegal dismissal;
The LA rejected Alcaraz’s argument that she was not
informed of the reasonable standards to qualify as a regular 2. Respondents are ordered to immediately reinstate
employee considering her admissions that she was briefed complainant to her former position without loss of seniority
by Almazar on her work during her pre-employment rights immediately upon receipt hereof;
orientation meeting30 and that she received copies of
Abbott’s Code of Conduct and Performance Modules which 3. To jointly and severally pay complainant backwages
computed from 16 May 2005 until finality of this decision. As
were used for evaluating all types of Abbott employees.31 As
Alcaraz was unable to meet the standards set by Abbott as of the date hereof the backwages is computed at
per her performance evaluation, the LA ruled that the
a. Backwages for 15 months PhP
termination of her probationary employment was
- 1,650,000.00
justified.32 Lastly, the LA found that there was no evidence

117
 b. 13th month pay - 110,000.00 given that petitioners’ allegation of Alcaraz’s "poor
performance" remained unsubstantiated.39
PhP Petitioners filed a motion for reconsideration which was
TOTAL
1,760,000.00 denied by the NLRC in a Resolution dated July 31, 2007.40

4. Respondents are ordered to pay complainant moral Aggrieved, petitioners filed with the CA a Petition for
damages of ₱50,000.00 and exemplary damages of Certiorari with Prayer for Issuance of a Temporary
₱50,000.00. Restraining Order and/or Writ of Preliminary Injunction,
docketed as CA G.R. SP No. 101045 (First CA Petition),
5. Respondents are also ordered to pay attorney’s fees of
alleging grave abuse of discretion on the part of NLRC
10% of the total award.
when it ruled that Alcaraz was illegally dismissed.41
6. All other claims are dismissed for lack of merit.
Pending resolution of the First CA Petition, Alcaraz moved
SO ORDERED. 35 for the execution of the NLRC’s Decision before the LA,
which petitioners strongly opposed. The LA denied the said
The NLRC reversed the findings of the LA and ruled that motion in an Order dated July 8, 2008 which was, however,
there was no evidence showing that Alcaraz had been eventually reversed on appeal by the NLRC.42 Due to the
apprised of her probationary status and the requirements foregoing, petitioners filed another Petition for Certiorari with
which she should have complied with in order to be a the CA, docketed as CA G.R. SP No. 111318 (Second CA
regular employee.36 It held that Alcaraz’s receipt of her job Petition), assailing the propriety of the execution of the
description and Abbott’s Code of Conduct and Performance NLRC decision.43
Modules was not equivalent to her being actually informed
of the performance standards upon which she should have The CA Ruling
been evaluated on.37 It further observed that Abbott did not
With regard to the First CA Petition, the CA, in a
comply with its own standard operating procedure in
Decision44 dated December 10, 2009, affirmed the ruling of
evaluating probationary employees.38 The NLRC was also
the NLRC and held that the latter did not commit any grave
not convinced that Alcaraz was terminated for a valid cause
abuse of discretion in finding that Alcaraz was illegally
dismissed.
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It observed that Alcaraz was not apprised at the start of her Meanwhile, petitioners’ motion for reconsideration of the
employment of the reasonable standards under which she CA’s May 18, 2010 Resolution in the Second CA Petition
could qualify as a regular employee.45 This was based on its was denied via a Resolution dated October 4, 2010.51 This
examination of the employment contract which showed that attained finality on January 10, 2011 for petitioners’ failure
the same did not contain any standard of performance or to timely appeal the same.52 Hence, as it stands, only the
any stipulation that Alcaraz shall undergo a performance issues in the First CA petition are left to be resolved.
evaluation before she could qualify as a regular
Incidentally, in her Comment dated November 15, 2010,
employee.46 It also found that Abbott was unable to prove
Alcaraz also alleges that petitioners were guilty of forum
that there was any reasonable ground to terminate Alcaraz’s
shopping when they filed the Second CA Petition pending
employment.47 Abbott moved for the reconsideration of the
the resolution of their motion for reconsideration of the CA’s
aforementioned ruling which was, however, denied by the
December 10, 2009 Decision i.e., the decision in the First
CA in a Resolution48 dated June 9, 2010.
CA Petition.53 She also contends that petitioners have not
The CA likewise denied the Second CA Petition in a complied with the certification requirement under Section 5,
Resolution dated May 18, 2010 (May 18, 2010 Resolution) Rule 7 of the Rules of Court when they failed to disclose in
and ruled that the NLRC was correct in upholding the the instant petition the filing of the June 16, 2010
execution of the NLRC Decision.49 Thus, petitioners filed a Memorandum of Appeal filed before the NLRC.54
motion for reconsideration.
The Issues Before the Court
While the petitioners’ motion for reconsideration of the CA’s
The following issues have been raised for the Court’s
May 18, 2010 Resolution was pending, Alcaraz again
resolution: (a) whether or not petitioners are guilty of forum
moved for the issuance of a writ of execution before the LA.
shopping and have violated the certification requirement
On June 7, 2010, petitioners received the LA’s order
under Section 5, Rule 7 of the Rules of Court; (b) whether or
granting Alcaraz’s motion for execution which they in turn
not Alcaraz was sufficiently informed of the reasonable
appealed to the NLRC – through a Memorandum of Appeal
standards to qualify her as a regular employee; (c) whether
dated June 16, 2010 (June 16, 2010 Memorandum of
or not Alcaraz was validly terminated from her employment;
Appeal ) – on the ground that the implementation of the LA’s
and (d) whether or not the individual petitioners herein are
order would render its motion for reconsideration moot and
liable.
academic.50
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The Court’s Ruling simultaneously or successively, to secure a favorable
judgment. It exists where the elements of litis pendentia are
A. Forum Shopping and
present, namely: (a) identity of parties, or at least such
Violation of Section 5, Rule 7
parties who represent the same interests in both actions; (b)
of the Rules of Court.
identity of rights asserted and relief prayed for, the relief
At the outset, it is noteworthy to mention that the prohibition being founded on the same facts; and (c) the identity with
against forum shopping is different from a violation of the respect to the two preceding particulars in the two (2) cases
certification requirement under Section 5, Rule 7 of the is such that any judgment that may be rendered in the
Rules of Court. In Sps. Ong v. CA,55 the Court explained pending case, regardless of which party is successful,
that: would amount to res judicata in the other case.57

x x x The distinction between the prohibition against forum In this case, records show that, except for the element of
shopping and the certification requirement should by now be identity of parties, the elements of forum shopping do not
too elementary to be misunderstood. To reiterate, exist. Evidently, the First CA Petition was instituted to
compliance with the certification against forum shopping is question the ruling of the NLRC that Alcaraz was illegally
separate from and independent of the avoidance of the act dismissed. On the other hand, the Second CA Petition
of forum shopping itself. There is a difference in the pertains to the propriety of the enforcement of the judgment
treatment between failure to comply with the certification award pending the resolution of the First CA Petition and
requirement and violation of the prohibition against forum the finality of the decision in the labor dispute between
shopping not only in terms of imposable sanctions but also Alcaraz and the petitioners. Based on the foregoing, a
in the manner of enforcing them. The former constitutes judgment in the Second CA Petition will not constitute res
sufficient cause for the dismissal without prejudice to the judicata insofar as the First CA Petition is concerned. Thus,
filing of the complaint or initiatory pleading upon motion and considering that the two petitions clearly cover different
after hearing, while the latter is a ground for summary subject matters and causes of action, there exists no forum
dismissal thereof and for direct contempt. x x x. 56 shopping.

As to the first, forum shopping takes place when a litigant As to the second, Alcaraz further imputes that the
files multiple suits involving the same parties, either petitioners violated the certification requirement under
Section 5, Rule 7 of the Rules of Court58 by not disclosing
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the fact that it filed the June 16, 2010 Memorandum of Having settled the foregoing procedural matter, the Court
Appeal before the NLRC in the instant petition. now proceeds to resolve the substantive issues.

In this regard, Section 5(b), Rule 7 of the Rules of Court B. Probationary employment;
requires that a plaintiff who files a case should provide a grounds for termination.
complete statement of the present status of any pending
A probationary employee, like a regular employee, enjoys
case if the latter involves the same issues as the one that
security of tenure. However, in cases of probationary
was filed. If there is no such similar pending case, Section
employment, aside from just or authorized causes of
5(a) of the same rule provides that the plaintiff is obliged to
termination, an additional ground is provided under Article
declare under oath that to the best of his knowledge, no
295 of the Labor Code, i.e., the probationary employee may
such other action or claim is pending.
also be terminated for failure to qualify as a regular
Records show that the issues raised in the instant petition employee in accordance with the reasonable standards
and those in the June 16, 2010 Memorandum of Appeal made known by the employer to the employee at the time of
filed with the NLRC likewise cover different subject matters the engagement.59 Thus, the services of an employee who
and causes of action. In this case, the validity of Alcaraz’s has been engaged on probationary basis may be terminated
dismissal is at issue whereas in the said Memorandum of for any of the following: (a) a just or (b) an authorized cause;
Appeal, the propriety of the issuance of a writ of execution and (c) when he fails to qualify as a regular employee in
was in question. accordance with reasonable standards prescribed by the
employer.60
Thus, given the dissimilar issues, petitioners did not have to
disclose in the present petition the filing of their June 16, Corollary thereto, Section 6(d), Rule I, Book VI of the
2010 Memorandum of Appeal with the NLRC. In any event, Implementing Rules of the Labor Code provides that if the
considering that the issue on the propriety of the issuance of employer fails to inform the probationary employee of the
a writ of execution had been resolved in the Second CA reasonable standards upon which the regularization would
Petition – which in fact had already attained finality – the be based on at the time of the engagement, then the said
matter of disclosing the June 16, 2010 Memorandum of employee shall be deemed a regular employee, viz.:
Appeal is now moot and academic.

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(d) In all cases of probationary employment, the employer probationary employee of the standards of regularization
shall make known to the employee the standards under should not be used to exculpate an employee who acts in a
which he will qualify as a regular employee at the time of his manner contrary to basic knowledge and common sense in
engagement. Where no standards are made known to the regard to which there is no need to spell out a policy or
employee at that time, he shall be deemed a regular standard to be met. In the same light, an employee’s failure
employee. to perform the duties and responsibilities which have been
clearly made known to him constitutes a justifiable basis for
In other words, the employer is made to comply with two (2)
a probationary employee’s non-regularization.
requirements when dealing with a probationary employee:
first, the employer must communicate the regularization In this case, petitioners contend that Alcaraz was terminated
standards to the probationary employee; and second, the because she failed to qualify as a regular employee
employer must make such communication at the time of the according to Abbott’s standards which were made known to
probationary employee’s engagement. If the employer fails her at the time of her engagement. Contrarily, Alcaraz
to comply with either, the employee is deemed as a regular claims that Abbott never apprised her of these standards
and not a probationary employee. and thus, maintains that she is a regular and not a mere
probationary employee.
Keeping with these rules, an employer is deemed to have
made known the standards that would qualify a probationary The Court finds petitioners’ assertions to be well-taken.
employee to be a regular employee when it has exerted
A punctilious examination of the records reveals that Abbott
reasonable efforts to apprise the employee of what he is
had indeed complied with the above-stated requirements.
expected to do or accomplish during the trial period of
This conclusion is largely impelled by the fact that Abbott
probation. This goes without saying that the employee is
clearly conveyed to Alcaraz her duties and responsibilities
sufficiently made aware of his probationary status as well as
as Regulatory Affairs Manager prior to, during the time of
the length of time of the probation.
her engagement, and the incipient stages of her
The exception to the foregoing is when the job is self- employment. On this score, the Court finds it apt to detail
descriptive in nature, for instance, in the case of maids, not only the incidents which point out to the efforts made by
cooks, drivers, or messengers.61 Also, in Aberdeen Court, Abbott but also those circumstances which would show that
Inc. v. Agustin,62 it has been held that the rule on notifying a
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Alcaraz was well-apprised of her employer’s expectations (g) Alcaraz received copies of Abbott’s Code of Conduct
that would, in turn, determine her regularization: and Performance Modules from Misa who explained to her
the procedure for evaluating the performance of
(a) On June 27, 2004, Abbott caused the publication in a
probationary employees; she was further notified that Abbott
major broadsheet newspaper of its need for a Regulatory
had only one evaluation system for all of its employees; and
Affairs Manager, indicating therein the job description for as
well as the duties and responsibilities attendant to the (h) Moreover, Alcaraz had previously worked for another
aforesaid position; this prompted Alcaraz to submit her pharmaceutical company and had admitted to have an
application to Abbott on October 4, 2004; "extensive training and background" to acquire the
necessary skills for her job.63
(b) In Abbott’s December 7, 2004 offer sheet, it was stated
that Alcaraz was to be employed on a probationary status; Considering the totality of the above-stated circumstances,
it cannot, therefore, be doubted that Alcaraz was well-aware
(c) On February 12, 2005, Alcaraz signed an employment
that her regularization would depend on her ability and
contract which specifically stated, inter alia, that she was to
capacity to fulfill the requirements of her position as
be placed on probation for a period of six (6) months
Regulatory Affairs Manager and that her failure to perform
beginning February 15, 2005 to August 14, 2005;
such would give Abbott a valid cause to terminate her
(d) On the day Alcaraz accepted Abbott’s employment offer, probationary employment.
Bernardo sent her copies of Abbott’s organizational
Verily, basic knowledge and common sense dictate that the
structure and her job description through e-mail;
adequate performance of one’s duties is, by and of itself, an
(e) Alcaraz was made to undergo a pre-employment inherent and implied standard for a probationary employee
orientation where Almazar informed her that she had to to be regularized; such is a regularization standard which
implement Abbott’s Code of Conduct and office policies on need not be literally spelled out or mapped into technical
human resources and finance and that she would be indicators in every case. In this regard, it must be observed
reporting directly to Walsh; that the assessment of adequate duty performance is in the
nature of a management prerogative which when
(f) Alcaraz was also required to undergo a training program
reasonably exercised – as Abbott did in this case – should
as part of her orientation; be respected. This is especially true of a managerial
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employee like Alcaraz who was tasked with the vital C. Probationary employment;
responsibility of handling the personnel and important termination procedure.
matters of her department.
A different procedure is applied when terminating a
In fine, the Court rules that Alcaraz’s status as a probationary employee; the usual two-notice rule does not
probationary employee and her consequent dismissal must govern.65 Section 2, Rule I, Book VI of the Implementing
stand. Consequently, in holding that Alcaraz was illegally Rules of the Labor Code states that "if the termination is
dismissed due to her status as a regular and not a brought about by the x x x failure of an employee to meet
probationary employee, the Court finds that the NLRC the standards of the employer in case of probationary
committed a grave abuse of discretion. employment, it shall be sufficient that a written notice is
served the employee, within a reasonable time from the
To elucidate, records show that the NLRC based its
effective date of termination."
decision on the premise that Alcaraz’s receipt of her job
description and Abbott’s Code of Conduct and Performance As the records show, Alcaraz's dismissal was effected
Modules was not equivalent to being actually informed of through a letter dated May 19, 2005 which she received on
the performance standards upon which she should have May 23, 2005 and again on May 27, 2005. Stated therein
been evaluated on.64 It, however, overlooked the legal were the reasons for her termination, i.e., that after proper
implication of the other attendant circumstances as detailed evaluation, Abbott determined that she failed to meet the
herein which should have warranted a contrary finding that reasonable standards for her regularization considering her
Alcaraz was indeed a probationary and not a regular lack of time and people management and decision-making
employee – more particularly the fact that she was well- skills, which are necessary in the performance of her
aware of her duties and responsibilities and that her failure functions as Regulatory Affairs Manager.66 Undeniably, this
to adequately perform the same would lead to her non- written notice sufficiently meets the criteria set forth above,
regularization and eventually, her termination. thereby legitimizing the cause and manner of Alcaraz’s
dismissal as a probationary employee under the parameters
Accordingly, by affirming the NLRC’s pronouncement which
set by the Labor Code.67
is tainted with grave abuse of discretion, the CA committed
a reversible error which, perforce, necessitates the reversal
of its decision.
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D. Employer’s violation of effect, the policy is deemed an implied contract for so long
company policy and as it remains in effect. If the employer unilaterally changes
procedure. the policy, the terms of the implied contract are also thereby
changed.1âwphi1 (Emphasis and underscoring supplied.)
Nonetheless, despite the existence of a sufficient ground to
terminate Alcaraz’s employment and Abbott’s compliance Hence, given such nature, company personnel policies
with the Labor Code termination procedure, it is readily create an obligation on the part of both the employee and
apparent that Abbott breached its contractual obligation to the employer to abide by the same.
Alcaraz when it failed to abide by its own procedure in
Records show that Abbott’s PPSE procedure mandates,
evaluating the performance of a probationary employee.
inter alia, that the job performance of a probationary
Veritably, a company policy partakes of the nature of an employee should be formally reviewed and discussed with
implied contract between the employer and employee. In the employee at least twice: first on the third month and
Parts Depot, Inc. v. Beiswenger,68 it has been held that: second on the fifth month from the date of employment.
Abbott is also required to come up with a Performance
Employer statements of policy . . . can give rise to
Improvement Plan during the third month review to bridge
contractual rights in employees without evidence that the
the gap between the employee’s performance and the
parties mutually agreed that the policy statements would
standards set, if any.69 In addition, a signed copy of the
create contractual rights in the employee, and, hence,
PPSE form should be submitted to Abbott’s HRD as the
although the statement of policy is signed by neither party,
same would serve as basis for recommending the
can be unilaterally amended by the employer without notice
confirmation or termination of the probationary
to the employee, and contains no reference to a specific 70
employment.
employee, his job description or compensation, and
although no reference was made to the policy statement in In this case, it is apparent that Abbott failed to follow the
pre-employment interviews and the employee does not above-stated procedure in evaluating Alcaraz. For one,
learn of its existence until after his hiring. Toussaint, 292 there lies a hiatus of evidence that a signed copy of
N.W .2d at 892. The principle is akin to estoppel. Once an Alcaraz’s PPSE form was submitted to the HRD. It was not
employer establishes an express personnel policy and the even shown that a PPSE form was completed to formally
employee continues to work while the policy remains in assess her performance. Neither was the performance
125
evaluation discussed with her during the third and fifth Case law has settled that an employer who terminates an
months of her employment. Nor did Abbott come up with the employee for a valid cause but does so through invalid
necessary Performance Improvement Plan to properly procedure is liable to pay the latter nominal damages.
gauge Alcaraz’s performance with the set company
In Agabon v. NLRC (Agabon),71 the Court pronounced that
standards.
where the dismissal is for a just cause, the lack of statutory
While it is Abbott’s management prerogative to promulgate due process should not nullify the dismissal, or render it
its own company rules and even subsequently amend them, illegal, or ineffectual. However, the employer should
this right equally demands that when it does create its own indemnify the employee for the violation of his statutory
policies and thereafter notify its employee of the same, it rights.72 Thus, in Agabon, the employer was ordered to pay
accords upon itself the obligation to faithfully implement the employee nominal damages in the amount of
them. Indeed, a contrary interpretation would entail a ₱30,000.00.73
disharmonious relationship in the work place for the laborer
Proceeding from the same ratio, the Court modified Agabon
should never be mired by the uncertainty of flimsy rules in
in the case of Jaka Food Processing Corporation v. Pacot
which the latter’s labor rights and duties would, to some
(Jaka)74 where it created a distinction between procedurally
extent, depend.
defective dismissals due to a just cause, on one hand, and
In this light, while there lies due cause to terminate those due to an authorized cause, on the other.
Alcaraz’s probationary employment for her failure to meet
It was explained that if the dismissal is based on a just
the standards required for her regularization, and while it
cause under Article 282 of the Labor Code (now Article 296)
must be further pointed out that Abbott had satisfied its
but the employer failed to comply with the notice
statutory duty to serve a written notice of termination, the
requirement, the sanction to be imposed upon him should
fact that it violated its own company procedure renders the
be tempered because the dismissal process was, in effect,
termination of Alcaraz’s employment procedurally infirm,
initiated by an act imputable to the employee; if the
warranting the payment of nominal damages. A further
dismissal is based on an authorized cause under Article 283
exposition is apropos.
(now Article 297) but the employer failed to comply with the
notice requirement, the sanction should be stiffer because
the dismissal process was initiated by the employer’s
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exercise of his management prerogative.75 Hence, in Jaka, employee, akin to dismissals due to just causes under
where the employee was dismissed for an authorized cause Article 296 of the Labor Code. Therefore, the Court deems it
of retrenchment76 – as contradistinguished from the appropriate to fix the amount of nominal damages at the
employee in Agabon who was dismissed for a just cause of amount of ₱30,000.00, consistent with its rulings in both
neglect of duty77 – the Court ordered the employer to pay Agabon and Jaka.
the employee nominal damages at the higher amount of
E. Liability of individual
₱50,000.00.
petitioners as corporate
Evidently, the sanctions imposed in both Agabon and Jaka officers.
proceed from the necessity to deter employers from future
It is hornbook principle that personal liability of corporate
violations of the statutory due process rights of
directors, trustees or officers attaches only when: (a) they
employees.78 In similar regard, the Court deems it proper to
assent to a patently unlawful act of the corporation, or when
apply the same principle to the case at bar for the reason
they are guilty of bad faith or gross negligence in directing
that an employer’s contractual breach of its own company
its affairs, or when there is a conflict of interest resulting in
procedure – albeit not statutory in source – has the parallel
damages to the corporation, its stockholders or other
effect of violating the laborer’s rights. Suffice it to state, the
persons; (b) they consent to the issuance of watered down
contract is the law between the parties and thus, breaches
stocks or when, having knowledge of such issuance, do not
of the same impel recompense to vindicate a right that has
forthwith file with the corporate secretary their written
been violated. Consequently, while the Court is wont to
objection; (c) they agree to hold themselves personally and
uphold the dismissal of Alcaraz because a valid cause
solidarily liable with the corporation; or (d) they are made by
exists, the payment of nominal damages on account of
specific provision of law personally answerable for their
Abbott’s contractual breach is warranted in accordance with
corporate action.80
Article 2221 of the Civil Code.79
In this case, Alcaraz alleges that the individual petitioners
Anent the proper amount of damages to be awarded, the
acted in bad faith with regard to the supposed crude manner
Court observes that Alcaraz’s dismissal proceeded from her
by which her probationary employment was terminated and
failure to comply with the standards required for her
thus, should be held liable together with Abbott. In the same
regularization. As such, it is undeniable that the dismissal
process was, in effect, initiated by an act imputable to the
127
vein, she further attributes the loss of some of her remaining REINSTATED with the MODIFICATION that petitioner
belongings to them.81 Abbott Laboratories, Philippines be ORDERED to pay
respondent Pearlie Ann F. Alcaraz nominal damages in the
Alcaraz’s contention fails to persuade.
amount of ₱30,000.00 on account of its breach of its own
A judicious perusal of the records show that other than her company procedure.
unfounded assertions on the matter, there is no evidence to
SO ORDERED.
support the fact that the individual petitioners herein, in their
capacity as Abbott’s officers and employees, acted in bad G.R. No. 170388 September 4, 2013
faith or were motivated by ill will in terminating
COLEGIO DEL SANTISIMO ROSARIO AND SR.
Alcaraz’s services. The fact that Alcaraz was made to resign ZENAIDA S. MOFADA, OP, PETITIONERS,
and not allowed to enter the workplace does not necessarily vs.
indicate bad faith on Abbott’s part since a sufficient ground EMMANUEL ROJO,* RESPONDENT.
existed for the latter to actually proceed with her
termination. On the alleged loss of her personal belongings, DECISION
records are bereft of any showing that the same could be DEL CASTILLO, J.:
attributed to Abbott or any of its officers. It is a well-settled
rule that bad faith cannot be presumed and he who alleges This Petition for Review on Certiorari1 assails the August 31,
bad faith has the onus of proving it. All told, since Alcaraz 2005 Decision2 and the November 10, 2005 Resolution3 of
failed to prove any malicious act on the part of Abbott or any the Court of Appeals (CA) in CA-G.R. SP No. 85188, which
of its officers, the Court finds the award of moral or affirmed the July 31, 2003 Decision4 of the National Labor
exemplary damages unwarranted. Relations Commission (NLRC). Said NLRC Decision
affirmed with modification the October 7, 2002 Decision5 of
WHEREFORE, the petition is GRANTED. The Decision the Labor Arbiter (LA) which, in turn, granted respondent
dated December 10, 2009 and Resolution dated June 9, Emmanuel Rojo’s (respondent) Complaint6 for illegal
2010 of the Court of Appeals in CA-G.R. SP No. 101045 are dismissal.
hereby REVERSED and SET ASIDE. Accordingly, the
Decision dated March 30, 2006 of the Labor Arbiter is Factual Antecedents

128
Petitioner Colegio del Santisimo Rosario (CSR) hired served the "three years" or 36 months mentioned in
respondent as a high school teacher on probationary basis paragraph 75 of the 1970 Manual.15
for the school years 1992-1993, 1993-19947 and 1994-
Ruling of the Labor Arbiter
1995.8
The LA ruled that "three school years" means three years of
On April 5, 1995, CSR, through petitioner Sr. Zenaida S.
10 months, not 12 months.16 Considering that respondent
Mofada, OP (Mofada), decided not to renew respondent’s
had already served for three consecutive school years, then
services.9
he has already attained regular employment status. Thus,
Thus, on July 13, 1995, respondent filed a Complaint10 for the non-renewal of his contract for school year 1995-1996
illegal dismissal. He alleged that since he had served three constitutes illegal dismissal.17
consecutive school years which is the maximum number of
The LA also found petitioners guilty of bad faith when they
terms allowed for probationary employment, he should be
treated respondent’s termination merely as the expiration of
extended permanent employment. Citing paragraph 75 of
the third employment contract and when they insisted that
the 1970 Manual of Regulations for Private Schools (1970
the school board actually deliberated on the non-renewal of
Manual), respondent asserted that "full- time teachers who
respondent’s employment without submitting admissible
have rendered three (3) consecutive years of satisfactory
proof of his alleged regular performance evaluation.18
services shall be considered permanent."11
The dispositive portion of the LA’s Decision19 reads:
On the other hand, petitioners argued that respondent knew
that his Teacher’s Contract for school year 1994-1995 with WHEREFORE, premises considered, judgment is hereby
CSR would expire on March 31, 1995.12 Accordingly, rendered ordering the [petitioners]:
respondent was not dismissed but his probationary contract
1. To pay [respondent] the total amount of ₱39,252.00
merely expired and was not renewed.13 Petitioners also
corresponding to his severance compensation and 13th
claimed that the "three years" mentioned in paragraph 75 of
the 1970 Manual refer to "36 months," not three school month pay, moral and exemplary damages.
years.14 And since respondent served for only three school 2. To pay 10% of the total amount due to [respondent] as
years of 10 months each or 30 months, then he had not yet attorney’s fees.

129
All other claims are dismissed for lack of merit. The Computation Division is hereby directed to compute
[respondent’s] full backwages to be attached and to form
SO ORDERED.20
part of this Decision.
Ruling of the National Labor Relations Commission
The rest of the appealed Decision stands.
On appeal, the NLRC affirmed the LA’s Decision with
SO ORDERED.23
modification. It held that after serving three school years,
respondent had attained the status of regular Petitioners moved for reconsideration which the NLRC
employment21 especially because CSR did not make known denied in its April 28, 2004 Resolution24 for lack of merit.
to respondent the reasonable standards he should
Ruling of the Court of Appeals
meet.22 The NLRC also agreed with the LA that
respondent’s termination was done in bad faith. It held that Petitioners filed a Petition for Certiorari25 before the CA
respondent is entitled to reinstatement, if viable; or alleging grave abuse of discretion on the part of the NLRC
separation pay, if reinstatement was no longer feasible, and in finding that respondent had attained the status of a
backwages, viz: regular employee and was illegally dismissed from
employment.
WHEREFORE, premises considered, the appealed
Decision is hereby, AFFIRMED with MODIFICATION only In a Decision26 dated August 31, 2005, the CA denied the
insofar as the award of separation pay is concerned. Since Petition for lack of merit. Citing Cagayan Capitol College v.
[respondent] had been illegally dismissed, [petitioner] National Labor Relations Commission,27 it held that
Colegio Del Santisimo Rosario is hereby ordered to respondent has satisfied all the requirements necessary to
reinstate him to his former position without loss of seniority acquire permanent employment and security of tenure viz:
rights with full backwages until he is actually reinstated.
However, if reinstatement is no longer feasible, the 1. The teacher is a full-time teacher;
respondent shall pay separation pay, in [addition] to the 2. The teacher must have rendered three (3) consecutive
payment of his full backwages. years of service; and

3. Such service must be satisfactory.28

130
According to the CA, respondent has attained the status of COMMITTED GRIEVOUS AND REVERSIBLE ERROR
a regular employee after he was employed for three WHEN IT RULED THAT A BASIC EDUCATION
consecutive school years as a full-time teacher and had (ELEMENTARY) TEACHER HIRED FOR THREE (3)
served CSR satisfactorily. Aside from being a high school CONSECUTIVE SCHOOL YEARS AS A PROBATIONARY
teacher, he was also the Prefect of Discipline, a task EMPLOYEE AUTOMATICALLY AND/OR BY LAW
entailing much responsibility. The only reason given by BECOMES A PERMANENT EMPLOYEE UPON
Mofada for not renewing respondent’s contract was the COMPLETION OF HIS THIRD YEAR OF PROBATION
alleged expiration of the contract, not any unsatisfactory NOTWITHSTANDING [A] THE PRONOUNCEMENT OF
service. Also, there was no showing that CSR set THIS HONORABLE COURT IN COLEGIO SAN AGUSTIN
performance standards for the employment of respondent, V. NLRC, 201 SCRA 398 1991 THAT A PROBATIONARY
which could be the basis of his satisfactory or unsatisfactory TEACHER ACQUIRES PERMANENT STATUS "ONLY
performance. Hence, there being no reasonable standards WHEN HE IS ALLOWED TO WORK AFTER THE
made known to him at the time of his engagement, PROBATIONARY PERIOD" AND [B] DOLE-DECS-CHED-
respondent was deemed a regular employee and was, thus, TESDA ORDER NO. 01, S. 1996 WHICH PROVIDE THAT
declared illegally dismissed when his contract was not TEACHERS WHO HAVE SERVED THE PROBATIONARY
renewed. PERIOD "SHALL BE MADE REGULAR OR PERMANENT
IF ALLOWED TO WORK AFTER SUCH PROBATIONARY
Petitioners moved for reconsideration. However, the CA
PERIOD."31
denied the motion for lack of merit in its November 10, 2005
Resolution.29 Petitioners maintain that upon the expiration of the
probationary period, both the school and the respondent
Hence, the instant Petition. Incidentally, on May 23, 2007,
were free to renew the contract or let it lapse. Petitioners
we issued a Resolution30 directing the parties to maintain
insist that a teacher hired for three consecutive years as a
the status quo pending the resolution of the present Petition.
probationary employee does not automatically become a
Issue regular employee upon completion of his third year of
probation. It is the positive act of the school – the hiring of
WHETHER THE COURT OF APPEALS [AS WELL AS THE the teacher who has just completed three consecutive years
NATIONAL LABOR RELATIONS COMMISSION]

131
of employment on probation for the next school year – that school year, and the probationary employment continues. At
makes the teacher a regular employee of the school. the end of the second fixed period of probationary
employment, the contract may again be renewed for the last
Our Ruling
time.
We deny the Petition.
Such employment for fixed terms during the teachers’
In Mercado v. AMA Computer College-Parañaque City, probationary period is an accepted practice in the teaching
Inc.,32 we had occasion to rule that cases dealing with profession. In Magis Young Achievers’ Learning Center v.
employment on probationary status of teaching personnel Manalo,34 we noted that:
are not governed solely by the Labor Code as the law is
The common practice is for the employer and the teacher to
supplemented, with respect to the period of probation, by
enter into a contract, effective for one school year. At the
special rules found in the Manual of Regulations for Private
end of the school year, the employer has the option not to
Schools (the Manual). With regard to the probationary
renew the contract, particularly considering the teacher’s
period, Section 92 of the 1992 Manual33 provides:
performance. If the contract is not renewed, the employment
Section 92. Probationary Period. – Subject in all instances relationship terminates. If the contract is renewed, usually
to compliance with the Department and school for another school year, the probationary employment
requirements, the probationary period for academic continues. Again, at the end of that period, the parties may
personnel shall not be more than three (3) consecutive opt to renew or not to renew the contract. If renewed, this
years of satisfactory service for those in the elementary and second renewal of the contract for another school year
secondary levels, six (6) consecutive regular semesters of would then be the last year – since it would be the third
satisfactory service for those in the tertiary level, and nine school year – of probationary employment. At the end of this
(9) consecutive trimesters of satisfactory service for those in third year, the employer may now decide whether to extend
the tertiary level where collegiate courses are offered on a a permanent appointment to the employee, primarily on the
trimester basis. (Emphasis supplied) basis of the employee having met the reasonable standards
of competence and efficiency set by the employer. For the
In this case, petitioners’ teachers who were on probationary entire duration of this three-year period, the teacher remains
employment were made to enter into a contract effective for
under probation. Upon the expiration of his contract of
one school year. Thereafter, it may be renewed for another
employment, being simply on probation, he cannot
132
automatically claim security of tenure and compel the That teachers on probationary employment also enjoy the
employer to renew his employment contract. It is when the protection afforded by Article 281 of the Labor Code is
yearly contract is renewed for the third time that Section 93 supported by Section 93 of the 1992 Manual which
of the Manual becomes operative, and the teacher then is provides:
entitled to regular or permanent employment status.
Sec. 93. Regular or Permanent Status. - Those who have
(Emphases supplied)
served the probationary period shall be made regular or
However, this scheme "of fixed-term contract is a system permanent. Full-time teachers who have satisfactorily
that operates during the probationary period and for this completed their probationary period shall be considered
reason is subject to Article 281 of the Labor Code,"35 which regular or permanent. (Emphasis supplied)
provides:
The above provision clearly provides that full-time teachers
x x x The services of an employee who has been engaged become regular or permanent employees once they have
on a probationary basis may be terminated for a just cause satisfactorily completed the probationary period of three
or when he fails to qualify as a regular employee in school years.37 The use of the term satisfactorily necessarily
accordance with reasonable standards made known by the connotes the requirement for schools to set reasonable
employer to the employee at the time of his engagement. standards to be followed by teachers on probationary
An employee who is allowed to work after a probationary employment. For how else can one determine if
period shall be considered a regular employee. [Emphasis probationary teachers have satisfactorily completed the
supplied] probationary period if standards therefor are not provided?

In Mercado, we held that "[u]nless this reconciliation is As such, "no vested right to a permanent appointment shall
made, the requirements of [Article 281 on probationary accrue until the employee has completed the prerequisite
status would be fully negated as the school may freely three-year period necessary for the acquisition of a
choose not to renew contracts simply because their terms permanent status. [However, it must be emphasized that]
have expired."36 This will have an unsettling effect in the mere rendition of service for three consecutive years does
equilibrium vis-a-vis the relations between labor and not automatically ripen into a permanent appointment. It is
management that the Constitution and Labor Code have also necessary that the employee be a full-time teacher,
worked hard to establish. and that the services he rendered are satisfactory."38
133
In Mercado, this Court, speaking through J. Brion, held that: or at the very least under the circumstances of the present
case, at the start of the semester or the trimester during
The provision on employment on probationary status under
which the probationary standards are to be applied. Of
the Labor Code is a primary example of the fine balancing
critical importance in invoking a failure to meet the
of interests between labor and management that the Code
probationary standards, is that the school should show – as
has institutionalized pursuant to the underlying intent of the
a matter of due process – how these standards have been
Constitution.
applied. This is effectively the second notice in a dismissal
On the one hand, employment on probationary status situation that the law requires as a due process guarantee
affords management the chance to fully scrutinize the true supporting the security of tenure provision, and is in
worth of hired personnel before the full force of the security furtherance, too, of the basic rule in employee dismissal that
of tenure guarantee of the Constitution comes into play. the employer carries the burden of justifying a dismissal.
Based on the standards set at the start of the probationary These rules ensure compliance with the limited security of
period, management is given the widest opportunity during tenure guarantee the law extends to probationary
the probationary period to reject hirees who fail to meet its employees.
own adopted but reasonable standards. These standards,
When fixed-term employment is brought into play under the
together with the just and authorized causes for termination
above probationary period rules, the situation – as in the
of employment [which] the Labor Code expressly provides,
present case – may at first blush look muddled as fixed-term
are the grounds available to terminate the employment of a
employment is in itself a valid employment mode under
teacher on probationary status. x x x
Philippine law and jurisprudence. The conflict, however, is
Labor, for its part, is given the protection during the more apparent than real when the respective nature of
probationary period of knowing the company standards the fixed-term employment and of employment on probationary
new hires have to meet during the probationary period, and status are closely examined.
to be judged on the basis of these standards, aside from the
The fixed-term character of employment essentially refers to
usual standards applicable to employees after they achieve
the period agreed upon between the employer and the
permanent status. Under the terms of the Labor Code,
employee; employment exists only for the duration of the
these standards should be made known to the teachers on
term and ends on its own when the term expires. In a
probationary status at the start of their probationary period,
sense, employment on probationary status also refers to a
134
period because of the technical meaning "probation" carries with a fixed-term contract not specifically used for the fixed
in Philippine labor law – a maximum period of six months, or term it offers, Article 281 should assume primacy and the
in the academe, a period of three years for those engaged fixed-period character of the contract must give way."40
in teaching jobs. Their similarity ends there, however,
An example given of a fixed-term contract specifically used
because of the overriding meaning that being "on probation"
for the fixed term it offers is a replacement teacher or a
connotes, i.e., a process of testing and observing the
reliever contracted for a period of one year to temporarily
character or abilities of a person who is new to a role or job.
take the place of a permanent teacher who is on leave. The
Understood in the above sense, the essentially protective expiration of the reliever’s fixed-term contract does not have
character of probationary status for management can probationary status implications as he or she was never
readily be appreciated. But this same protective character employed on probationary basis. This is because his or her
gives rise to the countervailing but equally protective rule employment is for a specific purpose with particular focus
that the probationary period can only last for a specific on the term. There exists an intent to end his or her
maximum period and under reasonable, well-laid and employment with the school upon expiration of this term.41
properly communicated standards. Otherwise stated, within
However, for teachers on probationary employment, in
the period of the probation, any employer move based on
which case a fixed term contract is not specifically used for
the probationary standards and affecting the continuity of
the fixed term it offers, it is incumbent upon the school to
the employment must strictly conform to the probationary
have not only set reasonable standards to be followed by
rules.
said teachers in determining qualification for regular
x x x If we pierce the veil, so to speak, of the parties’ so- employment, the same must have also been communicated
called fixed-term employment contracts, what undeniably to the teachers at the start of the probationary period, or at
comes out at the core is a fixed-term contract conveniently the very least, at the start of the period when they were to
used by the school to define and regulate its relations with be applied. These terms, in addition to those expressly
its teachers during their probationary period.39 (Emphasis provided by the Labor Code, would serve as the just cause
supplied; italics in the original) for the termination of the probationary contract.1âwphi1 The
specific details of this finding of just cause must be
In the same case, this Court has definitively pronounced
communicated to the affected teachers as a matter of due
that "in a situation where the probationary status overlaps
process.42 Corollarily, should the teachers not have been
135
apprised of such reasonable standards at the time specified provided by law, and subject to the requirements of due
above, they shall be deemed regular employees. process.

In Tamson’s Enterprises, Inc. v. Court of Appeals,43 we held (b) The foregoing shall also apply in cases of probationary
that "[t]he law is clear that in all cases of probationary employment; provided, however, that in such cases,
employment, the employer shall [convey] to the employee termination of employment due to failure of the employee to
the standards under which he will qualify as a regular qualify in accordance with the standards of the employer
employee at the time of his engagement. Where no made known to the former at the time of engagement may
standards are made known to the employee at that time, he also be a ground for termination of employment.
shall be deemed a regular employee.
xxxx
In this case, glaringly absent from petitioners’ evidence are
(d) In all cases of termination of employment, the following
the reasonable standards that respondent was expected to
standards of due process shall be substantially observed:
meet that could have served as proper guidelines for
purposes of evaluating his performance. Nowhere in the xxxx
Teacher’s Contract44 could such standards be
45 If the termination is brought about by the completion of a
found. Neither was it mentioned that the same were ever
contract or phase thereof, or by failure of an employee to
conveyed to respondent. Even assuming that respondent
failed to meet the standards set forth by CSR and made meet the standards of the employer in the case of
known to the former at the time he was engaged as a probationary employment, it shall be sufficient that a written
notice is served the employee, within a reasonable time
teacher on probationary status, still, the termination was
flawed for failure to give the required notice to from the effective date of termination. (Emphasis supplied)
respondent.46 This is because Book VI, Rule I, Section 2 of Curiously, despite the absence of standards, Mofada
the IRR of the Labor Code provides: mentioned the existence of alleged performance
Section 2. Security of Tenure. – (a) In cases of regular evaluations47in respondent’s case. We are, however, in a
employment, the employer shall not terminate the services quandary as to what could have been the basis of such
evaluation, as no evidence were adduced to show the
of an employee except for just or authorized causes as
reasonable standards with which respondent’s performance

136
was to be assessed or that he was informed thereof. Mofada would also have us believe that respondent chose
Notably too, none of the supposed performance evaluations to resign as he feared for his life, thus, the school’s decision
were presented. These flaws violated respondent’s right to not to renew his contract. However, no resignation letter
due process. As such, his dismissal is, for all intents and was presented. Besides, this is contrary to respondent’s act
purposes, illegal. of immediately filing the instant case against petitioners.

As a matter of due process, teachers on probationary WHEREFORE, the Petition is hereby DENIED. The August
employment, just like all probationary employees, have the 31, 2005 Decision and the November 10, 2005 Resolution
right to know whether they have met the standards against of the Court of Appeals in CA-G.R. SP No. 85188 are
which their performance was evaluated. Should they fail, AFFIRMED. The status quo order of this Court is LIFTED.
they also have the right to know the reasons therefor.
SO ORDERED.
It should be pointed out that absent any showing of
unsatisfactory performance on the part of respondent, it can AMA COMPUTER COLLEGE,
be presumed that his performance was satisfactory, PARAAQUE, and/or G.R. No. 164078
especially taking into consideration the fact that even while
he was still more than a year into his probationary AMABLE C. AGUILUZ IX,
employment, he was already designated Prefect of President, MRS. CELESTE BANSALE,
Discipline. In such capacity, he was able to uncover the School Director, MS. SOCORRO,
existence of a drug syndicate within the school and lessen Present:
the incidence of drug use therein. Yet despite respondent’s MR. PATRICK AZANZA,
substantial contribution to the school, petitioners chose to
GRACE BERANIA and MAJAL JACOB,
disregard the same and instead terminated his services; YNARES-SANTIAGO
while most of those who were involved in drug activities Petitioners,
Chairperson,
within the school were punished with a slap on the wrist as
they were merely made to write letters promising that the AUSTRIA-MARTINEZ
incident will not happen again.48
CHICO-NAZARIO,

137
- versus - NACHURA, and Before this Court is a Petition for Review
[1]
on Certiorari under Rule 45 of the Rules of Civil Procedure
REYES, JJ.
seeking the reversal of the Court of Appeals (CA)
ROLANDO A. AUSTRIA, Decision[2] dated March 29, 2004 which affirmed with
modification the Decision[3] of the National Labor Relations
Respondent. Commission (NLRC), dated March 31, 2003.

The Facts

Promulgated:
Petitioner AMA Computer College, Parañaque (AMA) is an
educational institution duly organized under the laws of
November 23, 2007the Philippines. The rest of the petitioners are principal
officers of AMA. Respondent Rolando A.
[4]
Austria (respondent) was hired by AMA on probationary
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - employment as a college dean on April 24,
--------x 2000.[5] On August 22, 2000, respondents appointment as
dean was confirmed by AMAs Officer-in-Charge (OIC),
Academic Affairs, in his Memorandum,[6] which reads:
DECISION

After a thorough evaluation of the performance of Mr.

NACHURA, J.: Rolando Austria as Dean, we are happy to inform you that
he is hereby officially confirmed as Dean of AMA College
Paraaque effective April 17, 2000 to September 17, 2000.

138
In view of this, he will be entitled to a transportation In a Memorandum[8] dated August 29, 2000, respondent
allowance of One Thousand Five Hundred Sixty Pesos refuted the charges against him. Thereafter, respondent
(P1,560.00). was placed on preventive suspension from September 8,
2000 to October 10, 2000. Notices[9] of Investigation were
sent to respondent. Eventually, on September 29, 2000,
In the event that Mr. Austria gives up the Dean position or respondent was informed of his dismissal, to wit:
fails to meet the standards of the (sic) based on the
evaluation of his immediate superior, he shall be considered
for a faculty position and the appointee agrees that he shall Dear Mr. Austria[,]
lose the transportation allowance he enjoys as Dean and be
entitled to his faculty rate.
Please be informed that after a careful deliberation on the
case filed against you and upon serious consideration of the
Sometime in August 2000, respondent was charged with evidences (sic) presented, the Management has found you
violating AMAs Employees Conduct and Discipline provided guilty of violating the following policies:
in its Orientation Handbook (Handbook),[7] as follows:

A. Loss of trust and confidence by management due

1) leaking of test questions; to gross inefficiency.

2) failure to monitor general requirements vital to the (5.21 Very Serious/Grave Offense)
operations of the

company; and
B. Failure to monitor general requirements vital to the
3) gross inefficiency. operations of the company.

(5.10 Medium Offense)

139
 Attorney's Fees against AMA and the rest of the petitioners.
Trial on the merits ensued.
C. Leaking of test questions.

(4.17 Very Serious/Grave Offense)

The Labor Arbiter's Ruling

This resulted to the loss of trust and confidence in your
credibility as a company officer holding a highly sensitive
position. In view of this, your services as Dean of AMA In his Decision[12] dated December 6, 2000, the Labor
Paraaque is hereby terminated effective immediately. Arbiter held that petitioners accorded respondent due
process. The Labor Arbiter however, also held that
respondent substantially refuted the charges of gross
You are hereby instructed to report to the branch HR inefficiency, incompetence, and leaking of test questions
Personnel for further instructions. Please bear in mind that filed against him. But since respondent can no longer be
as a company policy you are required to accomplish your reinstated beyond September 17, 2000 as his designation
clearance and turn over all documents and responsibilities as college dean was only until such date, respondent should
to the appropriate officers. instead be paid his compensation and transportation
allowance for the period from September 8, 2000 to
September 17, 2000, or the salary and benefits withheld
You are barred from entering the company premises unless prior thereto. Thus:
with clearance from the HRD.[10]

WHEREFORE, premises considered, judgment is hereby

On October 27, 2000, respondent filed a Complaint[11] for rendered ordering respondent AMA Computer College,
Illegal Dismissal, Illegal Suspension, Non-Payment of Paraaque to pay complainants proportionate salary for the
Salary and 13th Month Pay with prayer for Damages and period beginning 8 September 2000 to 17 September 2000.

140
P30,000 x 10/30 days = P10,000.00 and his proportionate
transportation allowance.

serving the three (3)-month probationary period required

under the Handbook.[15] Thus, while the NLRC sustained the
P1,560.00 x 10/30 days = P520.00 and the salary/benefits
Labor Arbiter's finding that petitioners failed to establish the
withheld prior to 8 September 2000, if any.
grounds for respondent's dismissal, it held that the Labor
Arbiter erred in declaring that respondent's appointment was
only from April 24 to September 17, 2000. Accordingly, the
All other claims are hereby dismissed for lack of merit. NLRC declared that respondent was a regular employee
and that he was illegally dismissed. Nevertheless, the NLRC
held that reinstatement would not promote industrial
SO ORDERED. harmony; hence, the NLRC disposed of the case in this
wise:
Aggrieved, respondent appealed the said Decision to the
NLRC.[13]
PREMISES CONSIDERED the Decision of December 6,
2000 is VACATED and a new one entered declaring
The NLRC's Ruling complainant illegally dismissed. Respondents are directed
to pay complainant separation pay computed at one (1)
month per year of service in addition to full backwages from
On March 31, 2003, the NLRC, in its Decision,[14] found September 29, 2000 until December 6, 2000, or in the
merit in respondent's appeal. The NLRC opined that the amount of one hundred thousand three hundred seventy
petitioners did not eight-pesos & 80/100 (P100,378.80).
contravene respondent's allegation that he had attained
regular status after
SO ORDERED.[16]

141
 to prove the grounds for respondent's dismissal. The
dispositive portion of the said Decision reads:
Petitioners filed a Motion for Reconsideration[17] assailing
respondent's regular status, which the NLRC in a
Resolution,[18] denied for having been filed out of time and
WHEREFORE, premises considered, the petition is
for lack of merit. Respondent also filed a Motion for Partial
hereby DENIED DUE COURSE and DISMISSED for lack of
Reconsideration,[19] which the NLRC, in another
merit. The decision of the NLRC
Resolution,[20] denied for lack of merit.
is AFFIRMED with MODIFICATION as above stated, with
regard to the computation of backwages.

Thus, petitioners went to the CA via Petition

for Certiorari[21] under Rule 65 of the 1997 Rules of Civil
SO ORDERED.
Procedure.

Petitioners filed a Motion for Reconsideration[23] of the said

Decision, which the CA denied, in its
The CA's Ruling
Resolution[24] dated June 11, 2004, for lack of merit.

On March 29, 2004, the CA held that based on the

Hence, this Petition based on the sole ground that the CA
Handbook and on respondent's appointment, it can be
committed serious error of law in affirming and then further
inferred that respondent was a regular employee, and as
modifying the erroneous decision of the NLRC declaring
such, his employment can only be terminated for any of the
that herein respondent was illegally dismissed by AMA.[25]
causes provided under Article 282[22] of the Labor Code and
after observance of the requirements of due
process. Furthermore, the CA upheld the Labor Arbiters and
the NLRCs similar findings that respondent sufficiently Petitioners argue that respondent, as college dean, was an
academic personnel of AMA under Section 4(m) (4)(c) of
rebutted the charges against him and that petitioners failed
142
the Manual of Regulations for Private Schools[26] (Manual) this Court;[29] that petitioners assailed the regular status of
and, as such, his probationary employment is governed by the respondent for the first time only before the CA; that
Section 92[27] thereof and not by the Labor Code or AMA's they never raised as issue respondent's regular status
Handbook; that under the circumstances, respondent has before the Labor Arbiter and the NLRC because they merely
not yet attained the status of a regular employee; that concentrated on their stand that respondent was lawfully
respondent's employment was for a fixed term as found by dismissed; that petitioners failed to discharge the burden of
the Labor Arbiter but the same was terminated earlier due to proving the existence of a valid ground in dismissing
just causes; that the respondent, whether he may be respondent as found by the Labor Arbiter, the NLRC, and
considered as a probationary or a regular employee, was the CA; and that the CA's award of backwages from the
dismissed for just causes; and that the award of backwages date of actual dismissal up to the date of the finality of the
in favor of the respondent, up to the finality of the decision, decision in favor of the respondent is consonant with Article
is oppressive to the petitioners, considering the absence of 279[30] of the Labor Code, and hence, valid.[31]
an order of reinstatement and the respondent's fixed period
of employment.[28]
From this exchange of arguments, we glean two ultimate
questions that require resolution, viz.:
On the other hand, respondent counters that both the NLRC
and the CA found that respondent was a regular employee
and that he was illegally dismissed; that the instant Petition 1. What is the nature of respondent's employment?
raises questions of fact - such as whether or not respondent
is a regular employee and whether or not circumstances 2. Was he lawfully dismissed? no
existed warranting his dismissal - which can no longer
be inquired into by
The first question, i.e., whether respondent is a regular,
probationary, or fixed term employee is essentially factual in
nature.[32] However, the Court opts to resolve this question
due to the far-reaching effects it could bring to the sector of
the academe.
143
 probationary period required in the Handbook, which the
petitioners failed to deny or contravene in the proceedings
As an exception to the general rule, we held in Molina v.
before the Labor Arbiter.
Pacific Plans, Inc.: [33]

Prior to his dismissal, respondent held the position of

A disharmony between the factual findings of the Labor
college dean. The letter of appointment states that he was
Arbiter and the National Labor Relations Commission opens
officially confirmed as Dean of AMA
the door to a review thereof by this Court. Factual findings
College, Paraaque, effective from April 17,
of administrative agencies are not infallible and will be set
2000 to September 17, 2000. Petitioners submit that the
aside when they fail the test of arbitrariness. Moreover,
nature of respondent's employment as dean is one with a
when the findings of the National Labor Relations
fixed term.
Commission contradict those of the Labor Arbiter, this
Court, in the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the questioned
We agree.
findings.

We held that Article 280 of the Labor Code does not

The instant case falls squarely within the aforesaid
proscribe or prohibit an employment contract with a fixed
exception. The Labor Arbiter held that, while petitioners did
period. Even if the duties of the employee consist of
not prove the existence of just causes in order to warrant
activities necessary or desirable in the usual
respondent's dismissal, the latter's employment as dean
business of the employer, the parties
ceased to exist upon expiration of respondent's term of
are free to agree on a fixed period
employment on September 17, 2000. In sum, the Labor
Arbiter held that the nature of respondent's employment is of time for the performance of such activities.
one for a fixed term. On the other hand, the NLRC and the There is nothing essentially
CA both held that respondent is a regular employee
because respondent had fully served the three (3)-month
144
 r" is not synonymous with or identical to employment with a f
ixed term. Logically, the decisive determinant in term emplo
yment should not be the activities that the employee is calle
contradictory between a definite period of employment and
d upon to perform, but the day certain agreed upon by the p
the nature of the employees duties.[34]
arties for the commencement and termination of their emplo
yment relationship, a day certain being understood to be "th
atwhich must necessarily come, although it may not be kno
Thus, this Court's ruling in Brent School, Inc. v. Zamora[35] is
wn when." Seasonal employment, and employment for a par
instructive: ticular project are merely instances of employment in which
a period, where not expressly set down, is necessarily impli
ed.
The question immediately provoked. . .
is whether or not a voluntary agreement on a fixed term or p xxxxxxxxx
eriod would be valid where the employee "has been engage
d to perform activities which are usually necessary or desira
ble in the usual business or trade of the employer." The defi Some familiar examples may be cited of employment contra
nition seems non sequitur. From the premise that the duties cts which may be neither for seasonal work nor for specific
of an employee entail "activities which are usually necessar projects, but to which a fixed term is an essential and na
y or desirable in the usual business or trade of the employer tural appurtenance: overseas employment contracts, for o
" the conclusion does not necessarily follow that the employ ne, to which, whatever the nature of the engagement, the co
er and employee should be forbidden to stipulate any period ncept of regular employment with all that it implies does not
of time for the performance of those activities. There is noth appear ever to have been applied, Article 280 of the Labor
ing essentially contradictory between a definite period of an Code notwithstanding; also appointments to the position
employment contract and the nature of the employee's dutie s of dean, assistant dean, college secretary, principal, a
s set down in that contract as being "usually necessary or d nd other administrative offices in educational institution
esirable in the usual business or trade of the employer." The s, which are by practice or tradition rotated among the f
concept of the employee's duties as being "usually necessa aculty members, and where fixed terms are a necessity
ry or desirable in the usual business or trade of the employe
145
without which no reasonable rotation would Second. The fact that respondent did not sign the letter of
be possible . . . . appointment is of no moment. We held in Brent School, to
wit:
xxx

Accordingly, and since the entire purpose behind the

development of legislation culminating in the present Article
The instant case involves respondent's position as dean, 280 of the Labor Code clearly appears to have been, as
and comes within the purview of the Brent School doctrine. already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the clause in
said article indiscriminately and completely ruling out all
First. The letter of appointment was clear. Respondent was written or oral agreements conflicting with the concept of
confirmed as Dean of AMA College, Paraaque, effective regular employment as defined therein should be construed
from April 17, 2000 to September 17, 2000. In numerous to refer to the substantive evil that the Code itself has
cases decided by this Court, we had taken notice, that by singled out: agreements entered into precisely to circumvent
way of practice and tradition, the position of dean is security of tenure. It should have no application to
normally an employment for a fixed term.[36] Although it does instances where a fixed period of employment was
not appear on record─ and neither was it alleged by any of agreed upon knowingly and voluntarily by the parties,
the parties─ that respondent, other than holding the position without any force, duress or improper pressure being
of dean, concurrently occupied a teaching position, it can be brought to bear upon the employee and absent any
deduced from the last paragraph of said letter that the other circumstances vitiating his consent, or where it
respondent shall be considered for a faculty position in the satisfactorily appears that the employer and employee
event he gives up his deanship or fails to meet AMA's dealt with each other on more or less equal terms with
standards. Such provision reasonably serves the intention no moral dominance whatever being exercised by the
set forth in Brent School that the deanship may be rotated former over the latter. Unless, thus, limited in its purview,
among the other members of the faculty. the law would be made to apply to purposes other than
those explicitly stated by its framers; it thus becomes

146
pointless and arbitrary, unjust in its effects and apt to lead to As such, petitioners aver that the three (3)-month
absurd and unintended consequences.[37] probationary period for officers set forth in the Handbook is
not applicable to the case of respondent.

The Handbook merely provides for two classes of

The fact that respondent voluntarily accepted the
employees for purposes of permanency, i.e., Faculty and
employment, assumed the position, and performed the
Non-Academic. However, the same does not specifically
functions of dean is clear indication that he knowingly and
classify the position of dean as part of the Faculty or of the
voluntarily consented to the terms and conditions of the
Non-Academic personnel. At this juncture, we find solace in
appointment, including the fixed period of his deanship.
the Manual of Regulations for Private Schools
Other than the handwritten notes made in the letter of
Annotated,[38] which provides that the college dean is the
appointment, no evidence was ever presented to show that
senior officer responsible for the operation of an academic
respondents consent was vitiated, or that respondent
program, the enforcement of rules and regulations, and the
objected to the said appointment or to any of its conditions.
supervision of faculty and student services. We already had
Furthermore, in his status as dean, there can be no valid
occasion to state that the position of dean is primarily
inference that he was shackled by any form of moral
academic[39] and, as such, he is considered a managerial
dominance exercised by AMA and the rest of the
employee.[40] Yet, a perusal of the Handbook yields the
petitioners.
interpretation that the provision on the permanency of
Faculty members applies to teachers only. But the
Handbook or school manual must yield to the decree of
Alternatively, petitioners also claim that respondent did not the Manual, the latter having the character of law.[41] The
attain regular status, relying on Section 92 of the Manual in
specified probationary periods in Section 92 of
connection with Section 4(m) 4(c) thereof which provides for
the Manual are the maximum periods; under certain
a three (3)-year probationary period for Academic conditions, regular status may be achieved by the employee
Personnel. Petitioners submit that the position of dean is in less time.[42] However, under the given circumstances and
included in the provision school officials responsible for
the fact that the position of dean in this case is for a fixed
academic matters, and may include other school officials.
term, the issue whether the respondent attained a regular
147
status is not in point. By the same token, the application of flowing from such employment after September 17, 2000,
the provision in the Manual as to the required probationary because the employment, which is the source of the
period is misplaced. It can be well said that a tenured status benefits, had, by then, already ceased to exist.
of employment co-exists and is co-terminous only with the
definite term fixed in the contract of employment.
Finally, while this Court adheres to the principle of social
justice and protection to labor, the constitutional policy to
provide such protection to labor is not meant to be an
In light of the foregoing disquisition, the resolution of the instrument to oppress employers. The commitment under
second question requires full cognizance of respondents the fundamental law is that the cause of labor does not
fixed term of employment and all the effects thereof. It is prevent us from sustaining the employer when the law is
axiomatic that a contract of employment for a definite period clearly on its side.[45]
terminates on its own force at the end of such period.[43] The
WHEREFORE, the instant Petition is GRANTED and the
lack of notice of termination is of no consequence because
CA Decision in CA-G.R. SP No.
when the contract specifies the length of its duration, it
78455 is REVERSED and SET ASIDE. The Decision of the
comes to an end upon the expiration of such period.[44]
Labor Arbiter, dated December 6, 2000, is
hereby REINSTATED. No costs.

Thus, the unanimous finding of the Labor Arbiter, the NLRC SO ORDERED.
and the CA that respondent adequately refuted all the
BIENVENIDO D. GOMA, G.R. No. 160905
charges against him assumes relevance only insofar as Petitioner,
respondents dismissal from the service was effected by Present:
petitioners before expiration of the fixed period of
YNARES-SANTIAGO, J.,
employment. True, petitioners erred in dismissing the Chairperson,
respondent, acting on the mistaken belief that respondent - versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
was liable for the charges leveled against him.But NACHURA, and
respondent also cannot claim entitlement to any benefit REYES, JJ.

148
PAMPLONA PLANTATIONINCORPORATED, Promulgated:
Respondent.
July 4, 2008

x------------------------------------------------------------------x Petitioner commenced[3] the instant suit by filing a complaint

for illegal dismissal, underpayment of wages, non-payment
of premium pay for holiday and rest day, five (5) days
incentive leave pay, damages and attorneys fees, against
the respondent. The case was filed with the Sub-Regional
DECISION Arbitration Branch No. VII of Dumaguete City. Petitioner
claimed that he worked as a carpenter at the Hacienda
Pamplona since 1995; that he worked from 7:30
NACHURA, J.: a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. daily
with a salary rate of P90.00 a day paid weekly; and that he
worked continuously until 1997 when he was not given any
work assignment.[4]On a claim that he was a regular
employee, petitioner alleged to have been illegally
dismissed when the respondent refused without just cause
to give him work assignment. Thus, he prayed for
backwages, salary differential, service incentive leave pay,
For review is the Decision[1] of the Court of Appeals (CA) damages and attorneys fees.[5]
dated August 27, 2003 granting respondent Pamplona
Plantation, Inc.s petition for certiorari and its
[2]
Resolution dated November 11, 2003 denying petitioner On the other hand, respondent denied having hired the
Bienvenido Gomas motion for reconsideration, in CA-G.R. petitioner as its regular employee. It instead argued that
SP No. 74892. petitioner was hired by a certain Antoy Caaveral, the
manager of the hacienda at the time it was owned by Mr.
Bower and leased by Manuel Gonzales, a jai-alai pelotari

149
known as Ybarra.[6] Respondent added that it was not the respondent, Pamplona Plantation Incorporated, the
obliged to absorb the employees of the former owner. following:

In 1995, Pamplona Plantation Leisure Corporation (PPLC) 1) to reinstate the complainant, BIENVENIDO D. GOMA to
was created for the operation of tourist resorts, hotels and his former position immediately without loss of seniority
bars. Petitioner, thus, rendered service in the construction of rights and other privileges;
the facilities of PPLC. If at all, petitioner was a project but
not a regular employee.[7]
2) to pay the same complainant TWELVE THOUSAND
THREE HUNDRED FIFTY-NINE PESOS (P12,359.00) in
On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa salary differentials;
dismissed the case for lack of merit.[8] The Labor Arbiter
concluded that petitioner was hired by the former owner,
hence, was not an employee of the 3) to pay to the same complainant ONE HUNDRED ONE
respondent. Consequently, his money claims were denied.[9] THOUSAND SIX HUNDRED SIXTY PESOS (P101,660.00)
in backwages to be updated until actual reinstatement; and

On appeal to the National Labor Relations Commission

(NLRC), the petitioner obtained favorable judgment when 4) to pay attorneys fee in the amount of ELEVEN
the tribunal reversed and set aside the Labor Arbiters THOUSAND FOUR HUNDRED TWO PESOS (P11,402.00)
decision. The dispositive portion of the NLRC decision which is equivalent to ten percent (10%) of the total
reads: judgment award.

WHEREFORE, the Decision of the Labor Arbiter is hereby The respondent is further ordered to pay the aggregate
SET ASIDE and a new one is hereby issued ORDERING amount of ONE HUNDRED FOURTEEN THOUSAND AND
150
NINETEEN PESOS (P114,019.00) to the complainant petitioner worked for the respondent for a period of two
through the cashier of this Commission within ten (10) days years, he was a regular employee.[15]
from receipt hereof.

Aggrieved, respondent instituted a special civil action

[10]
SO ORDERED. for certiorari under Rule 65 before the Court of Appeals
which granted the same; and consequently annulled and set
aside the NLRC decision. The CA disposed, as follows:

Respondents motion for reconsideration was denied by the

WHEREFORE, premises considered, the instant petition
NLRC on September 9, 2002.[11]
is GRANTED. The assailed decision of the NLRC
dated October 24, 2000, as well as the Resolution
dated September 9, 2002 in NLRC Case No. V-000882-99,
The NLRC upheld the existence of an employer-employee
RAB VII-0088-98-D are hereby ANNULLED and SET
relationship, ratiocinating that it was difficult to believe that a
ASIDE. The complaint is ordered DISMISSED.
simple carpenter from far away Pamplona would go
to Dumaguete City to hire a competent lawyer to help him
secure justice if he did not believe that his right as a laborer
SO ORDERED.[16]
had been violated.[12] It added that the creation of the PPLC
required the tremendous task of constructing hotels, inns, Contrary to the NLRCs finding, the CA concluded that there
restaurants, bars, boutiques and service shops, thus was no employer-employee relationship. The CA stressed
involving extensive carpentry work. As an old carpentry that petitioner having raised a positive averment, had the
hand in the old corporation, the possibility of petitioners burden of proving the existence of an employer-employee
employment was great.[13] The NLRC likewise held that the relationship. Respondent, therefore, had no obligation to
respondent should have presented its employment records prove its negative averment.[17] The appellate court further
if only to show that petitioner was not included in its list of held that while the respondents business required the
employees; its failure to do so was fatal.[14] Considering that performance of occasional repairs and carpentry work, the
151
retention of a carpenter in its payroll was not necessary or YES of the respondent? 2) If so, was he illegally dismissed
desirable in the conduct of its usual business.[18] Lastly, YES from employment? and 3) Is he entitled to his
although the petitioner was an employee of the former monetary claims?
owner of the hacienda, the respondent was not required to
absorb such employees because employment contracts
are in personam and binding only between the parties.[19] Petitioner insists that he was a regular employee of the
respondent corporation. The respondent, on the other hand,
counters that it did not hire the petitioner, hence, he was
Petitioner now comes before this Court raising the sole never an employee, much less a regular one.
issue:

Both the Labor Arbiter and the CA concluded that there was
WHETHER OR NOT THE DECISION OF [THE] COURT OF no employer-employee relationship between the petitioner
APPEALS DATED AUGUST 27, 2003, REVERSING AND and respondent. They based their conclusion on the alleged
SETTING ASIDE THE NLRC (Fourth Division, Cebu City) admission of the petitioner that he was previously hired by
RULING THAT THE PETITIONER WAS NOT ILLEGALLY the former owner of the hacienda. Thus, they rationalized
DISMISSED AS HE WAS NOT AN EMPLOYEE OF that since the respondent was not obliged to absorb all the
RESPONDENT, IS CONTRARY TO LAW AND employees of the former owner, petitioners claim of
JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT employment could not be sustained. The NLRC, on the
IN CONSONANCE WITH THE EVIDENCE ON RECORD.[20] other hand, upheld petitioners claim of regular employment
because of the respondents failure to present its
employment records.

The existence of an employer-employee relationship

The disposition of this petition rests on the resolution of the involves a question of fact which is well within the province
following questions: 1) Is the petitioner a regular employee of the CA to determine. Nonetheless, given the reality that

152
the CAs findings are at odds with those of the NLRC, the
Court is constrained to probe into the attendant
xxxx
circumstances as appearing on record.[21]

In other words, as regards those workers who worked in

A thorough examination of the records compels this Court to
1995 specifically in connection with the construction of the
reach a conclusion different from that of the CA. It is true
facilities of Pamplona Plantation Leisure Corporation, their
that petitioner admitted having been employed by the former
employment was definitely temporary in character and not
owner prior to 1993 or before the respondent took over the
regular employment. Their employment was deemed
ownership and management of the plantation, however, he
terminated by operation of law the moment they had
likewise alleged having been hired by the respondent as a
finished the job or activity under which they were
carpenter in 1995 and having worked as such for two years
employed.[22]
until 1997.Notably, at the outset, respondent categorically
denied that it hired the petitioner. Yet, in its petition filed
before the CA, respondent made this admission:

Private respondent [petitioner herein] cannot be considered

Thus, departing from its initial stand that it never hired
a regular employee since the nature of his work is merely
project in character in relation to the construction of the petitioner, the respondent eventually admitted the existence
of employer-employee relationship before the CA. It,
facilities of the Pamplona Plantation Leisure Corporation.
however, qualified such admission by claiming that it was
PPLC that hired the petitioner and that the nature of his
employment therein was that of a project and not regular
He is a project employee as he was hired 1) for a specific
employee.
project or undertaking, and 2) the completion or termination
of such project or undertaking has been determined at the
time of engagement of the employee. x x x.

153
Parenthetically, this Court in Pamplona Plantation ART. 280. REGULAR AND CASUAL EMPLOYMENT. -
Company, Inc. v. Tinghil[23] and Pamplona Plantation The provisions of written agreement to the contrary
Company v. Acosta[24] had pierced the veil of corporate notwithstanding and regardless of the oral agreement of the
fiction and declared that the two corporations,[25]PPLC and parties, an employment shall be deemed to be regular
the herein respondent, are one and the same. where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual
business or trade of the employer, except where the
By setting forth these defenses, respondent, in effect, employment has been fixed for a specific project or
admitted that petitioner worked for it, albeit in a different undertaking, the completion or termination of which has
capacity. Such an allegation is in the nature of a negative been determined at the time of the engagement of the
pregnant, a denial pregnant with the admission of the employee or where the work or service to be performed is
substantial facts in the pleadings responded to which are seasonal in nature and the employment is for the duration of
not squarely denied, and amounts to an acknowledgment the season.
that petitioner was indeed employed by respondent.[26]

An employment shall be deemed to be casual if it is not

The employment relationship having been established, the covered by the preceding paragraph: Provided, That, any
next question we must answer is: Is the petitioner a regular employee who has rendered at least one year of service,
or project employee? whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
We find the petitioner to be a regular employee. while such activity exists.

Article 280 of the Labor Code, as amended, provides: As can be gleaned from this provision, there are two kinds
of regular employees, namely: (1) those who are engaged
to perform activities which are usually necessary or

154
desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one
year of service, whether continuous or broken, with respect
to the activity in which they are employed.[27] Simply stated,
regular employees are classified into: regular employees by Respondent argues that, even assuming that petitioner can
nature of work; and regular employees by years of be considered an employee, he cannot be classified as a
service. The former refers to those employees who perform regular employee, but merely as a project employee whose
a particular activity which is necessary or desirable in the services were hired only with respect to a specific job and
usual business or trade of the employer, regardless of their only while that specific job existed.
length of service; while the latter refers to those employees
who have been performing the job, regardless of the nature
thereof, for at least a year.[28] If the employee has been A project employee is assigned to carry out a specific
performing the job for at least one year, even if the project or undertaking the duration and scope of which are
performance is not continuous or merely intermittent, the specified at the time the employee is engaged in the
law deems the repeated and continuing need for its project. A project is a job or undertaking which is distinct,
performance as sufficient evidence of the necessity, if not separate and identifiable from the usual or regular
indispensability, of that activity to the business.[29] undertakings of the company. A project employee is
assigned to a project which begins and ends at determined
or determinable times.[30]
Respondent is engaged in the management of the
Pamplona Plantation as well as in the operation of tourist
resorts, hotels, inns, restaurants, etc. Petitioner, on the The principal test used to determine whether employees are
other hand, was engaged to perform carpentry work. His project employees as distinguished from regular employees,
services were needed for a period of two years until such is whether or not the employees were assigned to carry out
time that the respondent decided not to give him work a specific project or undertaking, the duration or scope of
assignment anymore. Owing to his length of service, which was specified at the time the employees were
petitioner became a regular employee, by operation of law. engaged for that project.[31] In this case, apart from

155
respondents bare allegation that petitioner was a project the salary or the actual time spent at work. It is the
employee, it had not shown that petitioner was informed that character of the activities performed by the employer in
he would be assigned to a specific project or relation to the particular trade or business of the employer,
undertaking. Neither was it established that he was taking into account all the circumstances, including the
informed of the duration and scope of such project or length of time of its performance and its continued
undertaking at the time of his engagement. existence. Given the attendant circumstances in the case at
bar, it is obvious that one year after he was employed by the
Most important of all, based on the records, respondent did
respondent, petitioner became a regular employee by
not report the termination of petitioners supposed project
operation of law.[33]
employment to the Department of Labor and Employment
(DOLE). Department Order No. 19 (as well as the old Policy
Instructions No. 20) requires employers to submit a report of
As to the question of whether petitioner was illegally
an employees termination to the nearest public
dismissed, we answer in the affirmative.
employment
office every time the employment is terminated due to a
completion of a project. Respondents failure to file
Well-established is the rule that regular employees enjoy
termination reports, particularly on the cessation of
security of tenure and they can only be dismissed for just
petitioners employment, was an indication that the petitioner
cause and with due process, i.e., after notice and
was not a project but a regular employee.[32]
hearing. In cases involving an employees dismissal, the
burden is on the employer to prove that the dismissal was
legal. This burden was not amply discharged by the
We stress herein that the law overrides such conditions
respondent in this case.
which are prejudicial to the interest of the worker whose
weak bargaining position necessitates the succor of the
State. What determines whether a certain employment is
regular or otherwise is not the will or word of the employer, Obviously, petitioners dismissal was not based on any of
the just or authorized causes enumerated under Articles
to which the worker oftentimes acquiesces. Neither is it the
282,[34] 283[35] and 284[36] of the Labor Code, as
procedure of hiring the employee nor the manner of paying
156
amended. After working for the respondent for a period of In the instant case, we are prepared to concede the
two years, petitioner was shocked to find out that he was impossibility of the reinstatement of petitioner considering
not given any work assignment anymore. Hence, the that his position or any equivalent position may no longer be
requirement of substantive due process was not complied available in view of the length of time that this case has
with. been pending. Moreover, the protracted litigation may have
seriously abraded the relationship of the parties so as to
render reinstatement impractical. Accordingly, petitioner
Apart from the requirement that the dismissal of an may be awarded separation pay in lieu of reinstatement.[41]
employee be based on any of the just or authorized causes,
the procedure laid down in Book VI, Rule I, Section 2 (d) of
the Omnibus Rules Implementing the Labor Code, must be Petitioners separation pay is pegged at the amount
followed.[37] Failure to observe the rules is a violation of the equivalent to petitioners one (1) month pay, or one-half (1/2)
employees right to procedural due process. month pay for every year of service, whichever is higher,
reckoned from his first day of employment up to finality of
In view of the non-observance of both substantive and
this decision. Full backwages, on the other hand, should be
procedural due process, in accordance with the guidelines
computed from the date of his illegal dismissal until the
outlined by this Court in Agabon v. National Labor Relations
finality of this decision.
Commission,[38] we declare that petitioners dismissal from
employment is illegal.[39]

Having shown that petitioner is a regular employee and that On petitioners entitlement to attorneys fees, we must take
his dismissal was illegal, we now discuss the propriety of into account the fact that petitioner was illegally dismissed
the monetary claims of the petitioner. An illegally dismissed from his employment and that his wages and other benefits
employee is entitled to: (1) either reinstatement, if viable, or were withheld from him without any valid and legal basis. As
separation pay if reinstatement is no longer viable, and (2) a consequence, he was compelled to file an action for the
backwages.[40] recovery of his lawful wages and other benefits and, in the
process, incurred expenses. On these bases, the Court

157
finds that he is entitled to attorneys fees equivalent to ten SO ORDERED.
percent (10%) of the monetary award.[42]
G.R. No. 209499 January 28, 2015

MA. CHARITO C. GADIA, ERNESTO M. PENAS,

Lastly, we affirm the NLRCs award of salary differential. In GEMMABELLE B. REMO, LORENA S. QUESEA, MARIE
light of our foregoing disquisition on the illegality of JOY FRANCISCO, BEVERLY A. CABINGAS, IVEE U.
petitioners dismissal, and our adoption of the NLRCs BALINGIT, ROMA ANGELICA 0. BORJA, MARIE JOAN
findings, suffice it to state that such issue is a question of RAMOS, KIM GUEVARRA, LYNN S. DE LOS SANTOS,
fact, and we find no cogent reason to disturb the findings of CAREN C. ENCANTO, EIDEN BALDOVINO,
the labor tribunal. JACQUELINE B. CASTRENCE,MA.ESTRELLA V. LAPUZ,
JOSELITO L. LORD, RAYMOND G. SANTOS, ABIGAIL
M. VILORIA, ROMMEL C. ACOSTA, FRANCIS JAN S.
WHEREFORE, premises considered, the petition BAYLON, ERIC 0. PADIERNOS, MA. LENELL P. AARON,
is GRANTED. The Decision of the Court of CRISNELL P. AARON, and LAWRENCE CHRISTOPHER
Appeals dated August 27, 2003 and its Resolution F. PAPA, Petitioners,
dated November 11, 2003 in CA-G.R. SP No. 74892 vs.
are REVERSED and SET ASIDE. Petitioner is found to SYKES ASIA, INC./ CHUCK SYKES/ MIKE HINDS/
have been illegally dismissed from employment and thus, MICHAEL HENDERSON, Respondents.
is ENTITLED to: 1) Salary Differential embodied in the
DECISION
NLRC decision dated October 24, 2000 in NLRC Case No.
V-000882-99; 2) Separation Pay; 3) Backwages; and 4) PERLAS-BERNABE, J.:
Attorneys fees equivalent to ten percent (10%) of the
monetary awards. Upon finality of this judgment, let the Assailed in this petition for review on certiorari1 are the
records of the case be remanded to the NLRC for the Decision2 dated April 29, 2013 and the Resolution3 dated
computation of the exact amounts due the petitioner. October 3, 2013 of the Court of Appeals (CA) in CA-G.R.
SP No. 120433, which annulled and set aside the
Decision4 dated November 15, 2010 and the
Resolution5 dated May 10, 2011 of the National Labor
158
Relations Commission (NLRC), in NLRC LAC No. 07- different dates, Sykes Asia hired petitioners as customer
001583-10, and reinstated the Decision6 dated June 23, service representatives, team leaders, and trainers for the
2010 of the Labor Arbiter (LA), holding that herein Alltel Project.13
petitioners Ma. Charito C. Gadia7 (Gadia), Ernesto M.
Services for the said project went on smoothly until Alltel
Peñas,8 Gemmabelle B. Remo (Remo), Lorena S. Quesea
sent two (2) letters to Sykes Asia dated August 7,
(Quesea), Marie Joy Francisco, Beverly A. Cabingas, Ivee
200914and September 9, 200915 informing the latter that it
U. Balingit9(Balingit), Roma Angelica O. Borja, Marie Joan
was terminating all support services provided by Sykes Asia
Ramos, Kim Guevarra, Lynn S. De Los Santos, Caren C.
related to the Alltel Project. In view of this development,
Encanto, Eiden Baldovino, Jacqueline B. Castrence
Sykes Asia sent each of the petitioners end-of-life
(Castrence), Ma. Estrella V.Lapuz (Lapuz), Joselito L. Lord
notices,16informing them of their dismissal from employment
(Lord), Raymond G. Santos, Abigail M. Viloria (Viloria),
due to the termination of the Alltel Project. Aggrieved,
Rommel C. Acosta10 (Acosta), Francis Jan S. Baylon,Eric O.
petitioners filed separate complaints17 for illegal dismissal
Padiernos, Ma. Lenell P. Aaron, Crisnell P. Aaron, and
against respondents Sykes Asia, Chuck Sykes, the
Lawrence Christopher F.Papa (petitioners) are project
President and Chief Operating Officer of Sykes Enterprise,
employees of respondent Sykes Asia, Inc. (Sykes Asia),
Inc., and Mike Hinds and Michael Henderson, the President
and thus, were validly terminated from employment.
and Operations Director, respectively, of Sykes Asia
The Facts (respondents), praying for reinstatement, backwages, 13th
month pay, service incentive leave pay, night shift
Sykes Asia is a corporation engaged in Business Process
differential, moral and exemplary damages, and attorney’s
Outsourcing (BPO) which provides support to its
fees. In their complaints, petitioners alleged that their
international clients from various sectors (e.g., technology,
dismissal from service was unjust as the same was effected
telecommunications, retail services) by carrying on some of
without substantive and procedural due process.18
their operations, governed by service contracts that it enters
with them.11 On September 2, 2003,12 Alltel In their defense,19 respondents averred that petitioners were
Communications, Inc. (Alltel), a United States-based not regular employees but merely project-based employees,
telecommunications firm, contracted Sykes Asia’s services and as such, the termination of the Alltel Project served as a
to accommodate the needs and demands of Alltel clients for valid ground for their dismissal.20 In support of their position,
its postpaid and prepaid services (Alltel Project). Thus, on respondents noted that it was expressly indicated in
159
petitioners’ respective employment contracts that their for failure to prosecute,30 were awarded their separation pay
positions are "project-based" and thus, "co-terminus to the with interest of 12% per annum reckoned from the date of
project."21 Respondents further maintained that they their actual dismissal until full payment, plus attorney’s fees
complied with the requirements of procedural due process amounting to 10% of the total monetary award. In addition,
in dismissing petitioners by furnishing each of them their the NLRC awarded nominal damages in the amount of
notices of termination at least thirty (30) days prior to their ₱10,000.00 each to petitioners Gadia, Remo, Quesea,
respective dates of dismissal.22 Balingit, Castrence, Lapuz, and Lord for respondents’ failure
to furnish them the required written notice of termination
The LA Ruling
within the prescribed period.31
In a Decision23 dated June 23, 2010 the LA ruled in favor of
Contrary to the LA’s finding, the NLRC found that petitioners
respondents, and accordingly, dismissed petitioners’
could not be properly characterized as project-based
complaints for lack of merit.24 It found that petitioners are
employees, ratiocinating that while it was made known to
merely project-based employees, as their respective
petitioners that their employment would be co-terminus to
employment contracts indubitably provided for the duration
the Alltel Project, it was neither determined nor made known
and term of their employment, as well as the specific project
to petitioners, at the time of hiring, when the said project
to which they were assigned, i.e., the Alltel Project.25 Hence,
would end, be terminated, or be completed.32 In this
the LA concluded that the cessation of the Alltel Project
relation, the NLRC concluded that inasmuch as petitioners
naturally resulted in the termination of petitioners’
had been engaged to perform activities which are necessary
employment in Sykes Asia.26 Dissatisfied, petitioners
or desirable in respondents’ usual business or trade of BPO,
appealed27 to the NLRC.
petitioners should be deemed regular employees of Sykes
The NLRC Ruling Asia.33 This notwithstanding, and in view of the cessation of
the Alltel Project, the NLRC found petitioners’ employment
In a Decision28 dated November 15, 2010, the NLRC with Sykes Asia to be redundant; hence, declared that they
modified the LA Decision, ruling that petitioners are regular
were legally dismissed from service and were only entitled
employees but were validly terminated due to
to receive their respective separation pay.34
redundancy.29 Accordingly, petitioners, except Viloria and
Acosta whose complaints were dismissed without prejudice Respondents moved for reconsideration,35 which was,
however, denied in a Resolution36 dated May 10, 2011.
160
Unconvinced, Sykes Asia37 elevated the case to the CA on The petition is without merit.
certiorari.38
At the outset, it must be stressed that to justify the grant of
The CA Ruling the extraordinary remedy of certiorari, petitioners must
satisfactorily show that the court or quasi-judicial authority
In a Decision39 dated April 29, 2013, the CA annulled and
gravely abused the discretion conferred upon it. Grave
set aside the ruling of the NLRC, and accordingly, reinstated
abuse of discretion connotes judgment exercised in a
that of the LA.40 It held that a perusal of petitioners’
capricious and whimsical manner that is tantamount to lack
respective employment contracts readily shows that they
of jurisdiction. To be considered "grave," discretion must be
were hired exclusively for the Alltel Project and that it was
exercised in a despotic manner by reason of passion or
specifically stated therein that their employment would be
personal hostility, and must be so patent and gross as to
project-based.41 The CA further held that petitioners’
amount to an evasion of positive duty or to a virtual refusal
employment contracts need not state an actual date as to
to perform the duty enjoined by or to act at all in
when their employment would end, opining that it is enough
contemplation of law.45
that such date is determinable.42
In labor disputes, grave abuse of discretion may be ascribed
Petitioners moved for reconsideration,43 which was,
to the NLRC when, inter alia, its findings and the
however, denied in a Resolution44 dated October 3, 2013,
conclusions reached thereby are not supported by
hence, this petition.
substantial evidence. This requirement of substantial
The Issue Before the Court evidence is clearly expressed in Section 5, Rule 133 of the
Rules of Court which provides that "in cases filed before
The primordial issue for the Court’s resolution is whether or
administrative or quasi-judicial bodies, a fact may be
not the CA correctly granted respondents’ petition for deemed established if it is supported by substantial
certiorari, thereby setting aside the NLRC’s decision holding
evidence, or that amount of relevant evidence which a
that petitioners were regular employees and reinstating the
reasonable mind might accept as adequate to justify a
LA ruling that petitioners were merely project-based
conclusion."46
employees, and thus, validly dismissed from service.
Tested against these considerations, the Court finds that the
The Court’s Ruling CA correctly granted respondents’ certiorari petition before
161
it, since the NLRC gravely abused its discretion in ruling that A project employee is assigned to a project which begins
petitioners were regular employees of Sykes Asia when the and ends at determined or determinable
latter had established by substantial evidence that they times.1âwphi1 Unlike regular employees who may only be
were merely project-based. dismissed for just and/or authorized causes under the Labor
Code, the services of employees who are hired as "project[-
Article 29447 of the Labor Code,48 as amended,
based] employees" may be lawfully terminated at the
distinguishes a project-based employee from a regular
completion of the project.
employee as follows:
According to jurisprudence, the principal test for determining
Art. 294. Regular and casual employment.—The provisions
whether particular employees are properly characterised as
of written agreement to the contrary notwithstanding and
"project[-based] employees" as distinguished from "regular
regardless of the oral agreement of the parties, an
employees," is whether or not the employees were assigned
employment shall be deemed to be regular where the
to carry out a "specific project or undertaking," the duration
employee has been engaged to perform activities which are
(and scope) of which were specified at the time they were
usually necessary or desirable in the usual business or
engaged for that project. The project could either be (1) a
trade of the employer, except where the employment has
particular job or undertaking that is within the regular or
been fixed for a specific project or undertaking the
usual business of the employer company, but which is
completion or termination of which has been determined at
distinct and separate, and identifiable as such, from the
the time of the engagement of the employee or where the
other undertakings of the company; or (2) a particular job or
work or services to be performed is seasonal in nature and
undertaking that is not within the regular business of the
the employment is for the duration of the season.
corporation. In order to safeguard the rights of workers
x x x x (Emphasis and underscoring supplied) against the arbitrary use of the word "project" to prevent
employees from attaining a regular status, employers
In Omni Hauling Services, Inc. v. Bon,49 the Court claiming that their workers are project[-based] employees
extensively discussed how to determine whether an
should not only prove that the duration and scope of the
employee may be properly deemed project-based or
employment was specified at the time they were engaged,
regular, to wit: but also, that there was indeed a project.50 (Emphases and
underscoring supplied)
162
Verily, for an employee to be considered project-based, the caveat sufficiently apprised petitioners that their security of
employer must show compliance with two (2) requisites, tenure with Sykes Asia would only last as long as the Alltel
namely that: (a) the employee was assigned to carry out a Project was subsisting. In other words, when the Alltel
specific project or undertaking; and (b) the duration and Project was terminated, petitioners no longer had any
scope of which were specified at the time they were project to work on, and hence, Sykes Asia may validly
engaged for such project. terminate them from employment. Further, the Court
likewise notes the fact that Sykes Asia duly submitted an
In this case, records reveal that Sykes Asia adequately
Establishment Employment Report52 and an Establishment
informed petitioners of their employment status at the time
Termination Report53 to the Department of Labor and
of their engagement, as evidenced by the latter’s
Employment Makati-Pasay Field Office regarding the
employment contracts which similarly provide that they were
cessation of the Alltel Project and the list of employees that
hired in connection with the Alltel Project, and that their
would be affected by such cessation. As correctly pointed
positions were "project-based and as such is co-terminus to
out by the CA, case law deems such submission as an
the project." In this light, the CA correctly ruled that
indication that the employment was indeed project-based.54
petitioners were indeed project-based employees,
considering that: (a) they were hired to carry out a specific In sum, respondents have shown by substantial evidence
undertaking, i.e., the Alltel Project; and (b) the duration and that petitioners were merely project-based employees, and
scope of such project were made known to them at the time as such, their services were lawfully terminated upon the
of their engagement, i.e., "co-terminus with the project." cessation of the Alltel Project.

As regards the second requisite, the CA correctly stressed WHEREFORE, the petition is DENIED. Accordingly, the
that "[t]he law and jurisprudence dictate that ‘the duration of Decision dated April 29, 2013 and the Resolution dated
the undertaking begins and ends at determined or October 3, 2013 of the Court of Appeals in CA-G.R. SP No.
determinable times’" while clarifying that "[t]he phrase 120433 are hereby AFFIRMED.
‘determinable times’ simply means capable of being
SO ORDERED.
determined or fixed."51 In this case, Sykes Asia substantially
complied with this requisite when it expressly indicated in G.R. No. 204406 February 26, 2014
petitioners’ employment contracts that their positions were
"co-terminus with the project." To the mind of the Court, this
163
MACARTHUR MALICDEM and HERMENIGILDO They were responsible for the bagging of filament yarn, the
FLORES, Petitioners, quality of pp yarn package and the cleanliness of the work
vs. place area. Their employment contracts were for a period of
MARULAS INDUSTRIAL CORPORATION and MIKE one (1) year. Every year thereafter, they would sign a
MANCILLA, Respondents. Resignation/Quitclaim in favor of Marulas a day after their
contracts ended, and then sign another contract for one (1)
DECISION
year. Until one day, on December 16, 2010, Flores was told
MENDOZA, J.: not to report for work anymore after being asked to sign a
paper by Marulas' HR Head to the effect that he
This petition for review on certiorari1 under Rule 45 of the
acknowledged the completion of his contractual status. On
Rules of Court filed by Macarthur Malicdem (Malicdem) and
February 1, 2011, Malicdem was also terminated after
Hermenigildo Flores (Flores) assails the July 18, 2012 signing a similar document. Thus, both claimed to have
Decision2 and the November 12, 2012 Resolution3 of the
been illegally dismissed.
Court of Appeals (CA) in CA-G.R. SP No. 1244 70,
dismissing their petition for certiorari under Rule 65 in an Marulas countered that their contracts showed that they
action for illegal dismissal. were fixed-term employees for a specific undertaking which
was to work on a particular order of a customer for a
The Facts: specific period. Their severance from employment was due
A complaint4 for illegal dismissal, separation pay, money to the expiration of their contracts.
claims, moral and exemplary damages, and attorney's fees
On February 7, 2011, Malicdem and Flores lodged a
was filed by petitioners Malicdem and Flores against
complaint against Marulas and Mancilla for illegal dismissal.
respondents Marulas Industrial Corporation (Marulas) and
Mike Mancilla (Mancilla), who were engaged in the business On July 13, 2011, the Labor Arbiter (LA) rendered a
of manufacturing sacks intended for local and export decision5 in favor of the respondents, finding no illegal
markets. dismissal. He ruled that Malicdem and Flores were not
terminated and that their employment naturally ceased
Malicdem and Flores were first hired by Marulas as extruder
when their contracts expired. The LA, however, ordered
operators in 2006, as shown by their employment contracts.

164
Marulas to pay Malicdem and Flores their respective wage ₱404 – ₱362 = ₱42
differentials, to wit:

WHEREFORE, the complaints for illegal dismissal are x 26 days x 7.03 mos. = 7,676.76
dismissed for lack of merit. Respondent Marulas Industrial
Corporation is, however, ordered to pay complainants wage
differential in the following amounts: 20,111.26

1. Macarthur Malicdem ₱20,111.2 ; and

6
2. Herminigildo Flores ₱18,440.50
2/2/07 – 6/13/08 = None
2/2/08 – 6/13/08 = 4.36 mos. None
6/14/08 – 8/27/08 = 2.47 mos.
6/14/08 – 8/27/08 = 963.30
₱377 – 362 = ₱15
8/28/08 – 6/30/10 = 11,471.20
x 26 days x 2.47 mos. = 963.30
7/1/10 – 12/16/10 = 5.50 mos.
8/28/08 – 6/30/10 = 22.06 mos.
₱404 x ₱362 = ₱42
₱382 – ₱362 = ₱20
x 26 days x 5.50 mos. = 6,006.00
x 26 days x 22.06 mos. = 11,471.20

7/1/10 – 2/2/11 = 7.03 mos. 18,440.50

All other claims are dismissed for lack of merit.

165
SO ORDERED.6 findings of the NLRC, affirming those of the LA, as they
were supported by substantial evidence.
Malicdem and Flores appealed to the NLRC which partially
granted their appeal with the award of payment of 13th On the substantive issue, the CA explained that "the
month pay, service incentive leave and holiday pay for three repeated and successive rehiring of project employees do
(3) years. The dispositive portion of its December 19, 2011 not qualify them as regular employees, as length of service
Decision7 reads: is not the controlling determinant of the employment tenure
of a project employee, but whether the employment has
WHEREFORE, the appeal is GRANTED IN PART. The
been fixed for a specific project or undertaking, its
Decision of Labor Arbiter Raymund M. Celino, dated July
completion has been determined at the time of the
13, 2011, is MODIFIED. In addition to the award of salary
engagement of the employee."10
differentials, complainants should also be awarded 13th
month pay, service incentive leave and holiday pay for three Corollarily, considering that there was no illegal dismissal,
years. the CA ruled that payment of backwages, separation pay,
damages, and attorney's fees had no factual and legal
SO ORDERED.8
bases. Hence, they could not be awarded to the petitioners.
Still, petitioners filed a motion for reconsideration, but it was
Aggrieved, Malicdem and Flores filed a motion for
denied by the NLRC on February 29, 2011.
reconsideration, but their pleas were denied in the CA
Aggrieved, Malicdem and Flores filed a petition for certiorari Resolution, dated November 12, 2012.
under Rule 65 with the CA.
The Petition
On July 18, 2012, the CA denied the petition,9 finding no
Malicdem and Flores now come before this Court by way of
grave abuse of discretion amounting to lack or excess of
a petition for review on certiorari under Rule 45 of the Rules
jurisdiction on the part of the NLRC. It ruled that the issue of
of Court praying for the reversal of the CA decision
whether or not the petitioners were project employees or
anchored on the principal argument that the appellate court
regular employees was factual in nature and, thus, not
erred in affirming the NLRC decision that there was no
within the ambit of a petition for certiorari. Moreover, it
illegal dismissal because the petitioners’ contracts of
accorded respect and due consideration to the factual
employment with the respondents simply expired. They
166
claim that their continuous rehiring paved the way for The petitioners have convincingly shown that they should be
their regularization and, for said reason, they could not considered regular employees and, as such, entitled to full
be terminated from their jobs without just cause. backwages and other entitlements.

In their Comment,11 the respondents averred that the A reading of the 2008 employment contracts,13 denominated
petitioners failed to show that the CA erred in affirming the as "Project Employment Agreement," reveals that there was
NLRC decision. They posit that the petitioners were a stipulated probationary period of six (6) months from its
contractual employees and their rehiring did not amount to commencement. It was provided therein that in the event
regularization. The CA cited William Uy Construction Corp. that they would be able to comply with the company’s
v. Trinidad,12 where it was held that the repeated and standards and criteria within such period, they shall be
successive rehiring of project employees did not qualify reclassified as project employees with respect to the
them as regular employees, as length of service was not the remaining period of the effectivity of the contract.
controlling determinant of the employment tenure of a Specifically, paragraph 3(b) of the agreement reads:
project employee, but whether the employment had been
The SECOND PARTY hereby acknowledges, agrees and
fixed for a specific project or undertaking, its completion had
understands that the nature of his/her employment is
been determined at the time of the engagement of the
probationary and on a project-basis. The SECOND PARTY
employee. The respondents add that for said reason, the
further acknowledges, agrees and understands that within
petitioners were not entitled to full backwages, separation
the effectivity of this Contract, his/her job performance will
pay, moral and exemplary damages, and attorney’s fees.
be evaluated in accordance with the standards and criteria
Now, the question is whether or not the CA erred in not explained and disclosed to him/her prior to signing of this
finding any grave abuse of discretion amounting to lack or Contract. In the event that the SECOND PARTY is able to
excess of jurisdiction on the part of the NLRC. comply with the said standards and criteria within the
probationary period of six month/s from commencement of
The Court’s Ruling:
this Contract, he/she shall be reclassified as a project
The Court grants the petition. employee of (o)f the FIRST PARTY with respect to the
remaining period of the effectivity of this Contract.

167
Under Article 281 of the Labor Code, however, "an to the usual business or trade of the employer, then the
employee who is allowed to work after a probationary period employee must be deemed a regular employee, pursuant to
shall be considered a regular employee." When an Article 280 of the Labor Code and jurisprudence. To rule
employer renews a contract of employment after the lapse otherwise would allow circumvention of labor laws in
of the six-month probationary period, the employee thereby industries not falling within the ambit of Policy Instruction
becomes a regular employee. No employer is allowed to No. 20/Department Order No. 19, hence allowing the
determine indefinitely the fitness of its employees.14 While prevention of acquisition of tenurial security by project or
length of time is not the controlling test for project work pool employees who have already gained the status of
employment, it is vital in determining if the employee was regular employees by the employer's conduct.1âwphi1
hired for a specific undertaking or tasked to perform
The test to determine whether employment is regular or not
functions vital, necessary and indispensable to the usual
is the reasonable connection between the particular activity
business of trade of the employer.15 Thus, in the earlier
performed by the employee in relation to the usual business
case of Maraguinot, Jr. v. NLRC,16 it was ruled that a project
or trade of the employer. If the employee has been
or work pool employee, who has been: (1) continuously, as
performing the job for at least one year, even if the
opposed to intermittently, rehired by the same employer for
performance is not continuous or merely intermittent, the
the same tasks or nature of tasks; and (2) those tasks are
law deems the repeated and continuing need for its
vital, necessary and indispensable to the usual business or
performance as sufficient evidence of the necessity, if not
trade of the employer, must be deemed a regular employee.
indispensability of that activity to the business.17
Thus:
Guided by the foregoing, the Court is of the considered view
x x x. Lest it be misunderstood, this ruling does not mean
that there was clearly a deliberate intent to prevent the
that simply because an employee is a project or work pool
regularization of the petitioners.
employee even outside the construction industry, he is
deemed, ipso jure, a regular employee. All that we hold To begin with, there is no actual project. The only
today is that once a project or work pool employee has stipulations in the contracts were the dates of their
been: (1) continuously, as opposed to intermittently, re-hired effectivity, the duties and responsibilities of the petitioners
by the same employer for the same tasks or nature of tasks; as extruder operators, the rights and obligations of the
and (2) these tasks are vital, necessary and indispensable parties, and the petitioners’ compensation and allowances.
168
As there was no specific project or undertaking to speak of, Fishing v. NLRC,21 "if from the circumstances it is apparent
the respondents cannot invoke the exception in Article 280 that periods have been imposed to preclude acquisition of
of the Labor Code.18 This is a clear attempt to frustrate the tenurial security by the employee, they should be
regularization of the petitioners and to circumvent the law. disregarded for being contrary to public policy."

Next, granting that they were project employees, the The respondents’ invocation of William Uy Construction
petitioners could only be considered as regular employees Corp. v. Trinidad22 is misplaced because it is applicable only
as the two factors enumerated in Maraguinot, Jr., are in cases involving the tenure of project employees in the
present in this case. It is undisputed that the petitioners construction industry. It is widely known that in the
were continuously rehired by the same employer for the construction industry, a project employee's work depends
same position as extruder operators. As such, they were on the availability of projects, necessarily the duration of his
responsible for the operation of machines that produced the employment.23 It is not permanent but coterminous with the
sacks. Hence, their work was vital, necessary and work to which he is assigned.24 It would be extremely
indispensable to the usual business or trade of the burdensome for the employer, who depends on the
employer. availability of projects, to carry him as a permanent
employee and pay him wages even if there are no projects
In D.M. Consunji, Inc. v. Estelito Jamin19 and Liganza v.
for him to work on.25 The rationale behind this is that once
RBL Shipyard Corporation,20 the Court reiterated the ruling
the project is completed it would be unjust to require the
that an employment ceases to be coterminous with specific
employer to maintain these employees in their payroll. To
projects when the employee is continuously rehired due to
do so would make the employee a privileged retainer who
the demands of the employer’s business and re-engaged for
collects payment from his employer for work not done. This
many more projects without interruption.
is extremely unfair to the employers and amounts to labor
The respondents cannot use the alleged expiration of the coddling at the expense of management.26"
employment contracts of the petitioners as a shield of their
Now that it has been clearly established that the petitioners
illegal acts. The project employment contracts that the
were regular employees, their termination is considered
petitioners were made to sign every year since the start of
illegal for lack of just or authorized causes. Under Article
their employment were only a stratagem to violate their
279 of the Labor Code, an employee who is unjustly
security of tenure in the company. As restated in Poseidon
dismissed from work shall be entitled to reinstatement
169
without loss of seniority rights and other privileges and to his GR No. 179640, Mar 18, 2015 ]
full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the HACIENDA CATAYWA v. ROSARIO LOREZO +
time his compensation was withheld from him up to the time
of his actual reinstatement. The law intends the award of DECISION
backwages and similar benefits to accumulate past the date PERALTA, J.:
of the LA decision until the dismissed employee is actually Before this Court is a petition for review on certiorari dated
reinstated. September 28, 2007 of petitioner Hacienda Cataywa,
WHEREFORE, the petition is GRANTED. The assailed July Manuel Villanueva, et al., (petitioners) seeking to reverse
18, 2012 decision of the Court of Appeals and its November and set aside the Resolutions, dated October 17,
12, 2012 Resolution in CA-G.R. SP No. 1244 70, are hereby 2006[1] and August 10, 2007,[2] respectively, of the Court of
ANNULLED and SET ASIDE. Appeals (CA) and the Resolution and Order, dated October
12, 2005 and March 8, 2006, respectively, of the Social
Accordingly, respondent Marulas Industrial Corporation is Security Commission, ordering petitioners to pay jointly and
hereby ordered to reinstate petitioners Macarthur Malicdem severally all delinquent contributions, 3% penalty per month
and Hermenigildo Flores to their former positions without of delayed payment and damages to respondent Rosario
loss of seniority rights and other privileges and to pay their Lorezo.
full backwages, inclusive of allowances and their other
benefits or their monetary equivalent computed from the The antecedent facts follow:
time their compensations were withheld from them up to the
time of their actual reinstatement plus the wage differentials On October 22, 2002, respondent Rosario Lorezo received,
stated in the July 13, 2011 decision of the Labor Arbiter, as upon inquiry, a letter from the Social Security System (SSS)
modified by the December 19, 2011 NLRC decision. Western Visayas Group informing her that she cannot avail
SO ORDERED. of their retirement benefits since per their record she has
only paid 16 months. Such is 104 months short of the
minimum requirement of 120 months payment to be entitle
to the benefit. She was also informed that their

170
investigation of her alleged employment under employer contributions were duly paid and remitted to SSS. It was the
Hda. Cataywa could not be confirmed because Manuel late Domingo Lizares, Jr. who managed and administered
Villanueva was permanently residing in Manila and the hacienda.[5] While, Talisay Farms, Inc. filed a motion to
Joemarie Villanueva denied having managed the farm. She dismiss on the ground of lack of cause of action in the
was also advised of her options: continue paying absence of an allegation that there was an employer-
contributions as voluntary member; request for refund; leave employee relationship between Talisay Farms and
her contributions in-trust with the System, or file a petition respondent.[6]
before the Social Security Commission (SSC) so that
liabilities, if any, of her employer may be determined.[3] Consequently, the SSC rendered its Resolution dated
October 12, 2005, thus:
Aggrieved, respondent then filed her Amended Petition
dated September 30, 2003, before the SSC. She alleged
that she was employed as laborer in Hda. Cataywa
WHEREFORE, PREMISES CONSIDERED, this
managed by Jose Marie Villanueva in 1970 but was
Commission finds, and so holds, that Rosario M. Lorezo
reported to the SSS only in 1978. She alleged that SSS
was a regular employee subject to compulsory coverage of
contributions were deducted from her wages from 1970 to
Hda. Cataywa/Manuel Villanueva/ Mancy and Sons
1995, but not all were remitted to the SSS which,
Enterprises, Inc. within the period of 1970 to February 25,
subsequently, caused the rejection of her claim. She also
1990. In view thereof, the aforenamed respondents are
impleaded Talisay Farms, Inc. by virtue of its Investment
hereby ordered to pay jointly and severally, within thirty (30)
Agreement with Mancy and Sons Enterprises. She also
days from receipt hereof, all delinquent contributions within
prayed that the veil of corporate fiction be pierced since she
the proven employment period computed in accordance
alleged that Mancy and Sons Enterprises and Manuel and
with the then prevailing minimum wage (at 11 months per
Jose Marie Villanueva are one and the same.[4]
year) in the amount of P8,293.90, the 3% per month penalty
on the delayed payment of contributions in the amount of
Petitioners Manuel and Jose Villanueva refuted in their
P59,786.10 (computed as of September 9, 2005), pursuant
answer, the allegation that not all contributions of
to Section 22 of the SS Law and the damages in the amount
respondent were remitted. Petitioners alleged that all farm
of P32,356.21 for misrepresentation of the real date of
workers of Hda. Cataywa were reported and their
171
employment, pursuant to Section 24 (b) of the said statute. to wit:
-Petitioner failed to attach the following:
The SSS, on the other hand, is ordered to pay (subject to - Petition/Amended Petition filed before the SSS of
existing rules and regulations) petitioner Rosario M. Lorezo Makati City
her retirement benefit, upon the filing of the claim therefor, - Respondents' Answer filed before the SSS of Makati
and to inform this Commission of its compliance herewith. City
- Parties' respective position paper filed before the
SO ORDERED.[7] SSS of Makati City
- Parties' respective memorandum of appeal filed
before the Commission
The SSC denied petitioners' Motion for Reconsideration.
The petitioner, then, elevated the case before the CA where (Violation of Section 6, Rule 43 of the Rules of Court, in
the case was dismissed outrightly due to technicalities, thus: relation to Section 7, Rule 43 of the Rules of Court)[8]

Following the denial of petitioners' Motion for

The Court Resolved to DISMISS the instant petition on the Reconsideration of the CA, petitioner filed with this Court
basis of the following observations: the present petition stating the following grounds:

1. Signatory to the Verification failed to attach his

authority to sign for and [in] behalf of the other 1) THE HONORABLE COURT OF APPEALS COMMITTED
Petitioners. REVERSIBLE ERROR IN STRICTLY AND RIGIDLY
(Violation of Section 5, Rule 43 of the Rules of Court, APPLYING THE TECHNICAL RULES OF PROCEDURE
in relation to Section 7, Rule 45 of the Rules of Court) AND DISMISSING THE CASE ON TECHNICALITY
WITHOUT EVALUATING THE MERITS OF THE CASE;

2. Certified true copies of pleadings and documents

2) THE [SSC] COMMITTED REVERSIBLE ERROR IN
relevant and pertinent to the petition are incomplete,
MAKING CONCLUSIONS FOUNDED ON SPECULATIONS
172
AND SURMISES NOT CONFORMING TO EVIDENCE ON the worsening problem of delay in the resolution of rival
RECORD, MAKING MANIFESTLY MISTAKEN claims and in the administration of justice. However, this
INFERENCES, AND RENDERING JUDGMENT BASED ON Court has recognized exceptions to the Rules, but only for
MISAPPREHENSION OF FACTS AND MISAPPLICATION the most compelling reasons where stubborn obedience to
OF THE LAW, RULING AND RENDERING JUDGMENT the Rules would defeat rather than serve the ends of
THAT: justice.[10]

As in the case of Obut v. Court of Appeals,[11] this Court held

a) RESPONDENT WORKED FROM 1970 TO FEBRUARY
that "judicial orders are issued to be obeyed, nonetheless a
25,1990
non-compliance is to be dealt with as the circumstances
b) PETITIONERS ARE LIABLE FOR DELINQUENT
attending the case may warrant. What should guide judicial
CONTRIBUTIONS
action is the principle that a party-litigant is to be given the
c) PETITIONERS ARE LIABLE FOR 3% PER MONTH
fullest opportunity to establish the merits of his complaint of
PENALTY
defense rather than for him to lose life, liberty, honor or
d) PETITIONERS ARE LIABLE FOR DAMAGES DUE TO
property on technicalities."[12]
MISREPRESENTATION
e) MANCY & SONS ENTERPRISES, INC. AND MANUEL
When the CA dismisses a petition outright and the petitioner
VILLANUEVA ARE ONE AND THE SAME.[9]
files a motion for the reconsideration of such dismissal,
appending thereto the requisite pleadings, documents or
The petition is partially meritorious. order/resolution, this would constitute substantial
[13]
compliance with the Revised Rules of Court. Thus, in the
Petitioners argues that the CA has been too rigid in the present case, there was substantial compliance when in
application of the rules of procedure in dismissing the their Motion for Reconsideration, they attached a secretary
appeal without evaluation of the merits. certificate giving Joemarie's authority to sign on behalf of
the corporation. Petitioners also included the necessary
This Court has emphasized that procedural rules should be attachment.[14]
treated with utmost respect and due regard, since they are
designed to facilitate the adjudication of cases to remedy At the outset, it is settled that this Court is not a trier of facts
173
and will not weigh evidence all over again.[15] However, employer would be brought before the bar of
considering the issues raised which can be resolved on the justice.[17]Petitioners erred in insisting that, due to passage
basis of the pleadings and documents filed, and the fact that of time, SSS Form R-1A is the only remaining source of
respondent herself has asked this Court for early resolution, information available to prove when respondent started
this Court deems it more practical and in the greater interest working for them. However, such form merely reflected the
of justice not to remand the case to the CA but, instead, to time in which the petitioners reported the respondent for
resolve the controversy once and for all. coverage of the SSS benefit. They failed to substantiate
their claim that it was only in 1978 that respondent reported
Petitioners are of the opinion that the SSC committed for work.
reversible error in making conclusions founded on
speculations and surmises that respondent worked from The records are bereft of any showing that Demetria
1970 to February 25, 1990. Petitioners argue that the SSC Denaga and Susano Jugue harbored any ill will against the
did not give credence nor weight at all to the existing SSS petitioners prompting them to execute false affidavit. There
Form R-1A and farm bookkeeper Wilfredo Ibalobor. lies no reason for this Court not to afford full faith and credit
Petitioners insist that after thirty long years, all the records to their testimonies. Denaga, in her Joint Affidavit with
of the farm were already destroyed by termites and Jugue, stated that she and respondent started working in
elements, thus, they relied on the SSS Form R-1A as the Hda. Cataywa in 1970 and like her, she was reported to the
only remaining source of information available. Petitioners SSS on December 19, 1978.[18] It was also revealed in the
also alleged that respondent was a very casual worker. records that the SSC found that Denaga was employed by
Manuel Villanueva at Hda. Cataywa from 1970 to December
This Court disagrees. 1987.[19]

It was settled that there is no particular form of evidence Jurisprudence has identified the three types of employees
required to Drove the existence of the employer-employee mentioned in the provision[20] of the Labor Code: (1) regular
relationship. Any competent and relevant evidence to prove employees or those who have been engaged to perform
such relationship may be admitted. This may entirely be activities that are usually necessary or desirable in the usual
testimonial.[16] If only documentary evidence would be business or trade of the employer; (2) project employees or
required to demonstrate the relationship, no scheming those whose employment has been fixed for a specific
174
project or undertaking, the completion or termination of she had 16 months of contributions. It does not, in any way,
which has been determined at the time of their engagement, prove that the respondent performed a job which is not in
or those whose work or service is seasonal in nature and is connection with the business or occupation of the employer
performed for the duration of the season; and (3) casual to be considered as casual employee.
employees or those who are neither regular nor project
employees.[21] The test for regular employees to be considered as
such has been thoroughly explained in De Leon v.
NLRC,[27] viz.:
ISSUE: W/N RESPONDENT IS A REGULAR EMPLOYEE.
YES.

The primary standard, therefore, of determining a regular

Farm workers generally fall under the definition of seasonal
employment is the reasonable connection between the
employees.[22] It was also consistently held that seasonal
particular activity performed by the employee in relation
employees may be considered as regular employees when
to the usual business or trade of the employer. The test
they are called to work from time to time.[23] They are in
is whether the former is usually necessary or desirable in
regular employment because of the nature of the job, and
the usual business or trade of the employer. The connection
not because of the length of time they have worked.
can be determined by considering the nature of the work
However, seasonal workers who have worked for one
performed and its relation to the scheme of the particular
season only may not be considered regular employees.[24]
business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if the
The nature of the services performed and not the duration
performance is not continuous or merely intermittent, the
thereof, is determinative of coverage under the law.[25] To be
law deems the repeated and continuing need for its
exempted on the basis of casual employment, the services
performance as sufficient evidence of the necessity if not
must not merely be irregular, temporary or intermittent, but
indispensability of that activity to the business. Hence, the
the same must not also be in connection with the business
employment is also considered regular, but only with
or occupation of the employer.[26] Thus, it is erroneous for
respect to such activity and while such activity exists.[28]
the petitioners to conclude that the respondent was a very
casual worker simply because the SSS form revealed that
175
 working for the hacienda in 1970, it follows that petitioners
A reading of the records would reveal that petitioners failed are liable for deficiency in the SSS contributions.
to dispute the allegation that the respondent performed
hacienda work, such as planting sugarcane point, fertilizing, The imposition upon and payment by the delinquent
weeding, replanting dead sugarcane fields and routine employer of the three percent (3%) penalty for the late
miscellaneous hacienda work.[29] They merely alleged that remittance of premium contributions is mandatory and
respondent was a very casual worker because she only cannot be waived by the System. The law merely gives to
rendered work for 16 months.[30] Thus, respondent is the Commission the power to prescribe the manner of
considered a regular seasonal worker and not a casual paying the premiums. Thus, the power to remit or condone
worker as the petitioners alleged. the penalty for late remittance of premium contributions is
not embraced therein.[32] Petitioners erred in alleging that
Petitioners also assert that the sugarcane cultivation covers the imposition of penalty is not proper.
only a period of six months, thus, disproving the allegation
of the respondent that she worked for 11 months a year for Petitioners also insist that the award of damages for
25 years. This Court has classified farm workers as regular misrepresentation is without basis. This Court disagrees.
seasonal employees who are called to work from time to
time and the nature of their relationship with the employer is The law provides that should the employer misrepresent the
such that during the off season, they are temporarily laid off; true date of the employment of the employee member, such
but reemployed during the summer season or when their employer shall pay to the SSS damages equivalent to the
services may be needed.[31] Respondent, therefore, as a difference between the amount of benefit to which the
farm worker is only a seasonal employee. Since petitioners employee member or his beneficiary is entitled had the
provided that the cultivation of sugarcane is only for six] proper contributions been remitted to the SSS and the
months, respondent cannot be considered as regular amount payable on the basis of the contributions actually
employee during the months when there is no cultivation. remitted. However, should the employee member or his
beneficiary is entitled to pension benefits, the damages shall
Based on the foregoing facts and evidence on record, be equivalent to the accumulated pension due as of the
petitioners are liable for delinquent contributions. It being date of settlement of the claim or to the five years' pension,
proven by sufficient evidence that respondent started whichever is higher, including the dependent's pension.[33]
176
 veil may be pierced only if it becomes a shield for fraud,
Lastly, petitioners aver that there is no legal basis to pierce illegality or inequity committed against a third person.[36]
the veil of corporation entity.
The Court has expressed the language of piercing doctrine
[34]
It was held in Rivera v. United Laboratories, Inc. that - when applied to alter ego cases, as follows: Where the
stock of a corporation is owned by one person whereby the
corporation functions only for the benefit of such individual
owner, the corporation and the individual should be deemed
While a corporation may exist for any lawful purpose, the
the same.[37]
law will regard it as an association of persons or, in case of
two corporations, merge them into one, when its corporate
This Court agrees with the petitioners that there is no need
legal entity is used as a cloak for fraud or illegality. This is
to pierce the corporate veil. Respondent failed to
the doctrine of piercing the veil of corporate fiction. The
substantiate her claim that Mancy and Sons Enterprises,
doctrine applies only when such corporate fiction is used to
Inc. and Manuel and Jose Marie Villanueva are one and the
defeat public convenience, justify wrong, protect fraud, or
same. She based her claim on the SSS form wherein
defend crime, or when it is made as a shield to confuse the
Manuel Villanueva appeared as employer. However, this
legitimate issues, or where a corporation is the mere alter
does not prove, in any way, that the corporation is used to
ego or business conduit of a person, or where the
defeat public convenience, justify wrong, protect fraud, or
corporation is so organized and controlled and its affairs are
defend crime, or when it is made as a shield to confuse the
so conducted as to make it merely an instrumentality,
legitimate issues, warranting that its separate and distinct
agency, conduit or adjunct of another corporation. To
personality be set aside. Also, it was not alleged nor proven
disregard the separate juridical personality of a corporation,
that Mancy and Sons Enterprises, Inc. functions only for the
the wrongdoing must be established clearly and
benefit of Manuel Villanueva, thus, one cannot be an alter
convincingly. It cannot be presumed.[35]
ego of the other.

This Court has cautioned against the inordinate application WHEREFORE, the petition for review on certiorari dated
of this doctrine, reiterating the basic rule that "the corporate September 28, 2007 of petitioners Hda. Cataywa, Manuel

177
Villanueva, et al. is hereby DENIED. Consequently, the Respondent.
resolution by the Social Security Commission is
August 3, 2010
hereby AFFIRMED with MODIFICATIONS that the
delinquent contributions should be computed as six months x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
per year of service, and the case against Manuel and Jose - - - - - - - -x
Marie Villanueva be DISMISSED.

SO ORDERED. DECISION
TUNAY NA PAGKAKAISA G.R. No. 162025
NG MANGGAGAWA
VILLARAMA, JR., J.:
SA ASIABREWERY,
Present: For resolution is an appeal by certiorari filed by petitioner
Petitioner,
under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision[1] dated November 22,
CARPIO MORALES, J., 2002 and Resolution[2] dated January 28, 2004 rendered by
the Court of Appeals (CA) in CA-G.R. SP No. 55578,
Chairperson,
- versus - granting the petition of respondent company and reversing
BRION, the Voluntary Arbitrators Decision[3] dated October 14,
1999.
BERSAMIN,
The facts are:
ABAD,* and
Respondent Asia Brewery, Inc. (ABI) is engaged in the
VILLARAMA, JR., JJ. manufacture, sale and distribution of beer, shandy, bottled
water and glass products. ABI entered into a Collective
Bargaining Agreement (CBA),[4] effective for five (5) years
ASIA BREWERY, INC., Promulgated: from August 1, 1997 to July 31, 2002, with Bisig at Lakas ng
mga Manggagawa sa Asia-Independent (BLMA-
178
INDEPENDENT), the exclusive bargaining representative of 5. Superintendents
ABIs rank-and-file employees.On October 3, 2000, ABI and
6. Confidential and Executive Secretaries
BLMA-INDEPENDENT signed a renegotiated CBA effective
from August 1, 2000 to 31 July 2003.[5] 7. Personnel, Accounting and Marketing Staff
Article I of the CBA defined the scope of the bargaining unit, 8. Communications Personnel
as follows:
9. Probationary Employees
Section 1. Recognition. The COMPANY recognizes
the UNION as the sole and exclusive bargaining 10. Security and Fire Brigade Personnel
representative of all the regular rank-and-file daily paid 11. Monthly Employees
employees within the scope of the appropriate bargaining
unit with respect to rates of pay, hours of work and other 12. Purchasing and Quality Control Staff[6] [EMPHASIS
terms and conditions of employment. The UNION shall not SUPPLIED.]
represent or accept for membership employees outside Subsequently, a dispute arose when ABIs management
the scope of the bargaining unit herein defined. stopped deducting union dues from eighty-one (81)
Section 2. Bargaining Unit. The bargaining unit shall be employees, believing that their membership in BLMA-
comprised of all regular rank-and-file daily-paid employees INDEPENDENT violated the CBA. Eighteen (18) of these
of the COMPANY. However, the following jobs/positions as affected employees are QA Sampling
herein defined shall be excluded from the bargaining unit, Inspectors/Inspectresses and Machine Gauge Technician
to wit: who formed part of the Quality Control Staff. Twenty (20)
checkers are assigned at the Materials Department of the
1. Managers Administration Division, Full Goods Department of the
Brewery Division and Packaging Division. The rest are
2. Assistant Managers
secretaries/clerks directly under their respective division
3. Section Heads managers.[7]
4. Supervisors BLMA-INDEPENDENT claimed that ABIs actions restrained
the employees right to self-organization and brought the
179
matter to the grievance machinery. As the parties failed to WHEREFORE, foregoing premises considered, the
amicably settle the controversy, BLMA-INDEPENDENT questioned decision of the Honorable Voluntary Arbitrator
lodged a complaint before the National Conciliation and Bienvenido De Vera is hereby REVERSED and SET
Mediation Board (NCMB). The parties eventually agreed to ASIDE, and A NEW ONE ENTERED DECLARING THAT:
submit the case for arbitration to resolve the issue
a) the 81 employees are excluded from and are not eligible
of [w]hether or not there is restraint to employees in the
for inclusion in the bargaining unit as defined in Section 2,
exercise of their right to self-organization.[8]
Article I of the CBA;
In his Decision, Voluntary Arbitrator Bienvenido Devera
b) the 81 employees cannot validly become members of
sustained the BLMA-INDEPENDENT after finding that the
respondent and/or if already members, that their
records submitted by ABI showed that the positions of the
membership is violative of the CBA and that they should
subject employees qualify under the rank-and-file category
disaffiliate from respondent; and
because their functions are merely routinary and clerical. He
noted that the positions occupied by the checkers and c) petitioner has not committed any act that restrained or
secretaries/clerks in the different divisions are not tended to restrain its employees in the exercise of their right
managerial or supervisory, as evident from the duties and to self-organization.
responsibilities assigned to them. With respect to QA
Sampling Inspectors/Inspectresses and Machine Gauge NO COSTS.
Technician, he ruled that ABI failed to establish with SO ORDERED.[10]
sufficient clarity their basic functions as to consider them
Quality Control Staff who were excluded from the coverage BLMA-INDEPENDENT filed a motion for reconsideration. In
of the CBA. Accordingly, the subject employees were the meantime, a certification election was held on August
declared eligible for inclusion within the bargaining unit 10, 2002 wherein petitioner Tunay na Pagkakaisa ng
represented by BLMA-INDEPENDENT.[9] Manggagawa sa Asia (TPMA) won. As the incumbent
bargaining representative of ABIs rank-and-file employees
On appeal, the CA reversed the Voluntary Arbitrator, ruling claiming interest in the outcome of the case, petitioner filed
that: with the CA an omnibus motion for reconsideration of the
decision and intervention, with attached petition signed by

180
the union officers.[11] Both motions were denied by the employees, jurisprudence has extended this prohibition to
CA.[12] confidential employees or those who by reason of their
positions or nature of work are required to assist or act in a
The petition is anchored on the following grounds:
fiduciary manner to managerial employees and hence, are
(1) likewise privy to sensitive and highly confidential
records.[14] Confidential employees are thus excluded from
THE COURT OF APPEALS ERRED IN RULING THAT THE
the rank-and-file bargaining unit. The rationale for their
81 EMPLOYEES ARE EXCLUDED FROM AND ARE NOT
separate category and disqualification to join any labor
ELIGIBLE FOR INCLUSION IN THE BARGAINING UNIT organization is similar to the inhibition for managerial
AS DEFINED IN SECTION 2, ARTICLE 1 OF THE CBA[;] employees because if allowed to be affiliated with a Union,
(2) the latter might not be assured of their loyalty in view of
evident conflict of interests and the Union can also become
THE COURT OF APPEALS ERRED IN HOLDING THAT company-denominated with the presence of managerial
THE 81 EMPLOYEES CANNOT VALIDLY BECOME employees in the Union membership.[15] Having access to
UNION MEMBERS, THAT THEIR MEMBERSHIP IS confidential information, confidential employees may also
VIOLATIVE OF THE CBA AND THAT THEY SHOULD become the source of undue advantage. Said employees
DISAFFILIATE FROM RESPONDENT; may act as a spy or spies of either party to a collective
(3) bargaining agreement.[16]

THE COURT OF APPEALS SERIOUSLY ERRED IN In Philips Industrial Development, Inc. v. NLRC,[17] this
HOLDING THAT PETITIONER (NOW PRIVATE Court held that petitioners division secretaries, all Staff of
RESPONDENT) HAS NOT COMMITTED ANY ACT THAT General Management, Personnel and Industrial Relations
RESTRAINED OR TENDED TO RESTRAIN ITS Department, Secretaries of Audit, EDP and Financial
EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO Systems are confidential employees not included within the
SELF-ORGANIZATION.[13] rank-and-file bargaining unit.[18] Earlier, in Pier 8 Arrastre &
Stevedoring Services, Inc. v. Roldan-Confesor,[19] we
Although Article 245 of the Labor Code limits the ineligibility declared that legal secretaries who are tasked with, among
to join, form and assist any labor organization to managerial others, the typing of legal documents, memoranda and
181
 1. Abalos, Andrea A. Materials Mr. Andres G. Co
correspondence, the keeping of records and files, the giving 2. Algire, Juvy L. Materials Mr. Andres G. Co
of and receiving notices, and such other duties as required 3. Anouevo, Shirley P. Materials Mr. Andres G. Co
4. Aviso, Rosita S. Materials Mr. Andres G. Co
by the legal personnel of the corporation, fall under the 5. Barachina, Pauline C. Materials Mr. Andres G. Co
6. Briones, Catalina P. Materials Mr. Andres G. Co
category of confidential employees and hence excluded 7. Caralipio, Juanita P. Materials Mr. Andres G. Co
8. Elmido, Ma. Rebecca S. Materials Mr. Andres G. Co
from the bargaining unit composed of rank-and-file 9. Giron, Laura P. Materials Mr. Andres G. Co
employees.[20] 10. Mane, Edna A. Materials Mr. Andres G. Co

xxxx
Also considered having access to vital labor information are
C2 BREWERY DIVISION
the executive secretaries of the General Manager and the
1. Laloon, Daisy S. Brewhouse Mr. William Tan
executive secretaries of the Quality Assurance Manager,
1. Arabit, Myrna F. Bottling Production Mr. Julius Palmares
Product Development Manager, Finance Director, 2. Burgos, Adelaida D. Bottling Production Mr. Julius Palmares
3. Menil, Emmanuel S. Bottling Production Mr. Julius Palmares
Management System Manager, Human Resources 4. Nevalga, Marcelo G. Bottling Production Mr. Julius Palmares
Manager, Marketing Director, Engineering Manager,
1. Mapola, Ma. Esraliza T. Bottling Maintenance Mr. Ernesto Ang
Materials Manager and Production Manager.[21] 2. Velez, Carmelito A. Bottling Maintenance Mr. Ernesto Ang

1. Bordamonte, Rhumela D. Bottled Water Mr. Faustino Tetonche

In the present case, the CBA expressly excluded 2. Deauna, Edna R. Bottled Water Mr. Faustino Tetonche
3. Punongbayan, Marylou F. Bottled Water Mr. Faustino Tetonche
Confidential and Executive Secretaries from the rank-and- 4. Saguan, Lennie Y. Bottled Water Mr. Faustino Tetonche
file bargaining unit, for which reason ABI seeks their 1. Alcoran, Simeon A. Full Goods Mr. Tsoi Wah Tung
disaffiliation from petitioner. Petitioner, however, maintains 2. Cervantes, Ma. Sherley Y. Full Goods Mr. Tsoi Wah Tung
3. Diongco, Ma. Teresa M. Full Goods Mr. Tsoi Wah Tung
that except for Daisy Laloon, Evelyn Mabilangan and Lennie 4. Mabilangan, Evelyn M. Full Goods Mr. Tsoi Wah Tung
5. Rivera, Aurora M. Full Goods Mr. Tsoi Wah Tung
Saguan who had been promoted to monthly paid positions, 6. Salandanan, Nancy G. Full Goods Mr. Tsoi Wah Tung

the following secretaries/clerks are deemed included among 1. Magbag, Ma. Corazon C. Tank Farm/ Mr. Manuel Yu Liat
Cella Services
the rank-and-file employees of ABI:[22]
1. Capiroso, Francisca A. Quality Assurance Ms. Regina Mirasol
NAME DEPARTMENT IMMEDIATE SUPERIOR
1. Alconaba, Elvira C. Engineering Mr. Clemente Wong
C1 ADMIN DIVISION 2. Bustillo, Bernardita E. Electrical Mr. Jorge Villarosa
3. Catindig, Ruel A. Civil Works Mr. Roger Giron
1. Angeles, Cristina C. Transportation Mr. Melito K. Tan 4. Sison, Claudia B. Utilities Mr. Venancio Alconaba
2. Barraquio, Carina P. Transportation Mr. Melito K. Tan
3. Cabalo, Marivic B. Transportation Mr. Melito K. Tan xxxx
4. Fameronag, Leodigario C. Transportation Mr. Melito K. Tan
C3 PACKAGING DIVISION

182
1. Alvarez, Ma. Luningning L. GP Administration Ms. Susan Bella
that the positions were just being reclassified as these
2. Caiza, Alma A. GP Technical Mr. Chen Tsai Tyan employees actually discharged routine functions.
3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez
4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih
5. Lamadrid, Susana C. GP Production Mr. Robert Bautista We thus hold that the secretaries/clerks, numbering about
6. Mendoza, Jennifer L. GP Technical Mr. Mel Oa
As can be gleaned from the above listing, it is rather curious forty (40), are rank-and-file employees and not confidential
that there would be several secretaries/clerks for just one employees.
(1) department/division performing tasks which are mostly With respect to the Sampling Inspectors/Inspectresses and
routine and clerical. Respondent insisted they fall under the the Gauge Machine Technician, there seems no dispute
Confidential and Executive Secretaries expressly excluded that they form part of the Quality Control Staff who, under
by the CBA from the rank-and-file bargaining unit. However, the express terms of the CBA, fall under a distinct
perusal of the job descriptions of these secretaries/clerks category. But we disagree with respondents contention that
reveals that their assigned duties and responsibilities the twenty (20) checkers are similarly confidential
involve routine activities of recording and monitoring, and employees being quality control staff entrusted with the
other paper works for their respective departments while handling and custody of company properties and sensitive
secretarial tasks such as receiving telephone calls and filing information.
of office correspondence appear to have been commonly
imposed as additional duties.[23] Respondent failed to Again, the job descriptions of these checkers assigned in
indicate who among these numerous secretaries/clerks the storeroom section of the Materials Department, finishing
have access to confidential data relating to management section of the Packaging Department, and the decorating
policies that could give rise to potential conflict of interest and glass sections of the Production Department plainly
with their Union membership. Clearly, the rationale under showed that they perform routine and mechanical tasks
our previous rulings for the exclusion of executive preparatory to the delivery of the finished products.[24] While
secretaries or division secretaries would have little or no it may be argued that quality control extends to post-
significance considering the lack of or very limited access to production phase -- proper packaging of the finished
confidential information of these secretaries/clerks. It is not products -- no evidence was presented by the respondent to
even farfetched that the job category may exist only on prove that these daily-paid checkers actually form part of
paper since they are all daily-paid workers. Quite the companys Quality Control Staff who as such were
understandably, petitioner had earlier expressed the view exposed to sensitive, vital and confidential information about
183
[companys] products or have knowledge of mixtures of the claimed, this is not per se ground for their exclusion in the
products, their defects, and even their formulas which are bargaining unit of the daily-paid rank-and-file employees.[27]
considered trade secrets. Such allegations of respondent
Not being confidential employees, the secretaries/clerks and
must be supported by evidence.[25]
checkers are not disqualified from membership in
Consequently, we hold that the twenty (20) checkers may the Union of respondents rank-and-file employees.
not be considered confidential employees under the Petitioner argues that respondents act of unilaterally
category of Quality Control Staff who were expressly stopping the deduction of union dues from these employees
excluded from the CBA of the rank-and-file bargaining unit. constitutes unfair labor practice as it restrained the workers
exercise of their right to self-organization, as provided in
Confidential employees are defined as those who (1) assist
Article 248 (a) of the Labor Code.
or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies Unfair labor practice refers to acts that violate the workers
in the field of labor relations. The two (2) criteria are right to organize. The prohibited acts are related to the
cumulative, and both must be met if an employee is to be workers right to self organization and to the observance of a
considered a confidential employee that is, the confidential CBA. For a charge of unfair labor practice to prosper, it
relationship must exist between the employee and his must be shown that ABI was motivated by ill will, bad faith,
supervisor, and the supervisor must handle the prescribed or fraud, or was oppressive to labor, or done in a manner
responsibilities relating to labor relations. The exclusion contrary to morals, good customs, or public policy, and, of
from bargaining units of employees who, in the normal course, that social humiliation, wounded feelings or grave
course of their duties, become aware of management anxiety resulted x x x[28] from ABIs act in discontinuing the
policies relating to labor relations is a principal objective union dues deduction from those employees it believed
sought to be accomplished by the confidential employee were excluded by the CBA. Considering that the herein
rule.[26] There is no showing in this case that the dispute arose from a simple disagreement in the
secretaries/clerks and checkers assisted or acted in a interpretation of the CBA provision on excluded employees
confidential capacity to managerial employees and obtained from the bargaining unit, respondent cannot be said to have
confidential information relating to labor relations committed unfair labor practice that restrained its
policies. And even assuming that they had exposure to employees in the exercise of their right to self-organization,
internal business operations of the company, respondent nor have thereby demonstrated an anti-union stance.
184
WHEREFORE, the petition is GRANTED. The Decision We decide this petition for review1 on certiorari filed by Fuji
dated November 22, 2002 and Resolution dated January Television Network, Inc., seeking the reversal of the Court
28, 2004 of the Court of Appeals in CA-G.R. SP No. 55578 of Appeals’ Decision2 dated June 25, 2012, affirming with
are hereby REVERSED and SET ASIDE. The checkers and modification the decision3 of the National Labor Relations
secretaries/clerks of respondent company are hereby Commission.
declared rank-and-file employees who are eligible to join
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji
the Union of the rank-and-file employees.
Television Network, Inc. ("Fuji") asa news
4
No costs. correspondent/producer "tasked to report Philippine news
to Fuji through its Manila Bureau field office."5 Arlene’s
SO ORDERED.
employment contract initially provided for a term of one (1)
G.R. No. 204944-45 December 3, 2014 year but was successively renewed on a yearly basis with
salary adjustment upon every renewal.6 Sometime in
FUJI TELEVISION NETWORK, INC., Petitioner, January 2009, Arlenewas diagnosed with lung cancer.7She
vs. informed Fuji about her condition. In turn, the Chief of News
ARLENE S. ESPIRITU, Respondent. Agency of Fuji, Yoshiki Aoki, informed Arlene "that the
DECISION company will have a problem renewing her contract"8 since
it would be difficult for her to perform her job.9 She "insisted
LEONEN, J.: that she was still fit to work as certified by her attending
It is the burden of the employer to prove that a person physician."10
whose services it pays for is an independent contractor After several verbal and written communications,11 Arlene
rather than a regular employee with or without a fixed term. and Fuji signed a non-renewal contract on May 5, 2009
That a person has a disease does not per se entitle the where it was stipulated that her contract would no longer be
employer to terminate his or her services. Termination is the renewed after its expiration on May 31, 2009. The contract
last resort. At the very least, a competent public health also provided that the parties release each other from
authority must certify that the disease cannot be cured liabilities and responsibilities under the employment
within six ( 6) months, even with appropriate treatment. contract.12

185
In consideration of the non-renewal contract, Arlene Arlene appealed before the National Labor Relations
"acknowledged receipt of the total amount of US$18,050.00 Commission. In its decision dated March 5, 2010, the
representing her monthly salary from March 2009 to May National Labor Relations Commission reversed the Labor
2009, year-end bonus, mid-year bonus, and separation Arbiter’s decision.21 It held that Arlene was a regular
pay."13 However, Arlene affixed her signature on the employee with respect to the activities for which she was
nonrenewal contract with the initials "U.P." for "under employed since she continuously rendered services that
protest."14 were deemednecessary and desirable to Fuji’s
business.22 The National Labor Relations Commission
On May 6, 2009, the day after Arlene signed the non-
ordered Fuji to pay Arlene backwages, computed from the
renewal contract, she filed a complaint for illegal dismissal
date of her illegal dismissal.23 The dispositive portion of the
and attorney’s fees with the National Capital Region
decision reads:
Arbitration Branch of the National Labor Relations
Commission. She alleged that she was forced to sign the WHEREFORE, premises considered, judgment is hereby
nonrenewal contract when Fuji came to know of her illness rendered GRANTING the instant appeal. The Decision of
and that Fuji withheld her salaries and other benefits for the Labor Arbiter dated 19 September 2009 is hereby
March and April 2009 when she refused to sign.15 REVERSED and SET ASIDE, and a new one is issued
ordering respondents-appellees to pay complainant-
Arlene claimed that she was left with no other recourse but
appellant backwages computed from the date of her illegal
to sign the non-renewal contract, and it was only upon
dismissal until finality of this Decision.
signing that she was given her salaries and bonuses, in
addition to separation pay equivalent to four (4) years.16 SO ORDERED.24

In the decision17 dated September 10, 2009, Labor Arbiter Arlene and Fuji filed separat emotions for
Corazon C. Borbolla dismissed Arlene’s complaint.18Citing reconsideration.25 Both motions were denied by the National
Sonza v. ABS-CBN19 and applying the four-fold test, the Labor Relations Commission for lack of merit in the
Labor Arbiter held that Arlene was not Fuji’s employee but resolution dated April 26, 2010.26 From the decision of the
an independent contractor.20 National Labor Relations Commission, both parties filed
separate petitions for certiorari27 before the Court of

186
Appeals. The Court of Appeals consolidated the petitions Fuji Television, Inc. is hereby ORDERED to immediately
and considered the following issues for resolution: REINSTATE Arlene S. Espiritu to her position as News
Producer without loss of seniority rights and privileges and
1) Whether or not Espirituis a regular employee or a fixed-
to pay her the following:
term contractual employee;
1. Backwages at the rate of $1,900.00 per month computed
2) Whether or not Espiritu was illegally dismissed; and
from May 5, 2009 (the date of dismissal), until reinstated;
3) Whether or not Espirituis entitled to damages and
2. 13th Month Pay at the rate of $1,900.00 per annum from
attorney’s fees.28
the date of dismissal, until reinstated;
In the assailed decision, the Court of Appeals affirmed the
3. One and a half (1 1/2) months pay or $2,850.00 as
National Labor Relations Commission with the modification
midyear bonus per year from the date of dismissal, until
that Fuji immediately reinstate Arlene to her position as
reinstated;
News Producer without loss of seniority rights, and pay her
backwages, 13th-month pay, mid-year and year-end 4. One and a half (1 1/2) months pay or $2,850.00 as year-
bonuses, sick leave and vacation leave with pay until end bonus per year from the date of dismissal, until
reinstated, moral damages, exemplary damages, reinstated;
attorney’sfees, and legal interest of 12% per annum of the
5. Sick leave of 30 days with pay or $1,900.00 per year from
total monetary awards.29 The Court of Appeals ruled that:
the date of dismissal, until reinstated; and
WHEREFORE, for lack of merit, the petition of Fuji
6. Vacation leave with pay equivalent to 14 days or
Television Network, Inc. and Yoshiki Aoki is DENIED and
$1,425.00 per annum from date of dismissal, until
the petition of Arlene S. Espiritu is GRANTED. Accordingly,
reinstated.
the Decision dated March 5, 2010 of the National Labor
Relations Commission, 6th Division in NLRC NCR Case No. 7. The amount of ₱100,000.00 as moral damages;
05-06811-09 and its subsequent Resolution dated April 26,
2010 are hereby AFFIRMED with MODIFICATIONS, as 8. The amount of ₱50,000.00 as exemplary damages;
follows: 9. Attorney’s fees equivalent to 10% of the total monetary
awards herein stated; and
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10. Legal interest of twelve percent (12%) per annum of the The Court of Appeals found that Arlene did not sign the non-
total monetary awards computed from May 5, 2009, until renewal contract voluntarily and that the contract was a
their full satisfaction. mere subterfuge by Fuji to secure its position that it was her
choice not to renew her contract. She was left with no
The Labor Arbiter is hereby DIRECTED to make another
choice since Fuji was decided on severing her
recomputation of the above monetary awards consistent
employment.36
with the above directives.
Fuji filed a motion for reconsideration that was denied in the
SO ORDERED.30
resolution37 dated December 7, 2012 for failure to raise new
In arriving at the decision, the Court of Appeals held that matters.38
Arlene was a regular employee because she was engaged
Aggrieved, Fuji filed this petition for review and argued that
to perform work that was necessary or desirable in the
the Court of Appeals erred in affirming with modification the
business of Fuji,31 and the successive renewals of her fixed-
National Labor Relations Commission’s decision, holding
term contract resulted in regular employment.32
that Arlene was a regular employee and that she was
According to the Court of Appeals, Sonzadoes not apply in illegally dismissed. Fuji also questioned the award of
order to establish that Arlene was an independent monetary claims, benefits, and damages.39
contractor because she was not contracted on account of
Fuji points out that Arlene was hired as a stringer, and it
any peculiar ability, special talent, or skill.33 The fact that
informed her that she would remain one.40 She was hired as
everything used by Arlene in her work was owned by Fuji
an independent contractor as defined in Sonza.41 Fuji had
negated the idea of job contracting.34
no control over her work.42 The employment contracts were
The Court of Appeals also held that Arlene was illegally executed and renewed annually upon Arlene’s insistence to
dismissed because Fuji failed to comply with the which Fuji relented because she had skills that
requirements of substantive and procedural due process distinguished her from ordinary employees.43 Arlene and
necessary for her dismissal since she was a regular Fuji dealt on equal terms when they negotiated and entered
employee.35 into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew her fixed-
term contract as evidenced by her e-mail correspondences
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with Yoshiki Aoki.45 In fact, the signing of the non-renewal she consented to the non-renewal of her contract but
contract was not necessary to terminate her employment refused to sign anything.55 Aoki informed Arlene in an e-
since "such employment terminated upon expiration of her mail56 dated March 12, 2009 that she did not need to sign a
contract."46 Finally, Fuji had dealt with Arlene in good faith, resignation letter and that Fuji would pay Arlene’s salary
thus, she should not have been awarded damages.47 and bonus until May 2009 as well as separation pay.57

Fuji alleges that it did not need a permanent reporter since Arlene sent an e-mail dated March 18, 2009 with her
the news reported by Arlene could easily be secured from version of the non-renewal agreement that she agreed to
other entities or from the internet.48 Fuji "never controlled sign this time.58 This attached version contained a provision
the manner by which she performed her functions."49It was that Fuji shall re-hire her if she was still interested to work
Arlene who insisted that Fuji execute yearly fixed-term for Fuji.59 For Fuji, Arlene’s e-mail showed that she had the
contracts so that she could negotiate for annual increases in power to bargain.60
her pay.50
Fuji then posits that the Court of Appeals erred when it held
Fuji points out that Arlene reported for work for only five (5) that the elements of an employer-employee relationship are
days in February 2009, three (3) days in March 2009, and present, particularly that of control;61 that Arlene’s
one (1) day in April 2009.51 Despite the provision in her separation from employment upon the expiration of her
employment contract that sick leaves in excess of 30 days contract constitutes illegal dismissal;62 that Arlene is entitled
shall not be paid, Fuji paid Arlene her entire salary for the to reinstatement;63 and that Fuji is liable to Arlene for
months of March, April, and May; four(4) months of damages and attorney’s fees.64
separation pay; and a bonus for two and a half months for a
This petition for review on certiorari under Rule 45 was filed
total of US$18,050.00.52 Despite having received the
on February 8, 2013.65 On February 27, 2013, Arlene filed a
amount of US$18,050.00, Arlene still filed a case for illegal
manifestation66 stating that this court may not take
dismissal.53
jurisdiction over the case since Fuji failed to authorize
Fuji further argues that the circumstances would show that Corazon E. Acerden to sign the verification.67 Fuji filed a
Arlene was not illegally dismissed. The decision tonot renew comment on the manifestation68 on March 9, 2013.
her contract was mutually agreed upon by the parties as
indicated in Arlene’s e-mail54 dated March 11, 2009 where
189
Based on the arguments of the parties, there are procedural his authority to sign the necessary pleadings, including the
and substantive issues for resolution: verification and certification against forum shopping.69

I. Whether the petition for review should be dismissed as On the other hand, Arlene points outthat the authority given
Corazon E. Acerden, the signatory of the verification and to Mr. Shuji Yano and Mr. Jin Eto in the secretary’s
certification of non forum shopping of the petition, had no certificate is only for the petition for certiorari before the
authority to sign the verification and certification on behalf of Court of Appeals.70 Fuji did not attach any board resolution
Fuji; authorizing Corazon orany other person tofile a petition for
review on certiorari with this court.71 Shuji Yano and Jin Eto
II. Whether the Court of Appeals correctly determined that
could not re-delegate the power thatwas delegated to
no grave abuse of discretion was committed by the National
them.72 In addition, the special power of attorney executed
Labor Relations Commission when it ruled that Arlene was
by Shuji Yano in favor of Corazon indicated that she was
a regular employee, not an independent contractor, and that
empowered to sign on behalf of Shuji Yano, and not on
she was illegally dismissed; and
behalf of Fuji.73
III. Whether the Court of Appeals properly modified the
The Rules of Court requires the
National Labor Relations Commission’s decision by
submission of verification and
awarding reinstatement, damages, and attorney’s fees.
certification against forum shopping
The petition should be dismissed.
Rule 7, Section 4 of the 1997 Rules of Civil Procedure
I provides the requirement of verification, while Section 5 of
the same rule provides the requirement of certification
Validity of the verification and certification against forum
against forum shopping. These sections state:
shopping
SEC. 4. Ver if ica tio n. — Except when otherwise
In its comment on Arlene’s manifestation, Fuji alleges that specifically required by law or rule, pleadings need not be
Corazon was authorized to sign the verification and
under oath, verified or accompanied by affidavit.
certification of non-forum shopping because Mr. Shuji Yano
was empowered under the secretary’s certificate to delegate

190
A pleading is verified by an affidavit that the affiant has read certification or non-compliance with any of the undertakings
the pleading and that the allegations therein are true and therein shall constitute indirect contempt ofcourt, without
correct of his knowledge and belief. prejudice to the corresponding administrative and
criminalactions. If the acts of the party or his counsel clearly
A pleading required to be verifiedwhich containsa
constitute willful and deliberate forum shopping, the same
verification based on "information and belief," or upon
shall be ground for summary dismissal with prejudice and
"knowledge, information and belief," or lacks a proper
shall constitute direct contempt, as well as a cause for
verification, shall be treated as an unsigned pleading.
administrative sanctions.
SEC. 5. Certification against forum shopping.— The plaintiff
Section 4(e) of Rule 4574 requires that petitions for review
or principal party shall certify under oath in the complaint
should "contain a sworn certification against forum shopping
orother initiatory pleading asserting a claim for relief or in a
as provided in the last paragraph of section 2, Rule 42."
sworn certification annexed thereto and simultaneously filed
Section 5 of the same rule provides that failure to comply
therewith: (a) that he has not theretofore commenced any
with any requirement in Section 4 is sufficient ground to
action or filed any claim involving the same issues in any
dismiss the petition.
court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; Effects of non-compliance
(b) if there is such other pending action or claim, a complete
Uy v. Landbank75 discussed the effect of non-compliance
statement of the present status thereof; and (c) if he should
with regard to verification and stated that:
thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five [t]he requirement regarding verification of a pleading is
(5) days therefrom to the court wherein his aforesaid formal, not jurisdictional. Such requirement is simply a
complaint or initiatory pleading has been filed. condition affecting the form of pleading, the non-compliance
of which does not necessarily render the pleading fatally
Failure to comply with the foregoing requirements shall not
defective. Verification is simply intended to secure an
be curable by mere amendment of the complaint or other
assurance that the allegations in the pleading are true and
initiatory pleading but shall be cause for the dismissal of the
correct and not the product of the imagination or a matter of
case without prejudice, unless otherwise provided, upon
speculation, and that the pleading is filed in good faith. The
motion and after hearing. The submission of a false
191
court may order the correction of the pleading if the ground for dismissal, there are cases where this court
verification is lacking or act on the pleading although it is not allowed substantial compliance.
verified, if the attending circumstances are such that strict
In Loyola v. Court of Appeals,79 petitioner Alan Loyola
compliance with the rules may be dispensed with inorder
submitted the required certification one day after filing his
that the ends of justice may thereby be served.76 (Citations
electoral protest.80 This court considered the subsequent
omitted)
filing as substantial compliance since the purpose of filing
Shipside Incorporated v. Court of Appeals77 cited the the certification is to curtail forum shopping.81
discussion in Uy and differentiated its effect from non-
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña
compliance with the requirement of certification against
signed the verification and certification against forum
forum shopping:
shopping but failed to attach the board resolution indicating
On the other hand, the lack of certification against forum her authority to sign.83 In a motion for reconsideration, LDP
shopping is generally not curable by the submission thereof Marketing attached the secretary’s certificate quoting the
after the filing of the petition. Section 5, Rule 45 of the 1997 board resolution that authorized Dela Peña.84 Citing
Rules of Civil Procedure provides that the failure of the Shipside, this court deemed the belated submission as
petitioner tosubmit the required documents that should substantial compliance since LDP Marketing complied with
accompany the petition, including the certification against the requirement; what it failed to do was to attach proof of
forum shopping, shall be sufficient ground for the dismissal Dela Peña’s authority to sign.85 Havtor Management Phils.,
thereof. The same rule applies to certifications against Inc. v. National Labor Relations Commission86 and General
forum shopping signed by a person on behalf of a Milling Corporation v. National Labor Relations
corporation which are unaccompanied by proof that said Commission87 involved petitions that were dismissed for
signatory is authorized to file a petition on behalf of the failure to attach any document showing that the signatory on
corporation.78 (Emphasis supplied) Effects of substantial the verification and certification against forum-shopping was
compliance with the requirement of verification and authorized.88 In both cases, the secretary’s certificate was
certification against forum shopping attached to the motion for reconsideration.89 This court
considered the subsequent submission of proof indicating
Although the general rule is that failure to attach a
authority to sign as substantial compliance.90 Altres v.
verification and certification against forum shopping isa
192
Empleo91 summarized the rules on verification and submission or correction thereof, unless there is a need to
certification against forum shopping in this manner: relax the Rule on the ground of "substantial compliance" or
presence of "special circumstances or compelling reasons."
For the guidance of the bench and bar, the Court restates in
capsule form the jurisprudential pronouncements . . . 5) The certification against forum shopping must be signed
respecting non-compliance with the requirement on, or by all the plaintiffs or petitioners in a case; otherwise, those
submission of defective, verification and certification against who did not sign will be dropped as parties to the case.
forum shopping: Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest
1) A distinction must be made between non-compliance with
and invoke a common cause of action or defense, the
the requirement on or submission of defective verification,
signature of only one of them inthe certification against
and noncompliance with the requirement on or submission
forum shopping substantially complies with the Rule.
of defective certification against forum shopping.
6) Finally, the certification against forum shopping must be
2) As to verification, non-compliance therewith or a defect
executed by the party-pleader, not by his counsel. If,
therein does not necessarily render the pleading fatally
however, for reasonable or justifiable reasons, the party-
defective. The court may order its submission or correction
pleader is unable to sign, he must execute a Special Power
or act on the pleading if the attending circumstances are
of Attorney designating his counsel of record to sign on his
such that strict compliance with the Rule may be dispensed
behalf.92
with in order that the ends of justice may be served thereby.
There was substantial compliance
3) Verification is deemed substantially complied with when
by Fuji Television Network, Inc.
one who has ample knowledge to swear to the truth of the
allegations in the complaint or petition signs the verification, Being a corporation, Fuji exercises its power to sue and be
and when matters alleged in the petition have been made in sued through its board of directors or duly authorized
good faith or are true and correct. officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can
4) As to certification against forum shopping, non-
only be done by natural persons duly authorized either by
compliance therewith or a defect therein, unlike in
the corporate by-laws or a board resolution.93
verification, is generally not curable by its subsequent
193
In its petition for review on certiorari, Fuji attached Hideaki any other subsequent proceeding that may necessarily arise
Ota’s secretary’s certificate,94 authorizing Shuji Yano and therefrom, including but not limited to the filing of appeals in
Jin Eto to represent and sign for and on behalf of Fuji.95 The the appropriate venue;
secretary’s certificate was duly authenticated96 by Sulpicio
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are
Confiado, Consul-General of the Philippines in Japan.
hereby authorized, to verify and execute the certification
Likewise attached to the petition is the special power of
against nonforum shopping which may be necessary or
attorney executed by Shuji Yano, authorizing Corazon to
required to be attached to any pleading to [sic] submitted to
sign on his behalf.97 The verification and certification against
the Court of Appeals; and the authority to so verify and
forum shopping was signed by Corazon.98
certify for the Corporation in favor of the said persons shall
Arlene filed the manifestation dated February 27, 2013, subsist and remain effective until the termination of the said
arguing that the petition for review should be dismissed case;
because Corazon was not duly authorized to sign the
....
verification and certification against forum shopping.
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are
Fuji filed a comment on Arlene’s manifestation, stating that
hereby authorized, to represent and appear on behalf the
Corazon was properly authorized to sign. On the basis of
[sic] Corporation in all stages of the [sic] this case and in
the secretary’s certificate, Shuji Yano was empowered to
any other proceeding that may necessarily arise thereform
delegate his authority.
[sic], and to act in the Corporation’s name, place and stead
Quoting the board resolution dated May 13, 2010, the to determine, propose, agree, decide, do, and perform any
secretary's certificate states: and all of the following:

(a) The Corporation shall file a Petition for Certiorari with the 1. The possibility of amicable settlement or of submission to
Court of Appeals, against Philippines’ National Labor alternative mode of dispute resolution;
Relations Commission ("NLRC") and Arlene S. Espiritu,
2. The simplification of the issue;
pertaining to NLRC-NCR Case No. LAC 00-002697-09,
RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji 3. The necessity or desirability of amendments to the
Television Network, Inc./Yoshiki Aoki", and participate in pleadings;

194
4. The possibility of obtaining stipulation or admission of The said Attorneys-in-Fact are hereby further authorized to
facts and documents; and make, sign, execute and deliver such papers ordocuments
as may be necessary in furtherance of the power thus
5. Such other matters as may aid in the prompt disposition
granted, particularly to sign and execute the verification and
of the action.99 (Emphasis in the original; Italics omitted)
certification of non-forum shopping needed to be
Shuji Yano executed a special power of attorney appointing filed.101 (Emphasis in the original)
Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera as
In its comment102 on Arlene’s manifestation, Fuji argues that
his attorneys-in-fact.100 The special power of attorney states:
Shuji Yano could further delegate his authority because the
That I, SHUJI YANO, of legal age, Japanese national, with board resolution empowered him to "act in the Corporation’s
office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088 name, place and stead to determine, propose, agree,
Japan, and being the representative of Fuji TV, INc., [sic] decided [sic], do and perform any and all of the following: . .
(evidenced by the attached Secretary’s Certificate) one of . such other matters as may aid in the prompt disposition of
the respondents in NLRC-NCR Case No. 05-06811-00 the action."103 To clarify, Fuji attached a verification and
entitled "Arlene S. Espiritu v. Fuji Television Network, certification against forum shopping, but Arlene questions
Inc./Yoshiki Aoki", and subsequently docketed before the Corazon’s authority to sign. Arlene argues that the
Court of Appeals asC.A. G.R. S.P. No. 114867 secretary’s certificate empowered Shuji Yano to file a
(Consolidated with SP No. 114889) do hereby make, petition for certiorari before the Court of Appeals, and not a
constitute and appoint Ms. Ma. Corazon E. Acerden and Mr. petition for review before this court, and that since Shuji
Moises A. Rolleraas my true and lawful attorneys-infact for Yano’s authority was delegated to him, he could not further
me and my name, place and stead to act and represent me delegate such power. Moreover, Corazon was representing
in the above-mentioned case, with special power to make Shuji Yano in his personal capacity, and not in his capacity
admission/s and stipulations and/or to make and submit as as representative of Fuji.
well as to accept and approve compromise proposals upon
A review of the board resolution quoted in the secretary’s
such terms and conditions and under such covenants as my
certificate shows that Fuji shall "file a Petition for Certiorari
attorney-in-fact may deem fit, and to engage the services of
with the Court of Appeals"104 and "participate in any other
Villa Judan and Cruz Law Officesas the legal counsel to
subsequent proceeding that may necessarily arise
represent the Company in the Supreme Court;
therefrom, including but not limited to the filing of appeals in
195
the appropriate venue,"105 and that Shuji Yano and Jin Eto The secretary’s certificate does not state that Shuji Yano is
are authorized to represent Fuji "in any other proceeding prohibited from appointing a substitute. In fact, heis
that may necessarily arise thereform [sic]."106 As pointed out empowered to do acts that will aid in the resolution of this
by Fuji, Shuji Yano and Jin Eto were also authorized to "act case.
in the Corporation’s name, place and stead to determine,
This court has recognized that there are instances when
propose, agree, decide, do, and perform anyand all of the
officials or employees of a corporation can sign the
following: . . . 5. Such other matters as may aid in the
verification and certification against forum shopping without
prompt disposition of the action."107
a board resolution. In Cagayan Valley Drug Corporation v.
Considering that the subsequent proceeding that may arise CIR,108 it was held that:
from the petition for certiorari with the Court of Appeals is
In sum, we have held that the following officials or
the filing of a petition for review with this court, Fuji
employees of the company can sign the verification and
substantially complied with the procedural requirement.
certification without need of a board resolution: (1) the
On the issue of whether Shuji Yano validly delegated his Chairperson of the Board of Directors, (2) the President of a
authority to Corazon, Article 1892 of the Civil Code of the corporation, (3) the General Manager or Acting General
Philippines states: Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case.
ART. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he shall While the above cases109 do not provide a complete listing
be responsible for the acts of the substitute: of authorized signatories to the verification and certification
required by the rules, the determination of the sufficiency of
(1) When he was not given the power to appoint one;
the authority was done on a case to case basis. The
(2) When he was given such power, but without designating rationale applied in the foregoing cases is to justify the
the person, and the person appointed was notoriously authority of corporate officers or representatives of the
incompetent or insolvent. All acts of the substitute appointed corporation to sign the verification or certificate against
against the prohibition of the principal shall be void. forum shopping, being ‘in a position to verify the truthfulness
and correctness of the allegations in the petition.’110

196
Corazon’s affidavit111 states that she is the "office manager In St. Martin Funeral Home v. National Labor Relations
and resident interpreter of the Manila Bureau of Fuji Commission,116 this court cited several cases117 and
Television Network, Inc."112 and that she has "held the rejected the notion that this court had no jurisdiction to
position for the last twenty-three years."113 review decisions of the National Labor Relations
Commission. It stated that this court had the power to
As the office manager for 23 years,Corazon can be
review the acts of the National Labor Relations Commission
considered as having knowledge of all matters in Fuji’s
to see if it kept within its jurisdiction in deciding cases and
Manila Bureau Office and is in a position to verify "the
alsoas a form of check and balance.118 This court then
truthfulness and the correctness of the allegations in the
clarified that judicial review of National Labor Relations
Petition."114
Commission decisions shall be by way of a petition for
Thus, Fuji substantially complied with the requirements of certiorari under Rule 65. Citing the doctrine of hierarchy of
verification and certification against forum shopping. courts, it further ruled that such petitions shall be filed
before the Court of Appeals. From the Court of Appeals, an
Before resolving the substantive issues in this case, this
aggrieved party may file a petition for review on certiorari
court will discuss the procedural parameters of a Rule 45
under Rule 45.
petition for review in labor cases.
A petition for certiorari under Rule 65 is an original action
II where the issue is limited to grave abuse of discretion. As
Procedural parameters of petitions for review in labor cases an original action, it cannot be considered as a continuation
of the proceedings of the labor tribunals.
Article 223 of the Labor Code115 does not provide any mode
of appeal for decisions of the National Labor Relations On the other hand, a petition for review on certiorari under
Commission. It merely states that "[t]he decision of the Rule 45 is a mode of appeal where the issue is limited to
Commission shall be final and executory after ten (10) questions of law. In labor cases, a Rule 45 petition is limited
calendar days from receipt thereof by the parties." Being toreviewing whether the Court of Appeals correctly
final, it is no longer appealable. However, the finality of the determined the presence or absence of grave abuse of
National Labor Relations Commission’s decisions does not discretion and deciding other jurisdictional errors of the
mean that there is no more recourse for the parties. National Labor Relations Commission.119

197
In Odango v. National Labor Relations Commission,120 this NLRC, when affirmed by the Court of Appeals, are
court explained that a petition for certiorari is an conclusive upon the parties and binding on this Court.126
extraordinary remedy that is "available only and restrictively
Career Philippines v. Serna,127 citing Montoya v.
in truly exceptional cases"121 and that its sole office "is the
Transmed,128 is instructive on the parameters of judicial
correction of errors of jurisdiction including commission of
review under Rule 45:
grave abuse of discretion amounting to lack or excess of
jurisdiction."122 A petition for certiorari does not include a As a rule, only questions of law may be raised in a Rule 45
review of findings of fact since the findings of the National petition. In one case, we discussed the particular
Labor Relations Commission are accorded finality.123 In parameters of a Rule 45 appeal from the CA’s Rule 65
cases where the aggrieved party assails the National Labor decision on a labor case, as follows:
Relations Commission’s findings, he or she must be able to
show that the Commission "acted capriciously and In a Rule 45 review, we consider the correctness of the
whimsically or in total disregard of evidence material to the assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65.
controversy."124
Furthermore, Rule 45 limits us to the review of questions of
When a decision of the Court of Appeals under a Rule 65 law raised against the assailed CA decision. In ruling for
petition is brought to this court by way of a petition for legal correctness, we have to view the CA decision in the
review under Rule 45, only questions of law may be decided same context that the petition for certiorari it ruled upon was
upon. As held in Meralco Industrial v. National Labor presented to it; we have to examine the CA decision from
Relations Commission:125 the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision
This Court is not a trier of facts. Well-settled is the rule that
before it, not on the basis of whether the NLRC decision on
the jurisdiction of this Court ina petition for review on
the merits of the case was correct. In other words, we have
certiorari under Rule 45 of the Revised Rules of Court is
to be keenly aware that the CA undertook a Rule 65 review,
limited to reviewing only errors of law, not of fact, unless the
not a review on appeal, of the NLRC decision challenged
factual findings complained of are completely devoid of
before it.129 (Emphasis in the original)
support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts.
Besides, factual findings of quasi-judicial agencies like the
198
Justice Brion’s dissenting opinion in Abott Laboratories, In this case, there is no question thatArlene rendered
PhiIippines v. Aicaraz130 discussed that in petitions for services to Fuji. However, Fuji alleges that Arlene was an
review under Rule 45, "the Court simply determines whether independent contractor, while Arlene alleges that she was a
the legal correctness of the CA’s finding that the NLRC regular employee. To resolve this issue, we ascertain
ruling . . . had basis in fact and in Iaw."131 In this kind of whether an employer-employee relationship existed
petition, the proper question to be raised is, "Did the CA between Fuji and Arlene.
correctly determine whether the NLRC committed grave
This court has often used the four-fold test to determine the
abuse of discretion in ruling on the case?"132
existence of an employer-employee relationship. Under the
Justice Brion’s dissenting opinion also laid down the four-fold test, the "control test" is the most important.134 As
following guidelines: to how the elements in the four-fold test are proven, this
court has discussed that:
If the NLRC ruling has basis in the evidence and the
applicable law and jurisprudence, then no grave abuse of [t]here is no hard and fast rule designed to establish the
discretion exists and the CA should so declare and, aforesaid elements. Any competent and relevant evidence
accordingly, dismiss the petition. If grave abuse of discretion to prove the relationship may be admitted. Identification
exists, then the CA must grant the petition and nullify the cards, cash vouchers, social security registration,
NLRC ruling, entering at the same time the ruling that appointment letters or employment contracts, payrolls,
isjustified under the evidence and the governing law, rules organization charts, and personnel lists, serve as evidence
and jurisprudence. In our Rule 45 review, this Court must of employee status.135
denythe petition if it finds that the CA correctly
If the facts of this case vis-à-vis the four-fold test show that
acted.133 (Emphasis in the original)
an employer-employee relationship existed, we then
These parameters shall be used in resolving the substantive determine the status of Arlene’s employment, i.e., whether
issues in this petition. she was a regular employee. Relative to this, we shall
analyze Arlene’s fixed-term contract and determine whether
III
it supports her argument that she was a regular employee,
Determination of employment status; burden of proof or the argument of Fuji that she was an independent
contractor. We shall scrutinize whether the nature of
199
Arlene’s work was necessary and desirable to Fuji’s (1) she was hired because of her skills; (2) her salary was
business or whether Fuji only needed the output of her US$1,900.00, which is higher than the normal rate; (3) she
work. If the circumstances show that Arlene’s work was had the power to bargain with her employer; and (4) her
necessary and desirable to Fuji, then she is presumed to be contract was for a fixed term. According to Fuji, the Court of
a regular employee. The burden of proving that she was an Appeals erred when it ruled that Arlene was forcedto sign
independent contractor lies with Fuji. the non-renewal agreement, considering that she sent an
email with another version of the non-renewal
In labor cases, the quantum of proof required is substantial
agreement.140 Further, she is not entitled tomoral damages
evidence.136 "Substantial evidence" has been defined as
and attorney’s fees because she acted in bad faith when
"such amount of relevant evidence which a reasonable mind
she filed a labor complaint against Fuji after receiving
might accept as adequate to justify a conclusion."137
US$18,050.00 representing her salary and other
If Arlene was a regular employee, we then determine benefits.141 Arlene argues that she was a regular employee
whether she was illegally dismissed. In complaints for illegal because Fuji had control and supervision over her work.
dismissal, the burden of proof is on the employee to prove The news events that she covered were all based on the
the fact of dismissal.138 Once the employee establishes the instructions of Fuji.142 She maintains that the successive
fact of dismissal, supported by substantial evidence, the renewal of her employment contracts for four (4) years
burden of proof shifts tothe employer to show that there was indicates that her work was necessary and desirable.143 In
a just or authorized cause for the dismissal and that due addition, Fuji’s payment of separation pay equivalent to one
process was observed.139 (1) month’s pay per year of service indicates that she was a
regular employee.144 To further support her argument that
IV she was not an independent contractor, she states that Fuji
Whether the Court of Appeals correctly affirmed the owns the laptop computer and mini-camera that she used
National Labor for work.145 Arlene also argues that Sonza is not applicable
Relations Commission’s finding that Arlene was a regular because she was a plain reporter for Fuji, unlike Jay Sonza
employee who was a news anchor, talk show host, and who enjoyed a
celebrity status.146 On her illness, Arlene points outthat it
Fuji alleges that Arlene was anindependent contractor, was not a ground for her dismissal because her attending
citing Sonza v. ABS-CBN and relying on the following facts: physician certified that she was fit to work.147
200
Arlene admits that she signed the non-renewal agreement which heis employed and his employment shall continue
with quitclaim, not because she agreed to itsterms, but while such activity exist.
because she was not in a position to reject the non-renewal
This provision classifies employees into regular, project,
agreement. Further, she badly needed the salary withheld
seasonal, and casual. It further classifies regular employees
for her sustenance and medication.148 She posits that her
into two kinds: (1) those "engaged to perform activities
acceptance of separation pay does not bar filing of a
which are usually necessary or desirable in the usual
complaint for illegal dismissal.149
business or trade of the employer"; and (2) casual
Article 280 of the Labor Code provides that: employees who have "rendered at least one year of service,
whether such service is continuous or broken."
Art. 280. Regular and casual employment.The provisions of
written agreement to the contrary notwithstanding and Another classification of employees, i.e., employees with
regardless of the oral agreement of the parties, an fixed-term contracts, was recognized in Brent School, Inc. v.
employment shall be deemed to be regular where the Zamora150 where this court discussed that:
employee has been engaged to perform activities which are
Logically, the decisive determinant in the term employment
usually necessary or desirable in the usual business or
should not be the activities that the employee is called upon
trade of the employer, except where the employment has
to perform, but the day certain agreed upon by the parties
been fixed for a specific project or undertaking the
for the commencement and termination of their employment
completion or termination of which has been determined at
relationship, a day certainbeing understood to be "that
the time of the engagement of the employee or where the
which must necessarily come, although it may not be known
work or services to be performed is seasonal in nature and
when."151 (Emphasis in the original)
the employment is for the duration of the season.
This court further discussed that there are employment
An employment shall be deemed to be casual if it is not
contracts where "a fixed term is an essential and natural
covered by the preceding paragraph; Provided, That, any
appurtenance"152 such as overseas employment contracts
employee who has rendered at least one year of service,
and officers in educational institutions.153
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in

201
Distinctions among fixed-term These indications, which must be read together, make the
employees, independent contractors, Brent doctrine applicable only in a few special cases
and regular employees wherein the employer and employee are on more or less in
equal footing in entering into the contract. The reason for
GMA Network, Inc. v. Pabriga154 expounded the doctrine on
this is evident: whena prospective employee, on account of
fixed term contracts laid down in Brentin the following
special skills or market forces, is in a position to make
manner:
demands upon the prospective employer, such prospective
Cognizant of the possibility of abuse in the utilization of fixed employee needs less protection than the ordinary worker.
term employment contracts, we emphasized in Brentthat Lesser limitations on the parties’ freedom of contract are
where from the circumstances it is apparent that the periods thus required for the protection of the employee.155(Citations
have been imposed to preclude acquisition of tenurial omitted)
security by the employee, they should be struck down as
For as long as the guidelines laid down in Brentare satisfied,
contrary to public policy or morals. We thus laid down
this court will recognize the validity of the fixed-term
indications or criteria under which "term employment"
contract.
cannot be said to be in circumvention of the law on security
of tenure, namely: In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld
the fixedterm employment of petitioners because from the
1) The fixed period of employment was knowingly and
time they were hired, they were informed that their
voluntarily agreed upon by the parties without any force,
engagement was for a specific period. This court stated
duress, or improper pressure being brought to bear upon
that:
the employee and absent any other circumstances vitiating
his consent; or [s]imply put, petitioners were notregular employees. While
their employment as mixers, packers and machine
2) It satisfactorily appears that the employer and the
operators was necessary and desirable in the usual
employee dealt with each other on more or less equal terms
business ofrespondent company, they were employed
with no moral dominance exercised by the former or the
temporarily only, during periods when there was heightened
latter.
demand for production. Consequently, there could have
been no illegal dismissal when their services were
202
terminated on expiration of their contracts. There was even to one’s own manner and method, free from the control and
no need for notice of termination because they knew exactly direction of the principal in all matters connected with the
when their contracts would end. Contracts of employment performance of the work except as to the results thereof.161
for a fixed period terminate on their own at the end of such
In view of the "distinct and independent business" of
period.
independent contractors, no employer-employee
Contracts of employment for a fixed period are not unlawful. relationship exists between independent contractors and
What is objectionable is the practice of some scrupulous their principals. Independent contractors are recognized
employers who try to circumvent the law protecting workers under Article 106 of the Labor Code:
from the capricious termination of employment.157 (Citation
Art. 106. Contractor or subcontractor. Whenever an
omitted)
employer enters into a contract with another person for the
Caparoso v. Court of Appeals158 upheld the validity of the performance of the former’s work, the employees of the
fixed-term contract of employment. Caparoso and contractor and of the latter’s subcontractor, if any, shall be
Quindipan were hired as delivery men for three (3) months. paid in accordance with the provisions of this Code.
At the end of the third month, they were hired on a monthly
....
basis. In total, they were hired for five (5) months. They filed
a complaint for illegal dismissal.159 This court ruled that The Secretary of Labor and Employment may, by
there was no evidence indicating that they were pressured appropriate regulations, restrict or prohibit the contracting-
into signing the fixed-term contracts. There was likewise no out of labor to protect the rights of workers established
proof that their employer was engaged in hiring workers for under this Code. In so prohibiting or restricting, he may
five (5) months onlyto prevent regularization. In the absence make appropriate distinctions between labor-only
of these facts, the fixed-term contracts were upheld as contracting and job contracting as well as differentiations
valid.160 On the other hand, an independent contractor is within these types of contracting and determine who among
defined as: the parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or
. . . one who carries on a distinct and independent business
circumvention of any provision of this Code.
and undertakes to perform the job, work, or service on its
own account and under one’s own responsibility according
203
There is "labor-only" contracting where the person supplying employee relationship between the contractor and principal
workers to an employer does not have substantial capital or who engages the contractor’s services, but there is an
investment in the form of tools, equipment, machineries, employer-employee relationship between the contractor and
work premises, among others, and the workers recruited workers hired to accomplish the work for the principal.162
and placed by such person are performing activities which
Jurisprudence has recognized another kind of independent
are directly related to the principal business of such
contractor: individuals with unique skills and talents that set
employer. In such cases, the person or intermediary shall
them apart from ordinary employees. There is no trilateral
be considered merely as an agent of the employer who shall
relationship in this case because the independent contractor
be responsible to the workers in the same manner and
himself or herself performs the work for the principal. In
extent as if the latterwere directly employed by him.
other words, the relationship is bilateral.
In Department Order No. 18-A, Seriesof 2011, of the
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a
Department of Labor and Employment, a contractor is
columnist for the Philippine Daily Inquirer. This court ruled
defined as having:
that she was an independent contractor because of her
Section 3. . . . "talent, skill, experience, and her unique viewpoint as a
feminist advocate."164 In addition, the Philippine Daily
....
Inquirer did not have the power of control over Orozco, and
(c) . . . an arrangement whereby a principal agrees to put she worked at her own pleasure.165
out or farm out with a contractor the performance or
Semblante v. Court of Appeals166 involved a
completion of a specific job, work or service within a definite 167 168
masiador and a sentenciador. This court ruled that
or predetermined period, regardless of whether such job,
"petitioners performed their functions as masiadorand
work or service is to be performed or completed within
sentenciador free from the direction and control of
oroutside the premises of the principal.
respondents"169 and that the masiador and sentenciador
This department order also states that there is a trilateral "relied mainly on their ‘expertise that is characteristic of the
relationship in legitimate job contracting and subcontracting cockfight gambling.’"170 Hence, no employer-employee
arrangements among the principal, contractor, and relationship existed.
employees of the contractor. There is no employer-
204
Bernarte v. Philippine Basketball Association171 involved a are on equal footing. Theycan bargain on terms and
basketball referee. This court ruled that "a referee is an conditions until they are able to reach an agreement.
independent contractor, whose special skills and
On the other hand, contracts of employment are different
independent judgment are required specifically for such
and have a higher level of regulation because they are
position and cannot possibly be controlled by the hiring
impressed with public interest. Article XIII, Section 3 of the
party."172
1987 Constitution provides full protection to labor:
In these cases, the workers were found to be independent
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
contractors because of their unique skills and talents and
the lack of control over the means and methods in the ....
performance of their work.
LABOR
In other words, there are different kinds of independent
Section 3. The State shall afford full protection to labor, local
contractors: those engaged in legitimate job contracting and
and overseas, organized and unorganized, and promote full
those who have unique skills and talents that set them apart
employment and equality of employment opportunities for
from ordinary employees.
all.
Since no employer-employee relationship exists between
independent contractors and their principals, their contracts It shall guarantee the rights of all workers to self-
are governed by the Civil Code provisions on contracts and organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
other applicable laws.173
accordance with law. They shall be entitled to security of
A contract is defined as "a meeting of minds between two tenure, humane conditions of work, and a living wage. They
persons whereby one binds himself, with respect to the shall also participate in policy and decision-making
other, to give something or to render some processes affecting their rights and benefits as may be
service."174 Parties are free to stipulate on terms and provided by law.
conditions in contracts as long as these "are not contrary to
The State shall promote the principle of shared
law, morals, good customs, public order, or public
responsibility between workers and employers and the
policy."175 This presupposes that the parties to a contract
preferential use of voluntary modes in settling disputes,
205
including conciliation, and shall enforce their mutual labor. As stated in GMA Network, Inc. v. Pabriga, the ruling
compliance therewith to foster industrial peace. in Brent applies in cases where it appears that the employer
and employee are on equal footing.177 This recognizes the
The State shall regulate the relations between workers and
fact that not all workers are weak. To reiterate the
employers, recognizing the right of labor to its just share in
discussion in GMA Network v. Pabriga:
the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and The reason for this is evident: when a prospective
growth. employee, on account of special skills or market forces, is in
a position to make demands upon the prospective
Apart from the constitutional guarantee of protection to
employer, such prospective employee needs less protection
labor, Article 1700 of the Civil Code states:
than the ordinary worker. Lesser limitations on the parties’
ART. 1700. The relations between capital and labor are not freedom of contract are thus required for the protection of
merely contractual. They are so impressed with public the employee.178
interest that labor contracts must yield to the common good.
The level of protection to labor mustbe determined on the
Therefore, such contracts are subject to the special laws on
basis of the nature of the work, qualifications of the
labor unions, collective bargaining, strikes and lockouts,
employee, and other relevant circumstances.
closed shop, wages, working conditions, hours of labor and
similar subjects. For example, a prospective employee with a bachelor’s
degree cannot be said to be on equal footing witha grocery
In contracts of employment, the employer and the employee
bagger with a high school diploma. Employees who qualify
are not on equal footing. Thus, it is subject to regulatory
for jobs requiring special qualifications such as "[having] a
review by the labor tribunals and courts of law. The law
Master’s degree" or "[having] passed the licensure exam"
serves to equalize the unequal. The labor force is a special
are different from employees who qualify for jobs that
class that is constitutionally protected because of the
require "[being a] high school graduate; withpleasing
inequality between capital and labor.176 This presupposes
personality." In these situations, it is clear that those with
that the labor force is weak. However, the level of protection
special qualifications can bargain with the employer on
to labor should vary from case to case; otherwise, the state
equal footing. Thus, the level of protection afforded to these
might appear to be too paternalistic in affording protection to
employees should be different.
206
Fuji’s argument that Arlene was an independent contractor performance of duties of the employee. It is enough that the
under a fixed-term contract is contradictory. Employees employer has the right to wield that power.183 (Citation
under fixed-term contracts cannot be independent omitted)
contractors because in fixed-term contracts, an employer-
Orozco v. Court of Appeals further elucidated the meaning
employee relationship exists. The test in this kind of contract
of "power of control" and stated the following:
is not the necessity and desirability of the employee’s
activities, "but the day certain agreed upon by the parties for Logically, the line should be drawn between rules that
the commencement and termination of the employment merely serve as guidelines towards the achievement of the
relationship."179 For regular employees, the necessity and mutually desired result without dictating the means or
desirability of their work in the usual course of the methods to be employed in attaining it, and those that
employer’s business are the determining factors. On the control or fix the methodology and bind or restrict the party
other hand, independent contractors do not have employer- hired to the use of such means. The first, which aim only to
employee relationships with their principals. Hence, before promote the result, create no employer-employee
the status of employment can be determined, the existence relationship unlike the second, which address both the
of an employer-employee relationship must be established. result and the means used to achieve it. . . .184 (Citation
omitted)
The four-fold test180 can be used in determining whether an
employeremployee relationship exists. The elements of the In Locsin, et al. v. Philippine Long Distance Telephone
four-fold test are the following: (1) the selection and Company,185 the "power of control" was defined as "[the]
engagement of the employee; (2) the payment of wages; (3) right to control not only the end to be achieved but also the
the power of dismissal; and (4) the power of control, which means to be used in reaching such end."186
is the most important element.181
Here, the Court of Appeals applied Sonza v. ABS-CBN and
The "power of control" was explained by this court in Dumpit Murillo v. Court of Appeals187 in determining whether
Corporal, Sr. v. National Labor Relations Commission:182 Arlene was an independent contractor or a regular
employee.
The power to control refers to the existence of the power
and not necessarily to the actual exercise thereof, nor is it In deciding Sonza and Dumpit-Murillo, this court used the
essential for the employer to actually supervise the four-fold test. Both cases involved newscasters and
207
anchors. However, Sonza was held to be an independent In Sonza, this court ruled that ABS-CBN did not control how
contractor, while Dumpit-Murillo was held to be a regular Sonza delivered his lines, how he appeared on television, or
employee. how he sounded on radio.195 All that Sonza needed was his
talent.196 Further, "ABS-CBN could not terminate or
Comparison of the Sonza and
discipline SONZA even if the means and methods of
Dumpit-Murillo cases using
performance of his work . . . did not meet ABS-CBN’s
the four-fold test
approval."197 In Dumpit-Murillo, the duties and
Sonza was engaged by ABS-CBN in view of his "unique responsibilities enumerated in her contract was a clear
skills, talent and celebrity status not possessed by ordinary indication that ABC had control over her work.198
employees."188 His work was for radio and television
Application of the four-fold test
programs.189 On the other hand, Dumpit-Murillo was hired
by ABC as a newscaster and co-anchor.190 Sonza’s talent The Court of Appeals did not err when it relied on the ruling
fee amounted to ₱317,000.00 per month, which this court in Dumpit-Murillo and affirmed the ruling of the National
found to be a substantial amount that indicatedhe was an Labor Relations Commission finding that Arlene was a
independent contractor rather than a regular regular employee. Arlene was hired by Fuji as a news
employee. Meanwhile, Dumpit-Murillo’s monthly salary
191
producer, but there was no showing that she was hired
was ₱28,000.00, a very low amount compared to what because of unique skills that would distinguish her from
Sonza received.192 ordinary employees. Neither was there any showing that
she had a celebrity status. Her monthly salary amounting to
Sonza was unable to prove that ABS-CBN could terminate
US$1,900.00 appears tobe a substantial sum, especially if
his services apart from breach of contract. There was no
compared to her salary whenshe was still connected with
indication that he could be terminated based on just or
GMA.199 Indeed, wages may indicate whether oneis an
authorized causes under the Labor Code. In addition, ABS-
independent contractor. Wages may also indicate that an
CBN continued to pay his talent fee under their agreement,
employee is able to bargain with the employer for better
even though his programs were no longer
193
pay. However, wages should not be the conclusive factor in
broadcasted. Dumpit-Murillo was found to have
determining whether one is an employee or an independent
beenillegally dismissed by her employer when they did not
contractor.
renew her contract on her fourth year with ABC.194
208
Fuji had the power to dismiss Arlene, as provided for in nature of Arlene’s work necessary and desirable for Fuji’s
paragraph 5 of her professional employment contract.200 Her usual course of business?
contract also indicated that Fuji had control over her work
Arlene was a regular employee
because she was required to work for eight (8) hours from
with a fixed-term contract
Monday to Friday, although on flexible time.201 Sonza was
not required to work for eight (8) hours, while Dumpit-Murillo The test for determining regular employment is whether
had to be in ABC to do both on-air and off-air tasks. there is a reasonable connection between the employee’s
activities and the usual business of the employer. Article
On the power to control, Arlene alleged that Fuji gave her
280 provides that the nature of work must be "necessary or
instructions on what to report.202 Even the mode of
desirable in the usual business or trade of the employer" as
transportation in carrying out her functions was controlled by
the test for determining regular employment. As stated in
Fuji. Paragraph 6 of her contract states:
ABS-CBN Broadcasting Corporation v. Nazareno:204
6. During the travel to carry out work, if there is change of
In determining whether an employment should be
place or change of place of work, the train, bus, or public
considered regular or non-regular, the applicable test is the
transport shall be used for the trip. If the Employee uses the
reasonable connection between the particular activity
private car during the work and there is an accident the
performed by the employee in relation to the usual business
Employer shall not be responsible for the damage, which
or trade of the employer. The standard, supplied by the law
may be caused to the Employee.203
itself, is whether the work undertaken is necessary or
Thus, the Court of Appeals did not err when it upheld the desirable in the usual business or trade of the employer, a
findings of the National Labor Relations Commission that fact that can be assessed by looking into the nature of the
Arlene was not an independent contractor. services rendered and its relation to the general scheme
under which the business or trade is pursued in the usual
Having established that an employer-employee relationship
course. It is distinguished from a specific undertaking that is
existed between Fuji and Arlene, the next questions for
divorced from the normal activities required incarrying on
resolution are the following: Did the Court of Appeals
the particular business or trade.205
correctly affirm the National Labor Relations Commission
that Arlene had become a regular employee? Was the

209
However, there may be a situation where an employee’s ....
work is necessary but is not always desirable inthe usual
Clearly, private respondent was hired for a specific project
course of business of the employer. In this situation, there is
that was not within the regular business of the corporation.
no regular employment.
For petitioner is not engaged in the business of repairing
In San Miguel Corporation v. National Labor Relations furnaces. Although the activity was necessary to enable
Commission,206 Francisco de Guzman was hired to repair petitioner to continue manufacturing glass, the necessity
furnaces at San Miguel Corporation’s Manila glass plant. He therefor arose only when a particular furnace reached the
had a separate contract for every furnace that he repaired. end of its life or operating cycle. Or, as in the second
He filed a complaint for illegal dismissal three (3) years after undertaking, when a particular furnace required an
the end of his last contract.207 In ruling that de Guzman did emergency repair. In other words, the undertakings where
not attain the status of a regular employee, this court private respondent was hired primarily as helper/bricklayer
explained: have specified goals and purposes which are fulfilled once
the designated work was completed. Moreover, such
Note that the plant where private respondent was employed
undertakings were also identifiably separate and distinct
for only seven months is engaged in the manufacture of
from the usual, ordinary or regular business operations of
glass, an integral component of the packaging and
petitioner, which is glass manufacturing. These
manufacturing business of petitioner. The process of
undertakings, the duration and scope of which had been
manufacturing glass requires a furnace, which has a limited
determined and made known to private respondent at the
operating life. Petitioner resorted to hiring project or fixed
time of his employment, clearly indicated the nature of his
term employees in having said furnaces repaired since said
employment as a project employee.208
activity is not regularly performed. Said furnaces are to be
repaired or overhauled only in case of need and after being Fuji is engaged in the business of broadcasting,209 including
used continuously for a varying period of five (5) to ten (10) news programming.210 It is based in Japan211 and has
years. In 1990, one of the furnaces of petitioner required overseas offices to cover international news.212
repair and upgrading. This was an undertaking distinct and
Based on the record, Fuji’s Manila Bureau Office is a small
separate from petitioner's business of manufacturing glass.
unit213 and has a few employees.214 As such, Arlene had to
For this purpose, petitioner must hire workers to undertake
do all activities related to news gathering. Although Fuji
the said repair and upgrading. . . .
210
insists that Arlene was a stringer, it alleges that her Espiritu is an independent contractor, as claimed by Fuji,
designation was "News Talent/Reporter/Producer."215 the factthat everything that she uses to perform her job is
owned by the company including the laptop computer and
A news producer "plans and supervises newscast . . . [and]
mini camera discounts the idea of job contracting.221
work[s] with reporters in the field planning and gathering
information. . . ."216 Arlene’s tasks included "[m]onitoring and Moreover, the Court of Appeals explained that Fuji’s
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in argument that no employer-employee relationship existed in
front of a video camera,"217 "the timely submission of news view of the fixed-term contract does not persuade because
and current events reports pertaining to the Philippines[,] fixed-term contracts of employment are strictly
and traveling [sic] to [Fuji’s] regional office in 222
construed. Further, the pieces of equipment Arlene used
Thailand."218 She also had to report for work in Fuji’s office were all owned by Fuji, showing that she was a regular
in Manila from Mondays to Fridays, eight (8) hours per employee and not an independent contractor.223
day.219 She had no equipment and had to use the facilities
The Court of Appeals likewise cited Dumpit-Murillo, which
of Fuji to accomplish her tasks.
involved fixed-term contracts that were successively
The Court of Appeals affirmed the finding of the National renewed for four (4) years.224 This court held that "[t]his
Labor Relations Commission that the successive renewals repeated engagement under contract of hire is indicative of
of Arlene’s contract indicated the necessity and desirability the necessity and desirability of the petitioner’s work in
of her work in the usual course of Fuji’s business. Because private respondent ABC’s business."225
of this, Arlene had become a regular employee with the right
With regard to Fuji’s argument that Arlene’s contract was for
to security of tenure.220 The Court of Appeals ruled that:
a fixed term, the Court of Appeals cited Philips
Here, Espiritu was engaged by Fuji as a stinger [sic] or Semiconductors, Inc. v. Fadriquela226 and held that where
news producer for its Manila Bureau. She was hired for the an employee’s contract "had been continuously extended or
primary purpose of news gathering and reporting to the renewed to the same position, with the same duties and
television network’s headquarters. Espiritu was not remained in the employ without any interruption,"227 then
contracted on account of any peculiar ability or special such employee is a regular employee. The continuous
talent and skill that she may possess which the network renewal is a scheme to prevent regularization. On this
desires to make use of. Parenthetically, ifit were true that basis, the Court of Appeals ruled in favor of Arlene.
211
As stated in Price, et al. v. Innodata Corp., et al.:228 V

The employment status of a person is defined and Whether the Court of Appeals correctly affirmed
prescribed by law and not by what the parties say it should
the National Labor Relations Commission’s finding of illegal
be. Equally important to consider is that a contract of
dismissal
employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions Fuji argues that the Court of Appeals erred when it held that
of applicable statutes are deemed written into the contract, Arlene was illegally dismissed, in view of the non-renewal
and the parties are not at liberty to insulate themselves and contract voluntarily executed by the parties. Fuji also argues
their relationships from the impact of labor laws and that Arlene’s contract merely expired; hence, she was not
regulations by simply contracting with each illegally dismissed.231
229
other. (Citations omitted)
Arlene alleges that she had no choice but to sign the non-
Arlene’s contract indicating a fixed term did not renewal contract because Fuji withheldher salary and
automatically mean that she could never be a regular benefits.
employee. This is precisely what Article 280 seeks to avoid.
The ruling in Brent remains as the exception rather than the With regard to this issue, the Court of Appeals held:
general rule. We cannot subscribe to Fuji’s assertion that Espiritu’s
Further, an employee can be a regular employee with a contract merely expired and that she voluntarily agreed not
to renew the same. Even a cursory perusal of the subject
fixed-term contract. The law does not preclude the
Non-Renewal Contract readily shows that the same was
possibility that a regular employee may opt to have a fixed-
term contract for valid reasons. This was recognized in signed by Espiritu under protest. What is apparent is that
the Non-Renewal Contract was crafted merely as a
Brent: For as long as it was the employee who requested, or
subterfuge to secure Fuji’s position that it was Espiritu’s
bargained, that the contract have a "definite date of
termination," or that the fixed-term contract be freely entered choice not to renew her contract.232
into by the employer and the employee, then the validity of As a regular employee, Arlene was entitled to security of
the fixed-term contract will be upheld.230 tenure and could be dismissed only for just or authorized
causes and after the observance of due process.
212
The right to security of tenureis guaranteed under Article compensation was withheld from him up to the time of his
XIII, Section 3 of the 1987 Constitution: ARTICLE XIII. actual reinstatement.
SOCIAL JUSTICE AND HUMAN RIGHTS
Thus, on the right to security of tenure, no employee shall
.... be dismissed, unless there are just orauthorized causes and
only after compliance with procedural and substantive due
LABOR
process is conducted.
....
Even probationary employees are entitled to the right to
It shall guarantee the rights of all workers to self- security of tenure. This was explained in Philippine Daily
organization, collective bargaining and negotiations, and Inquirer, Inc. v. Magtibay, Jr.:233
peaceful concerted activities, including the right to strike in
Within the limited legal six-month probationary period,
accordance with law. They shall be entitled to security of
probationary employees are still entitled to security of
tenure, humane conditions of work, and a living wage. They
tenure. It is expressly provided in the afore-quoted Article
shall also participate in policy and decision-making
281 that a probationary employee may be terminated only
processes affecting their rights and benefits as may be
on two grounds: (a) for just cause, or (b) when he fails to
provided by law.
qualify as a regular employee in accordance with
Article 279 of the Labor Code also provides for the right to reasonable standards made known by the employer to the
security of tenure and states the following: employee at the time of his engagement.234 (Citation
omitted)
Art. 279. Security of tenure.In cases of regular employment,
the employer shall not terminate the services of an The expiration of Arlene’s contract does not negate the
employee except for a just cause of when authorized by this finding of illegal dismissal by Fuji. The manner by which Fuji
Title. An employee who is unjustly dismissed from work informed Arlene that her contract would no longer be
shall be entitled to reinstatement without loss of seniority renewed is tantamount to constructive dismissal. To make
rights and other privileges and to his full backwages, matters worse, Arlene was asked to sign a letter of
inclusive of allowances, and to his other benefits or their resignation prepared by Fuji.235 The existence of a fixed-
monetary equivalent computed from the time his term contract should not mean that there can be no illegal

213
dismissal. Due process must still be observed in the pre- Book VI, Rule 1, Section 8 of the Omnibus Rules
termination of fixed-term contracts of employment. Implementing the Labor Code provides:

In addition, the Court of Appeals and the National Labor Sec. 8. Disease as a ground for dismissal.– Where the
Relations Commission found that Arlene was dismissed employee suffers from a disease and his continued
because of her health condition. In the non-renewal employment is prohibited by law or prejudicial to his
agreement executed by Fuji and Arlene, it is stated that: healthor to the health of his coemployees, the employer
shall not terminate his employment unless there is a
WHEREAS, the SECOND PARTY is undergoing
certification by a competent public health authority that the
chemotherapy which prevents her from continuing to
disease is of such nature or at such a stage that it cannot be
effectively perform her functions under the said Contract
cured within a period of six (6) months even with proper
such as the timely submission of news and current events
medical treatment. If the disease or ailment can be cured
reports pertaining to the Philippines and travelling [sic] to
within the period, the employer shall not terminate the
the FIRST PARTY’s regional office in
236
employee but shall ask the employee to take a leave. The
Thailand. (Emphasis supplied)
employer shall reinstate such employee to his former
Disease as a ground for termination is recognized under position immediately upon the restoration of his normal
Article 284 of the Labor Code: health.

Art. 284. Disease as ground for termination. An employer For dismissal under Article 284 to bevalid, two requirements
may terminate the services of an employee who has been must be complied with: (1) the employee’s disease cannot
found to be suffering from any disease and whose be cured within six (6) months and his "continued
continued employment is prohibited by law or is prejudicial employment is prohibited by law or prejudicial to his health
to his health as well as to the health of his co-employees: as well as to the health of his co-employees"; and (2)
Provided, That he is paid separation pay equivalent to at certification issued by a competent public health authority
least one (1) month salary or to one-half (1/2) month salary that even with proper medical treatment, the disease cannot
for every year of service, whichever is greater, a fraction of be cured within six (6) months.237 The burden of proving
at least six (6) months being considered as one (1) whole compliance with these requisites is on the
238
year. employer. Noncompliance leads to the conclusion that the
dismissal was illegal.239
214
There is no evidence showing that Arlene was accorded Commission’s decision. However, only backwages were
due process. After informing her employer of her lung included in the dispositive portion because the National
cancer, she was not given the chance to present medical Labor Relations Commission recognized that Arlene had
certificates. Fuji immediately concluded that Arlene could no received separation pay in the amount of US$7,600.00. The
longer perform her duties because of chemotherapy. It did Court of Appeals affirmed the National Labor Relations
not ask her how her condition would affect her work. Neither Commission’s decision but modified it by awarding moral
did it suggest for her to take a leave, even though she was and exemplary damages and attorney’s fees, and all other
entitled to sick leaves. Worse, it did not present any benefits Arlene was entitled to under her contract with Fuji.
certificate from a competent public health authority. What The Court of Appeals also ordered reinstatement, reasoning
Fuji did was to inform her thather contract would no longer that the grounds when separation pay was awarded in lieu
be renewed, and when she did not agree, her salary was of reinstatement were not proven.241
withheld. Thus, the Court of Appeals correctly upheld the
Article 279 of the Labor Code provides:
finding of the National Labor Relations Commission that for
failure of Fuji to comply with due process, Arlene was Art. 279. Security of tenure. In cases of regular employment,
illegally dismissed.240 the employer shall not terminate the services of an
employee except for a just cause or when authorized by this
VI
Title. An employee who is unjustly dismissed from work
Whether the Court of Appeals properly modified shall be entitled to reinstatement without loss of seniority
the National Labor Relations Commission’s decision rights and other privileges and to his full backwages,
when it awarded reinstatement, damages, and attorney’s inclusive of allowances, and to his other benefits or their
fees monetary equivalent computed from the time his
compensation was withheld from him up to the time of his
The National Labor Relations Commission awarded
actual reinstatement. (Emphasis supplied)
separation pay in lieu of reinstatement, on the ground that
the filing of the complaint for illegal dismissal may have The Court of Appeals’ modification of the National Labor
seriously strained relations between the parties. Backwages Relations Commission’s decision was proper because the
were also awarded, to be computed from date of dismissal law itself provides that illegally dismissed employees are
until the finality of the National Labor Relations
215
entitled to reinstatement, backwages including allowances, The Court of Appeals reasoned that strained relations are a
and all other benefits. question of fact that must be supported by evidence.246No
evidence was presented by Fuji to prove that reinstatement
On reinstatement, the National Labor Relations Commission
was no longer feasible. Fuji did not allege that it ceased
ordered payment of separation pay in lieu of reinstatement,
operations or that Arlene’s position was no longer available.
reasoning "that the filing of the instant suit may have
Nothing in the records shows that Arlene’s reinstatement
seriously abraded the relationship of the parties so as to
would cause an atmosphere of antagonism in the
render reinstatement impractical."242 The Court of Appeals
workplace. Arlene filed her complaint in 2009. Five (5) years
reversed this and ordered reinstatement on the ground that
are not yet a substantial period247 to bar reinstatement.
separation pay in lieu of reinstatement is allowed only in
several instances such as (1) when the employer has On the award of damages, Fuji argues that Arlene is
ceased operations; (2) when the employee’s position is no notentitled to the award of damages and attorney’s fees
longer available; (3) strained relations; and (4) a substantial because the non-renewal agreement contained a quitclaim,
period has lapsed from date of filing to date of finality.243 which Arlene signed. Quitclaims in labor cases do not bar
illegally dismissed employees from filing labor complaints
On this matter, Quijano v. Mercury Drug Corp.244 is
and money claim. As explained by Arlene, she signed the
instructive:
non-renewal agreement out of necessity. In Land and
Well-entrenched is the rule that an illegally dismissed Housing Development Corporation v. Esquillo,248 this court
employee is entitled to reinstatement as a matter of right. . . explained: We have heretofore explained that the reason
. why quitclaims are commonly frowned upon as contrary to
public policy, and why they are held to be ineffective to bar
To protect labor’s security of tenure, we emphasize that the
claims for the full measure of the workers’ legal rights, is the
doctrine of "strained relations" should be strictly applied so fact that the employer and the employee obviously do not
as not to deprive an illegally dismissed employee of his right stand on the same footing. The employer drove the
to reinstatement. Every labor dispute almost always results
employee to the wall. The latter must have to get holdof
in "strained relations" and the phrase cannot be given an
money. Because, out of a job, he had to face the harsh
overarching interpretation, otherwise, an unjustly dismissed necessities of life. He thus found himself in no position to
employee can never be reinstated.245 (Citations omitted)

216
resist money proffered. His, then, is a case of adherence, asking for patience and understanding and your response
not of choice.249 was not to RENEW my contract.252

With regard to the Court of Appeals’ award of moral and Apart from Arlene’s illegal dismissal, the manner of her
exemplary damages and attorney’s fees, this court has dismissal was effected in an oppressive approach withher
recognized in several cases that moral damages are salary and other benefits being withheld until May 5, 2009,
awarded "when the dismissal is attended by bad faith or when she had no other choice but to sign the non-renewal
fraud or constitutes an act oppressive to labor, or is done in contract. Thus, there was legal basis for the Court of
a manner contrary to good morals, good customs or public Appeals to modify the National Labor Relations
policy."250 On the other hand, exemplary damages may be Commission’s decision.
awarded when the dismissal was effected "in a wanton,
However, Arlene receivedher salary for May
oppressive or malevolent manner."251
2009.253 Considering that the date of her illegal dismissal
The Court of Appeals and National Labor Relations was May 5, 2009,254 this amount may be subtracted from
Commission found that after Arlene had informed Fuji of her the total monetary award. With regard to the award of
cancer, she was informed that there would be problems in attorney’s fees, Article 111 of the Labor Code states that
renewing her contract on account of her condition. This "[i]n cases of unlawful withholding of wages, the culpable
information caused Arlene mental anguish, serious anxiety, party may be assessed attorney’s fees equivalent to ten
and wounded feelings that can be gleaned from the tenor of percent of the amount of wages recovered." Likewise, this
her email dated March 11, 2009. A portion of her email court has recognized that "in actions for recovery of wages
reads: or where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of
I WAS SO SURPRISED . . . that at a time when I am at my
attorney’s fees is legallyand morally justifiable."255 Due to
lowest, being sick and very weak, you suddenly came to
her illegal dismissal, Arlene was forced to litigate.
deliver to me the NEWS that you will no longer renew my
contract.1awp++i1 I knew this will come but I never thought In the dispositive portion of its decision, the Court of
that you will be so ‘heartless’ and insensitive to deliver that Appeals awarded legal interest at the rate of 12% per
news just a month after I informed you that I am sick. I was annum.256 In view of this court’s ruling in Nacar v. Gallery

217
Frames,257 the legal interest shall be reducd to a rate of 6% CARPIO MORALES, J.:
per annum from July 1, 2013 until full satisfaction.
Petitioner Philippine Airlines as Owner, and Synergy
WHEREFORE, the petition is DENIED. The assailed Court Services Corporation (Synergy) as Contractor, entered into
of Appeals decision dated June 25, 2012 is AFFIRMED with an Agreement1 on July 15, 1991 whereby Synergy
the modification that backwages shall be computed from undertook to "provide loading, unloading, delivery of
June 2009. Legal interest shall be computed at the rate of baggage and cargo and other related services to and from
6% per annum of the total monetary award from date of [petitioner]'s aircraft at the Mactan Station."2
finality of this decision until full satisfaction.
The Agreement specified the following "Scope of Services"
SO ORDERED. of Contractor Synergy:

G.R. No. 146408 February 29, 2008 1.2 CONTRACTOR shall furnish all the necessary capital,
workers, loading, unloading and delivery materials, facilities,
PHILIPPINE AIRLINES, INC., petitioner, supplies, equipment and tools for the satisfactory
vs. performance and execution of the following services (the
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, Work):
JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, a. Loading and unloading of baggage and cargo to and from
RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. the aircraft;
CAPIN, RAMEL BERNARDES, LORENZO BUTANAS,
b. Delivering of baggage from the ramp to the baggage
BENSON CARESUSA, JEFFREY LLENOS, ROQUE
claim area;
PILAPIL, ANTONIO M. PAREJA, CLEMENTE R.
LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, c. Picking up of baggage from the baggage sorting area to
CHERRIE ALEGRES, BENEDICTO AUXTERO, the designated parked aircraft;
EDUARDO MAGDADARAUG, NELSON M. DULCE, and
d. Delivering of cargo unloaded from the flight to cargo
ALLAN BENTUZAL, respondents.
terminal;
DECISION

218
e. Other related jobs (but not janitorial functions) as may be 10.2 Should CONTRACTOR fail to improve the
required and necessary; services within the period stated above or should
CONTRACTOR breach the terms of this Agreement and fail
CONTRACTOR shall perform and execute the
or refuse to perform the Work in such a manner as will be
aforementioned Work at the following areas located at
consistent with the achievement of the result therein
Mactan Station, to wit:
contracted for or in any other way fail to comply strictly with
a. Ramp Area any terms of this Agreement, OWNER at its option, shall
have the right to terminate this Agreement and to make
b. Baggage Claim Area other arrangements for having said Work performed and
c. Cargo Terminal Area, and pursuant thereto shall retain so much of the money held on
the Agreement as is necessary to cover the OWNER's costs
d. Baggage Sorting Area3 (Underscoring supplied) and damages, without prejudice to the right of OWNER to
And it expressly provided that Synergy was "an independent seek resort to the bond furnished by CONTRACTOR should
contractor and . . . that there w[ould] be no employer- the money in OWNER's possession be insufficient.
employee relationship between CONTRACTOR and/or its x x x x (Underscoring supplied)
employees on the one hand, and OWNER, on the other."4
Except for respondent Benedicto Auxtero (Auxtero), the rest
On the duration of the Agreement, Section 10 thereof of the respondents, who appear to have been assigned by
provided: Synergy to petitioner following the execution of the July 15,
10. 1 Should at any time OWNER find the services herein 1991 Agreement, filed on March 3, 1992 complaints before
undertaken by CONTRACTOR to be unsatisfactory, it shall the NLRC Regional Office VII at Cebu City against
notify CONTRACTOR who shall have fifteen (15) days from petitioner, Synergy and their respective officials
such notice within which to improve the services. If for underpayment, non-payment of premium pay for
CONTRACTOR fails to improve the services under this holidays, premium pay for rest days, service incentive leave
Agreement according to OWNER'S specifications and pay, 13th month pay and allowances, and for regularization
standards, OWNER shall have the right to terminate this of employment status with petitioner, they claiming to be
Agreement immediately and without advance notice. "performing duties for the benefit of [petitioner] since their
job is directly connected with [its] business x x x."5
219
Respondent Auxtero had initially filed a complaint against THREE HUNDRED FIFTY NINE PESOS AND EIGHTY
petitioner and Synergy and their respective officials for SEVEN CENTAVOS (P322,359.87) are computed in detail
regularization of his employment status. Later alleging that by our Fiscal Examiner which computation is hereto
he was, without valid ground, verbally dismissed, he filed a attached to form part of this decision.
complaint against petitioner and Synergy and their
The rest of the claims are hereby ordered dismissed for lack
respective officials for illegal dismissal and reinstatement
of merit.8 (Underscoring supplied)
with full backwages.6
On appeal by respondents, the NLRC, Fourth Division,
The complaints of respondents were consolidated.
Cebu City, vacated and set aside the decision of the Labor
By Decision7 of August 29, 1994, Labor Arbiter Dominador Arbiter by Decision9 of January 5, 1996, the fallo of which
Almirante found Synergy an independent contractor and reads:
dismissed respondents' complaint for regularization against
WHEREFORE, the Decision of the Labor Arbiter Dominador
petitioner, but granted their money claims. The fallo of the
A. Almirante, dated August 29, 1994, is hereby VACATED
decision reads:
and SET ASIDE and judgment is hereby rendered:
WHEREFORE, foregoing premises considered, judgment is
1. Declaring respondent Synergy Services Corporation to be
hereby rendered as follows:
a 'labor-only' contractor;
(1) Ordering respondents PAL and Synergy jointly and
2. Ordering respondent Philippine Airlines to accept, as its
severally to pay all the complainants herein their 13thmonth
regular employees, all the complainants, . . . and to give
pay and service incentive leave benefits;
each of them the salaries, allowances and other
xxxx employment benefits and privileges of a regular
employee under the Collective Bargaining Agreement
(3) Ordering respondent Synergy to pay complainant
subsisting during the period of their employment;
Benedicto Auxtero a financial assistance in the amount of
P5,000.00. xxxx

The awards hereinabove enumerated in the aggregate total 4. Declaring the dismissal of complainant Benedicto
amount of THREE HUNDRED TWENTY-TWO THOUSAND Auxtero to be illegal and ordering his reinstatement as
220
helper or utility man with respondent Philippine Airlines, with II.
full backwages, allowances and other benefits and
. . . IN AFFIRMING THE RULING OF THE NATIONAL
privileges from the time of his dismissal up to his actual
LABOR RELATIONS COMMISSION ORDERING THE
reinstatement; and
REINSTATEMENT OF RESPONDENT AUXTERO
5. Dismissing the appeal of respondent Synergy Services DESPITE THE ABSENCE [OF] ANY FACTUAL FINDINGIN
Corporation, for lack of merit.10 (Emphasis and underscoring THE DECISION THAT PETITIONER ILLEGALLY
supplied) TERMINATED HIS EMPLOYMENT.

Only petitioner assailed the NLRC decision via petition for III.
certiorari before this Court.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND
By Resolution11 of January 25, 1999, this Court referred the GRAVE ERROR IN UPHOLDING THE DECISION OF THE
case to the Court of Appeals for appropriate action and NATIONAL LABOR RELATIONS COMMISSION WHICH
disposition, conformably with St. Martin Funeral Homes v. COMPELLED THE PETITIONER TO EMPLOY THE
National Labor Relations Commission which was RESPONDENTS AS REGULAR EMPLOYEES DESPITE
promulgated on September 16, 1998. THE FACT THAT THEIR SERVICES ARE IN EXCESS OF
PETITIONER COMPANY'S OPERATIONAL
The appellate court, by Decision of September 29, 2000, 14
REQUIREMENTS. (Underscoring supplied)
affirmed the Decision of the NLRC.12 Petitioner's motion for
reconsideration having been denied by Resolution of Petitioner argues that the law does not prohibit an employer
December 21, 2000,13 the present petition was filed, faulting from engaging an independent contractor, like Synergy,
the appellate court which has substantial capital in carrying on an independent
business of contracting, to perform specific jobs.
I.
Petitioner further argues that its contracting out to Synergy
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS
various services like janitorial, aircraft cleaning, baggage-
COMMISSION DECISION WHICH IMPOSED THE
handling, etc., which are directly related to its business,
RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN
does not make respondents its employees.
PETITIONER AND THE RESPONDENTS HEREIN.

221
Petitioner furthermore argues that none of the four (4) ART. 106. CONTRACTOR OR SUBCONTRACTOR. -
elements of an employer-employee relationship between Whenever an employer enters into a contract with another
petitioner and respondents, viz: selection and engagement person for the performance of the former's work, the
of an employee, payment of wages, power of dismissal, and employees of the contractor and of the latter's
the power to control employee's conduct, is present in the subcontractor, if any, shall be paid in accordance with the
case.15 provisions of this Code.

Finally, petitioner avers that reinstatement of respondents In the event that the contractor or subcontractor fails to pay
had been rendered impossible because it had reduced its the wages of his employees in accordance with this Code,
personnel due to heavy losses as it had in fact terminated the employer shall be jointly and severally liable with his
its service agreement with Synergy effective June 30, contractor or subcontractor to such employees to the extent
199816 as a cost-saving measure. of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
The decision of the case hinges on a determination of
employed by him.
whether Synergy is a mere job-only contractor or a
legitimate contractor. If Synergy is found to be a mere job- The Secretary of Labor may, by appropriate regulations,
only contractor, respondents could be considered as regular restrict or prohibit the contracting out of labor to protect the
employees of petitioner as Synergy would then be a mere rights of workers established under the Code. In so
agent of petitioner in which case respondents would be prohibiting or restricting, he may make appropriate
entitled to all the benefits granted to petitioner's regular distinctions between labor-only contracting and job
employees; otherwise, if Synergy is found to be a legitimate contracting as well as differentiations within these types of
contractor, respondents' claims against petitioner must fail contracting and determine who among the parties involved
as they would then be considered employees of Synergy. shall be considered the employer for purposes of this Code,
to prevent any violation or circumvention of any provision of
The statutory basis of legitimate contracting or
this Code.
subcontracting is provided in Article 106 of the Labor Code
which reads: 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,
222
machineries, work premises, among others, AND the Section 5. Prohibition against labor-only contracting. Labor-
workers recruited and placed by such person only contracting is hereby declared prohibited. For this
are performing activities which are directly related to purpose, labor-only contracting shall refer to an
the principal business of such employer. In such arrangement where the contractor or subcontractor merely
cases, the person or intermediary shall be recruits, supplies or places workers to perform a job, work
considered merely as an agent of the employer who or service for a principal, and any of the following elements
shall be responsible to the workers in the same manner are [sic] present:
and extent as if the latter were directly employed by
(i) The contractor or subcontractor does not have
him. (Emphasis, capitalization and underscoring supplied)
substantial capital or investment which relates to the job,
Legitimate contracting and labor-only contracting are work or service to be performed and the employees
defined in Department Order (D.O.) No. 18-02, Series of recruited, supplied or placed by such contractor or
2002 (Rules Implementing Articles 106 to 109 of the Labor subcontractor are performing activities which are directly
Code, as amended) as follows: related to the main business of the principal; OR

Section 3. Trilateral relationship in contracting (ii) The contractor does not exercise the right to control
arrangements. In legitimate contracting, there exists a over the performance of the work of the contractual
trilateral relationship under which there is a contract for a employee. (Emphasis, underscoring and capitalization
specific job, work or service between the principal and the supplied)
contractor or subcontractor, and a contract of employment
"Substantial capital or investment" and the "right to control"
between the contractor or subcontractor and its workers.
are defined in the same Section 5 of the Department Order
Hence, there are three parties involved in these
as follows:
arrangements, the principal which decides to farm out a job
or service to a contractor or subcontractor, the contractor or "Substantial capital or investment" refers to capital stocks
subcontractor which has the capacity to independently and subscribed capitalization in the case of
undertake the performance of the job, work or service, corporations, tools, equipment, implements, machineries
and the contractual workersengaged by the contractor or and work premises, actually and directly used by the
subcontractor to accomplish the job, work or service.
(Emphasis and underscoring supplied)
223
contractor or subcontractor in the performance or bank, a big local bank, a hospital center, government
completion of the job, work or service contracted out. agencies, etc."

The "right to control" shall refer to the right reserved to the In stark contrast to the case at bar, while petitioner
person for whom the services of the contractual workers are steadfastly asserted before the Labor Arbiter and the NLRC
performed, to determine not only the end to be achieved, that Synergy has a substantial capital to engage in
but also the manner and means to be used in reaching that legitimate contracting, it failed to present evidence thereon.
end. (Emphasis and underscoring supplied) As the NLRC held:

From the records of the case, it is gathered that the work The decision of the Labor Arbiter merely mentioned on page
performed by almost all of the respondents - loading and 5 of his decision that respondent SYNERGY has substantial
unloading of baggage and cargo of passengers - is directly capital, but there is no showing in the records as to how
related to the main business of petitioner. And the much is that capital. Neither had respondents shown that
equipment used by respondents as station loaders, such as SYNERGY has such substantial capital. x x
trailers and conveyors, are owned by petitioner.17 21
x (Underscoring supplied)

Petitioner asserts, however, that mere compliance with It was only after the appellate court rendered its challenged
substantial capital requirement suffices for Synergy to be Decision of September 29, 2002 when petitioner, in its
considered a legitimate contractor, citing Neri v. National Motion for Reconsideration of the decision, sought to prove,
Labor Relations Commission.18 Petitioner's reliance on said for the first time, Synergy's substantial capitalization by
case is misplaced. attaching photocopies of Synergy's financial statements,
e.g., balance sheets, statements of income and retained
In Neri, the Labor Arbiter and the NLRC both determined
earnings, marked as "Annexes 'A' - 'A-4.'"22
that Building Care Corporation had a capital stock of P1
million fully subscribed and paid for.19 The corporation's More significantly, however, is that respondents worked
status as independent contractor had in fact been previously alongside petitioner's regular employees who were
confirmed in an earlier case20 by this Court which found it to performing identical work.23 As San Miguel Corporation v.
be serving, among others, a university, an international Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25teach,
such is an indicium of labor-only contracting.

224
For labor-only contracting to exist, Section 5 of D.O. No. 18- While petitioner claimed that it was Synergy's supervisors
02 which requires any of two elements to be present is, for who actually supervised respondents, it failed to present
convenience, re-quoted: evidence thereon. It did not even identify who were the
Synergy supervisors assigned at the workplace.
(i) The contractor or subcontractor does not
have substantial capital or investment which relates to Even the parties' Agreement does not lend support to
the job, work or service to be performed and the employees petitioner's claim, thus:
recruited, supplied or placed by such contractor or
Section
subcontractor are performing activities which are directly
6. Qualified and Experienced Worker: Owner's Right to Dis
related to the main business of the principal, OR
miss Workers.
(ii) The contractor does not exercise the right to
CONTRACTOR shall employ capable and experienced
control over the performance of the work of the contractual
workers and foremen to carry out the loading, unloading and
employee. (Emphasis and CAPITALIZATION supplied)
delivery Work as well as provide all equipment, loading,
Even if only one of the two elements is present then, there unloading and delivery equipment, materials, supplies and
is labor-only contracting. tools necessary for the performance of the Work.
CONTRACTOR shall upon OWNER'S request furnish the
The control test element under the immediately-quoted
latter with information regarding the qualifications of the
paragraph (ii), which was not present in the old
former's workers, to prove their capability and
Implementing Rules (Department Order No. 10, Series of
experience. Contractor shall require all its workers,
1997),26 echoes the prevailing jurisprudential
employees, suppliers and visitors to comply with
trend27elevating such element as a primary determinant of
OWNER'S rules, regulations, procedures and directives
employer-employee relationship in job contracting
relative to the safety and security of OWNER'S
agreements.
premises, properties and operations. For this purpose,
One who claims to be an independent contractor has to CONTRACTOR shall furnish its employees and
prove that he contracted to do the work according to his workers identification cards to be countersigned by
own methods and without being subject to the employer's OWNER and uniforms to be approved by OWNER.
control except only as to the results.28 OWNER may require CONTRACTOR to dismiss
225
immediately and prohibit entry into OWNER'S provisions are not valid determinants of the existence of
premises of any person employed therein by such relationship. For it is the totality of the facts and
CONTRACTOR who in OWNER'S opinion is surrounding circumstances of the case33 which is
incompetent or misconducts himself or does not determinative of the parties' relationship.
comply with OWNER'S reasonable instructions and
Respecting the dismissal on November 15, 199234 of
requests regarding security, safety and other matters and
Auxtero, a regular employee of petitioner who had been
such person shall not again be employed to perform the
working as utility man/helper since November 1988, it is not
services hereunder without OWNER'S
legally justified for want of just or authorized cause therefor
permission.29 (Underscoring partly in the original and partly
and for non-compliance with procedural due process.
supplied; emphasis supplied)
Petitioner's claim that he abandoned his work does not
Petitioner in fact admitted that it fixes the work schedule of persuade.35 The elements of abandonment being (1) the
respondents as their work was dependent on the frequency failure to report for work or absence without valid or
of plane arrivals.30 And as the NLRC found, petitioner's justifiable reason, and (2) a clear intention to sever the
managers and supervisors approved respondents' weekly employer-employee relationship manifested by some overt
work assignments and respondents and other regular PAL acts,36 the onus probandi lies with petitioner which,
employees were all referred to as "station attendants" of the however, failed to discharge the same.
cargo operation and airfreight services of petitioner.31
Auxtero, having been declared to be a regular employee of
Respondents having performed tasks which are usually petitioner, and found to be illegally dismissed from
necessary and desirable in the air transportation business of employment, should be entitled to salary differential37 from
petitioner, they should be deemed its regular employees the time he rendered one year of service until his dismissal,
and Synergy as a labor-only contractor.32 reinstatement plus backwages until the finality of this
decision.38 In view, however, of the long period of time39 that
The express provision in the Agreement that Synergy was
had elapsed since his dismissal on November 15, 1992, it
an independent contractor and there would be "no
would be appropriate to award separation pay of one (1)
employer-employee relationship between [Synergy] and/or
month salary for each year of service, in lieu of
its employees on one hand, and [petitioner] on the other
reinstatement.40
hand" is not legally binding and conclusive as contractual
226
As regards the remaining respondents, the Court affirms the the assailed decision, respondents are deemed to be
ruling of both the NLRC and the appellate court, ordering continuously employed by petitioner, for purposes of
petitioner to accept them as its regular employees and to computing the wages and benefits due respondents.
give each of them the salaries, allowances and other
Finally, it must be stressed that respondents, having been
employment benefits and privileges of a regular employee
declared to be regular employees of petitioner, Synergy
under the pertinent Collective Bargaining Agreement.
being a mere agent of the latter, had acquired security of
Petitioner claims, however, that it has become impossible tenure. As such, they could only be dismissed by petitioner,
for it to comply with the orders of the NLRC and the Court of the real employer, on the basis of just or authorized cause,
Appeals, for during the pendency of this case, it was forced and with observance of procedural due process.
to reduce its personnel due to heavy losses caused by
WHEREFORE, the Court of Appeals Decision of September
economic crisis and the pilots' strike of June 5,
29, 2000 is AFFIRMED with MODIFICATION.
1998.41 Hence, there are no available positions where
respondents could be placed. Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
And petitioner informs that "the employment contracts of all (a) accept respondents ENRIQUE LIGAN, EMELITO
if not most of the respondents . . . were terminated by SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD
Synergy effective 30 June 1998 when petitioner terminated GONCER, NONILON PILAPIL, AQUILINO YBANEZ,
its contract with Synergy."42 BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P.
CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES,
Other than its bare allegations, petitioner presented nothing
LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
to substantiate its impossibility of compliance. In fact,
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA,
petitioner waived this defense by failing to raise it in its
CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO
Memorandum filed on June 14, 1999 before the Court of
TUNACAO, CHERRIE ALEGRES, EDUARDO
Appeals.43 Further, the notice of termination in 1998 was in
MAGDADARAUG, NELSON M. DULCE and ALLAN
disregard of a subsisting temporary restraining order44to
BENTUZAL as its regular employees in their same or
preserve the status quo, issued by this Court in 1996 before
substantially equivalent positions, and pay the wages and
it referred the case to the Court of Appeals in January 1999.
benefits due them as regular employees plus salary
So as to thwart the attempt to subvert the implementation of
227
differential corresponding to the difference between the ROLANDO ESPINA, BERNARDINO REGIDOR, ARNELIO
wages and benefits given them and those granted to SUMALINOG, GUMERSINDO ALCONTIN, LORETO
petitioner's other regular employees of the same rank; and NUEZ, JOEBE BOY DAYON, CONRADO MESANQUE,
MARCELO PESCADOR, MARCELINO JABAGAT,
(b) pay respondent BENEDICTO AUXTERO salary
VICENTE DEVILLERES, VICENTE ALIN, RODOLFO
differential; backwages from the time of his dismissal until
PAHUGOT, RUEL NAVARES, DANILO ANABIEZA, ALEX
the finality of this decision; and separation pay, in lieu of
JUEN, JUANITO GARCES, SILVINO LIMBAGA, AURELIO
reinstatement, equivalent to one (1) month pay for every
JURPACIO, JOVITO LOON, VICTOR TENEDERO,
year of service until the finality of this decision.
SASING MORENO, WILFREDO HORTEZUELA,
There being no data from which this Court may determine JOSELITO MELENDEZ, ALFREDO GESTOPA, REGINO
the monetary liabilities of petitioner, the case is GABUYA, JORGE GAMUZARNO, LOLITO COCIDO,
REMANDED to the Labor Arbiter solely for that purpose. EFRAIM YUBAL, VENERANDO ROAMAR, GERARDO
BUTALID, HIPOLITO VIDAS, VENGELITO FRIAS,
SO ORDERED.
VICENTE CELACIO, CORLITO PESTAAS, ERVIN
[G.R. No. 144672. July 10, 2003] HYROSA, ROMMEL GUERERO, RODRIGO ENERLAS,
FRANCISCO CARBONILLA, NICANOR CUIZON, PEDRO
San Miguel Corporation, petitioner, vs. MAERC BRIONES, RODOLFO CABALHUG, TEOFILO RICARDO,
Integrated Services, Inc.; and Emerberto Orque, DANILO R. DIZON, ALBERTO EMBONG, ALFONSO
ROGELIO PRADO, JR., EDDIE SELLE, ALEJANDRO ECHAVEZ, GONZALO RORACEA, MARCELO
ANNABIEZA, ANNIAS JUAMO-AS, CONSORCIO CARACINA, RAUL BORRES, LINO TONGALAMOS,
MANLOLOYO, ANANIAS ALCONTIN, REY GESTOPA, ARTEMIO BONGO, JR., ROY AVILA, MELCHOR
EDGARDO NUEZ, JUNEL CABATINGAN, PAUL FREGLO, RAUL CABILLADA, EDDIE CATAB,
DUMAQUETA, FELIMON ECHAVEZ, VITO SEALANA, MELENCIO DURANO, ALLAN RAGO, DOMINADOR
DENECIA PALAO, ROBERTO LAPIZ, BALTAZAR LABIO, CAPARIDA, JOVITO CATAB, ALBERT LASPIAS, ALEX
LEONARDO BONGO, EL CID ICALINA, JOSE ANABIEZA, NESTOR REYNANTE, EULOGIO GESTOPA,
DIOCAMPO, ADELO CANTILLAS, ISAIAS BRANZUELA, MARIO BOLO, EDERLITO A. BALOCANO, JOEL
RAMON ROSALES, GAUDENCIO PESON, HECTOR PEPITO, REYNALDO LUDIA, MANUEL CINCO, ALLAN
CABAOG, EDGARDO DAGMAYAN, ROGELIO CRUZ, AGUSTIN, PABLITO POLEGRATES, CLYDE PRADO,
228
DINDO MISA, ROGER SASING, RAMON ARCALLANA, BINGAS, ROSALIO DURAN, SR., ROSALIO DURAN, JR.,
GABRIEL SALAS, EDWIN SASAN, DIOSDADO ROMEO DURAN, ANTONIO ABELLA, MARIANO
BARRIGA, MOISES SASAN, SINFORIANO CANTAGO, REPOLLO, POLEGARPO DEGAMO, MARIO CEREZA,
LEONARDO MARTURILLAS, MARIO RANIS, ANTONIO LAOROMILLA, PROCTUSO MAGALLANES,
ALEJANDRO RANIDO, JEROME PRADO, RAUL OYAO, ELADIO TORRES, WARLITO DEMANA, HENRY
VICTOR CELACIO, GERALDO ROQUE, ZOSIMO GEDARO, DOISEDERIO GEMPERAO, ANICETO
CARARATON, VIRGILIO ZANORIA, JOSE ZANORIA, GEMPERAO, JERRY CAPAROSO, SERLITO NOYNAY,
ALLAN ZANORIA, VICTORINO SENO, TEODULO LUCIANO RECOPELACION, JUANITO GARCES,
JUMAO-AS, ALEXANDER HERA, ANTHONY ARANETA, FELICIANO TORRES, RANILO VILLAREAL, FERMIN
ALDRIN SUSON, VICTOR VERANO, RUEL ALIVIANO, JUNJIE LAVISTE, TOMACITO DE CASTRO,
SUFRERENCIA, ALFRED NAPARATE, WENCESLAO JOSELITO CAPILINA, SAMUEL CASQUEJO,
BACLOHON, EDUARDO LANGITA, FELIX ORDENEZA, LEONARDO NATAD, BENJAMIN SAYSON, PEDRO
ARSENIO LOGARTA, EDUARDO DELA VEGA, INOC, EDWARD FLORES, EDWIN SASAN, JOSE REY
JOVENTINO CANOOG, ROGELIO ABAPO, RICARDO INOT, EDGAR CORTES, ROMEO LOMBOG, NICOLAS
RAMAS, JOSE BANDIALAN, ANTONIO BASALAN, RIBO, JAIME RUBIN, ORLANDO REGIS, RICKY
LYNDON BASALAN, WILFREDO ALIVIANO, ALCONZA, RUDY TAGALOG, VICTORINO TAGALOG,
BIENVENIDO ROSARIO, JESUS CAPANGPANGAN, EDWARD COLINA, RONIE GONZAGA, PAUL
RENATO MENDOZA, ALEJANDRO CATANDEJAN, CABILLADA, WILFREDO MAGALONA, JOEL PEPITO,
RUBEN TALABA, FILEMON ECHAVEZ, MARCELINO PROSPERO MAGLASANG, ALLAN AGUSTIN, FAUSTO
CARACENA, IGNACIO MISA, FELICIANO AGBAY, BARGAYO, NOMER SANCHEZ, JOLITO ALIN, BIRNING
VICTOR MAGLASANG, ARTURO HEYROSA, ALIPIO REGIDOR, GARRY DIGNOS, EDWIN DIGNOS, DARIO
TIROL, ROSENDO MONDARES, ANICETO LUDIA, DIGNOS, ROGELIO DIGNOS, JIMMY CABIGAS,
REYNALDO LAVANDERO, REUYAN HERCULANO, FERNANDO ANAJAO, ALEX FLORES, FERNANDO
TEODULO NIQUE, EMERBERTO ORQUE, ZOSIMO REMEDIO, TOTO MOSQUIDA, ALBERTO YAGONIA,
BAOBAO, MEDARDO SINGSON, ANTONIO VICTOR BARIQUIT, IGNACIO MISA, ELISEO
PATALINGHUG, ERNESTO SINGSON, ROBERTO VILLARENO, MANUEL LAVANDERO, VIRCEDE, MARIO
TORRES, CESAR ESCARIO, LEODEGARIO DOLLECIN, RANIS, JAIME RESPONSO, MARIANITO AGUIRRE,
ALBERTO ANOBA, RODRIGO BISNAR, ZOSIMO MARCIAL HERUELA, GODOFREDO TUACAO,
229
PERFECTO REGIS, ROEL DEMANA, ELMER CASTILLO, BELLOSILLO , J.:
WINEFREDO CALAMOHOY, RUDY LUCERNAS,
TWO HUNDRED NINETY-ONE (291) workers filed their
ANTONIO CAETE, EFRAIM YUBAL, JESUS
complaints (nine [9] complaints in all) against San Miguel
CAPANGPANGAN, DAMIAN CAPANGPANGAN,
Corporation (petitioner herein) and Maerc Integrated
TEOFILO CAPANGPANGAN, NILO CAPANGPANGAN,
Services, Inc. (respondent herein), for illegal dismissal,
CORORENO CAPANGPANGAN, EMILIO MONDARES,
underpayment of wages, non-payment of service incentive
PONCIANO AGANA, VICENTE DEVILLERES, MARIO
leave pays and other labor standards benefits, and for
ALIPAN, ROMANITO ALIPAN, ALDEON ROBINSON,
separation pays from 25 June to 24 October 1991. The
FORTUNATO SOCO, CELSO COMPUESTO, WILLIAM
complainants alleged that they were hired by San Miguel
ITORALDE, ANTONIO PESCADOR, JEREMIAS
Corporation (SMC) through its agent or intermediary Maerc
RONDERO, ESTROPIO PUNAY, LEOVIJILDO PUNAY,
Integrated Services, Inc. (MAERC) to work in two (2)
ROMEO QUILONGQUILONG, WILFREDO GESTOPA,
designated workplaces in Mandaue City: one, inside the
ELISEO SANTOS, HENRY ORIO, JOSE YAP, NICANOR
SMC premises at the Mandaue Container Services, and
MANAYAGA, TEODORO SALINAS, ANICETO
another, in the Philphos Warehouse owned by
MONTERO, RAFAELITO VERZOSA, ALEJANDRO
MAERC. They washed and segregated various kinds of
RANIDO, HENRY TALABA, ROMULO TALABA,
empty bottles used by SMC to sell and distribute its beer
DIOSDADO BESABELA, SYLVESTRE TORING,
beverages to the consuming public. They were paid on a
EDILBERTO PADILLA, ALLAN HEROSA, ERNESTO
per piece or pakiao basis except for a few who worked as
SUMALINOG, ARISTON VELASCO, JR., FERNANDO
checkers and were paid on daily wage basis.
LOPEZ, ALFONSO ECHAVEZ, NICANOR CUIZON,
DOMINADOR CAPARIDA, ZOSIMO CORORATION, Complainants alleged that long before SMC contracted the
ARTEMIO LOVERANES, DIONISIO YAGONIA, VICTOR services of MAERC a majority of them had already been
CELOCIA, HIPOLITO VIDAS, TEODORO ARCILLAS, working for SMC under the guise of being employees of
MARCELINO HABAGAT, GAUDIOSO LABASAN, another contractor, Jopard Services, until the services of the
LEOPOLDO REGIS, AQUILLO DAMOLE, WILLY ROBLE latter were terminated on 31 January 1988.
and NIEL ZANORIA, respondents.
SMC denied liability for the claims and averred that the
DECISION complainants were not its employees but of MAERC, an
230
independent contractor whose primary corporate purpose MAERC for its part admitted that it recruited the
was to engage in the business of cleaning, receiving, complainants and placed them in the bottle segregation
sorting, classifying, etc., glass and metal containers. project of SMC but maintained that it was only conveniently
used by SMC as an intermediary in operating the project or
It appears that SMC entered into a Contract of Services with
work directly related to the primary business concern of the
MAERC engaging its services on a non-exclusive basis for
latter with the end in view of avoiding its obligations and
one (1) year beginning 1 February 1988. The contract was
responsibilities towards the complaining workers.
renewed for two (2) more years in March 1989. It also
provided for its automatic renewal on a month-to-month The nine (9) cases[1] were consolidated. On 31 January
basis after the two (2)-year period and required that a 1995 the Labor Arbiter rendered a decision holding that
written notice to the other party be given thirty (30) days MAERC was an independent contractor.[2] He dismissed the
prior to the intended date of termination, should a party complaints for illegal dismissal but ordered MAERC to pay
decide to discontinue with the contract. complainants' separation benefits in the total amount
of P2,334,150.00. MAERC and SMC were also ordered to
In a letter dated 15 May 1991, SMC informed MAERC of the
jointly and severally pay complainants their wage
termination of their service contract by the end of June
differentials in the amount of P845,117.00 and to pay
1991. SMC cited its plans to phase out its segregation
attorney's fees in the amount of P317,926.70.
activities starting 1 June 1991 due to the installation of labor
and cost-saving devices. The complainants appealed the Labor Arbiter's finding that
MAERC was an independent contractor and solely liable to
When the service contract was terminated, complainants
pay the amount representing the separation benefits to the
claimed that SMC stopped them from performing their jobs;
exclusion of SMC, as well as the Labor Arbiter's failure to
that this was tantamount to their being illegally dismissed by
grant the Temporary Living Allowance of the
SMC who was their real employer as their activities were
complainants. SMC appealed the award of attorney's fees.
directly related, necessary and desirable to the main
business of SMC; and, that MAERC was merely made a The National Labor Relations Commission (NLRC) ruled in
tool or a shield by SMC to avoid its liability under the Labor its 7 January 1997 decision that MAERC was a labor-only
Code. contractor and that complainants were employees of
SMC.[3] The NLRC also held that whether MAERC was a job
231
contractor or a labor-only contractor, SMC was still solidarily Relying heavily on the factual findings of the Labor Arbiter,
liable with MAERC for the latter's unpaid obligations, citing petitioner maintained that MAERC was a legitimate job
Art. 109[4] of the Labor Code. Thus, the NLRC modified the contractor. It directed this Court's attention to the undisputed
judgment of the Labor Arbiter and held SMC jointly and evidence it claimed to establish this assertion: MAERC is a
severally liable with MAERC for complainants' separation duly organized stock corporation whose primary purpose is
benefits. In addition, both respondents were ordered to pay to engage in the business of cleaning, receiving, sorting,
jointly and severally an indemnity fee of P2,000.00 to each classifying, grouping, sanitizing, packing, delivering,
complainant. warehousing, trucking and shipping any glass and/or metal
containers and that it had listed in its general information
SMC moved for a reconsideration which resulted in the
sheet two hundred seventy-eight (278) workers, twenty-two
reduction of the award of attorney's fees from P317,926.70
(22) supervisors, seven (7) managers/officers and a board
to P84,511.70. The rest of the assailed decision was
of directors; it also voluntarily entered into a service contract
unchanged.[5]
on a non-exclusive basis with petitioner from which it earned
On 12 March 1998, SMC filed a petition for certiorari with a gross income of P42,110,568.24 from 17 October 1988 to
prayer for the issuance of a temporary restraining order 27 November 1991; the service contract specified that
and/or injunction with this Court which then referred the MAERC had the selection, engagement and discharge of its
petition to the Court of Appeals. personnel, employees or agents or otherwise in the
direction and control thereof; MAERC admitted that it had
On 28 April 2000 the Court of Appeals denied the petition
machinery, equipment and fixed assets used in its business
and affirmed the decision of the NLRC.[6] The appellate valued at P4,608,080.00; and, it failed to appeal the Labor
court also denied SMC's motion for reconsideration in a
Arbiter's decision which declared it to be an independent
resolution[7] dated 26 July 2000. Hence, petitioner seeks a
contractor and ordered it to solely pay the separation
review of the Court of Appeals judgment before this Court. benefits of the complaining workers.
Petitioner poses the same issues brought up in the appeals
We find no basis to overturn the Court of Appeals and the
court and the pivotal question is whether the complainants
NLRC. Well-established is the principle that findings of fact
are employees of petitioner SMC or of respondent MAERC. of quasi-judicial bodies, like the NLRC, are accorded with
respect, even finality, if supported by substantial
232
evidence.[8] Particularly when passed upon and upheld by and forklift operator assigned to the Beer Marketing Division
the Court of Appeals, they are binding and conclusive upon at the SMC compound and who had been working with
the Supreme Court and will not normally be disturbed.[9] SMC under a purported contractor Jopard Services since
March 1979 and March 1981, respectively. Both witnesses
This Court has invariably held that in ascertaining an
also testified that together with other complainants they
employer-employee relationship, the following factors are
continued working for SMC without break from Jopard
considered: (a) the selection and engagement of employee;
Services to MAERC.
(b) the payment of wages; (c) the power of dismissal; and,
(d) the power to control an employee's conduct, the last As for the payment of workers' wages, it is conceded that
being the most important.[10] Application of the aforesaid MAERC was paid in lump sum but records suggest that the
criteria clearly indicates an employer-employee relationship remuneration was not computed merely according to the
between petitioner and the complainants. result or the volume of work performed. The memoranda of
the labor rates bearing the signature of a Vice-President
Evidence discloses that petitioner played a large and
and General Manager for the Vismin Beer Operations[12] as
indispensable part in the hiring of MAERC's workers. It also
well as a director of SMC[13] appended to the contract of
appears that majority of the complainants had already been
service reveal that SMC assumed the responsibility of
working for SMC long before the signing of the service
paying for the mandated overtime, holiday and rest day
contract between SMC and MAERC in 1988.
pays of the MAERC workers.[14] SMC also paid the
The incorporators of MAERC admitted having supplied and employer's share of the SSS and Medicare contributions,
recruited workers for SMC even before MAERC was the 13th month pay, incentive leave pay and maternity
created.[11] The NLRC also found that when MAERC was benefits.[15] In the lump sum received, MAERC earned a
organized into a corporation in February 1988, the marginal amount representing the contractors share. These
complainants who were then already working for SMC were lend credence to the complaining workers' assertion that
made to go through the motion of applying for work with Ms. while MAERC paid the wages of the complainants, it merely
Olga Ouano, President and General Manager of MAERC, acted as an agent of SMC.
upon the instruction of SMC through its supervisors to make
Petitioner insists that the most significant determinant of an
it appear that complainants were hired by MAERC. This was
employer-employee relationship, i.e., the right to control, is
testified to by two (2) of the workers who were segregator
absent. The contract of services between MAERC and SMC
233
provided that MAERC was an independent contractor and Viewed alongside the findings of the Labor Arbiter that the
that the workers hired by it "shall not, in any manner and MAERC organizational set-up in the bottle segregation
under any circumstances, be considered employees of the project was such that the segregators/cleaners were
Company, and that the Company has no control or supervised by checkers and each checker was also under a
supervision whatsoever over the conduct of the Contractor supervisor who was in turn under a field supervisor, the
or any of its workers in respect to how they accomplish their responsibility of watching over the MAERC workers by
work or perform the Contractor's obligations under the MAERC personnel became superfluous with the presence
Contract."[16] of additional checkers from SMC.

In deciding the question of control, the language of the Reinforcing the belief that the SMC exerted control over the
contract is not determinative of the parties' relationship; work performed by the segregators or cleaners, albeit
rather, it is the totality of the facts and surrounding through the instrumentality of MAERC, were letters by SMC
circumstances of each case.[17] to the MAERC management. These were letters[19]written by
a certain Mr. W. Padin[20] addressed to the President and
Despite SMCs disclaimer, there are indicia that it actively
General Manager of MAERC as well as to its head of
supervised the complainants. SMC maintained a constant
operations,[21] and a third letter[22] from Carlito R. Singson
presence in the workplace through its own checkers. Its
also addressed to the President and General Manager of
asseveration that the checkers were there only to check the
MAERC. More than just a mere written report of the number
end result was belied by the testimony of Carlito R. Singson,
of bottles improperly cleaned and/or segregated, the letters
head of the Mandaue Container Service of SMC, that the
named three (3) workers who were responsible for the
checkers were also tasked to report on the identity of the
rejection of several bottles, specified the infraction
workers whose performance or quality of work was not
committed in the segregation and cleaning, then
according to the rules and standards set by SMC. According
recommended the penalty to be imposed. Evidently, these
to Singson, "it (was) necessary to identify the names of
workers were reported by the SMC checkers to the SMC
those concerned so that the management [referring to
inspector.
MAERC] could call the attention to make these people
improve the quality of work."[18] While the Labor Arbiter dismissed these letters as merely
indicative of the concern in the end-result of the job
contracted by MAERC, we find more credible the contention
234
of the complainants that these were manifestations of the discussed were the calling of SMC contractors to have
right of petitioner to recommend disciplinary measures over workers assigned to segregation to undergo and pass eye
MAERC employees. Although calling the attention of its examination to be done by SMC EENT company doctor and
contractors as to the quality of their services may a review of compensation/incentive system for segregators
reasonably be done by SMC, there appears to be no need to improve the segregation activities.[25]
to instruct MAERC as to what disciplinary measures should
But the most telling evidence is a letter by Mr. Antonio
be imposed on the specific workers who were responsible
Ouano, Vice-President of MAERC dated 27 May 1991
for rejections of bottles. This conduct by SMC
addressed to Francisco Eizmendi, SMC President and Chief
representatives went beyond a mere reminder with respect
Executive Officer, asking the latter to reconsider the phasing
to the improperly cleaned/segregated bottles or a genuine
out of SMCs segregation activities in Mandaue City. The
concern in the outcome of the job contracted by MAERC.
letter was not denied but in fact used by SMC to advance its
Control of the premises in which the contractor's work was own arguments. [26]
performed was also viewed as another phase of control
Briefly, the letter exposed the actual state of affairs under
over the work, and this strongly tended to disprove the
which MAERC was formed and engaged to handle the
independence of the contractor.[23] In the case at bar, the
segregation project of SMC. It provided an account of how
bulk of the MAERC segregation activities was accomplished
in 1987 Eizmendi approached the would-be incorporators of
at the MAERC-owned PHILPHOS warehouse but the
MAERC and offered them the business of servicing the
building along with the machinery and equipment in the
SMC bottle-washing and segregation department in order to
facility was actually being rented by SMC. This is evident
avert an impending labor strike. After initial reservations,
from the memoranda of labor rates which included rates for
MAERC incorporators accepted the offer and before long
the use of forklifts and the warehouse at the PHILPHOS
trial segregation was conducted by SMC at the PHILPHOS
area, hence, the NLRCs conclusion that the payment for the
warehouse.[27]
rent was cleverly disguised since MAERC was not in the
business of renting warehouses and forklifts.[24] The letter also set out the circumstances under which
MAERC entered into the Contract of Services in 1988 with
Other instances attesting to SMCs supervision of the
the assurances of the SMC President and CEO that the
workers are found in the minutes of the meeting held by the
employment of MAERC's services would be long term to
SMC officers on 5 December 1988. Among those matters
235
enable it to recover its investments. It was with this However, in Vinoya v. NLRC,[30] we clarified that it was not
understanding that MAERC undertook borrowings from enough to show substantial capitalization or investment in
banking institutions and from affiliate corporations so that it the form of tools, equipment, machinery and work premises,
could comply with the demands of SMC to invest in etc., to be considered an independent contractor.In fact,
machinery and facilities. jurisprudential holdings were to the effect that in determining
the existence of an independent contractor relationship,
In sum, the letter attested to an arrangement entered into by
several factors may be considered, such as, but not
the two (2) parties which was not reflected in the Contract of
necessarily confined to, whether the contractor was carrying
Services. A peculiar relationship mutually beneficial for a
on an independent business; the nature and extent of the
time but nonetheless ended in dispute when SMC decided
work; the skill required; the term and duration of the
to prematurely end the contract leaving MAERC to shoulder
relationship; the right to assign the performance of specified
all the obligations to the workers.
pieces of work; the control and supervision of the workers;
Petitioner also ascribes as error the failure of the Court of the power of the employer with respect to the hiring, firing
Appeals to apply the ruling in Neri v. NLRC.[28] In that case, and payment of the workers of the contractor; the control of
it was held that the law did not require one to possess both the premises; the duty to supply premises, tools,
substantial capital and investment in the form of tools, appliances, materials and labor; and the mode, manner and
equipment, machinery, work premises, among others, to be terms of payment.[31]
considered a job contractor. The second condition to
In Neri, the Court considered not only the fact that
establish permissible job contracting[29] was sufficiently met
respondent Building Care Corporation (BBC) had
if one possessed either attribute.
substantial capitalization but noted that BCC carried on an
Accordingly, petitioner alleged that the appellate court and independent business and performed its contract according
the NLRC erred when they declared MAERC a labor-only to its own manner and method, free from the control and
contractor despite the finding that MAERC had investments supervision of its principal in all matters except as to the
amounting to P4,608,080.00 consisting of buildings, results thereof.[32] The Court likewise mentioned that the
machinery and equipment. employees of BCC were engaged to perform specific
special services for their principal.[33] The status of BCC had
also been passed upon by the Court in a previous case
236
where it was found to be a qualified job contractor because Petitioner also alleged that the Court of Appeals erred in
it was "a big firm which services among others, a university, ruling that "whether MAERC is an independent contractor or
an international bank, a big local bank, a hospital center, a labor-only contractor, SMC is liable with MAERC for the
government agencies, etc." Furthermore, there were only latter's unpaid obligations to MAERC's workers."
two (2) complainants in that case who were not only
On this point, we agree with petitioner as distinctions must
selected and hired by the contractor before being assigned
be made. In legitimate job contracting, the law creates an
to work in the Cagayan de Oro branch of FEBTC but the
employer-employee relationship for a limited purpose, i.e.,
Court also found that the contractor maintained effective
to ensure that the employees are paid their wages.[34]The
supervision and control over them.
principal employer becomes jointly and severally liable with
In comparison, MAERC, as earlier discussed, displayed the the job contractor only for the payment of the employees'
characteristics of a labor-only contractor. Moreover, while wages whenever the contractor fails to pay the same. Other
MAERCs investments in the form of buildings, tools and than that, the principal employer is not responsible for any
equipment amounted to more than P4 Million, we cannot claim made by the employees.
disregard the fact that it was the SMC which required
On the other hand, in labor-only contracting, the statute
MAERC to undertake such investments under the
creates an employer-employee relationship for a
understanding that the business relationship between
comprehensive purpose: to prevent a circumvention of labor
petitioner and MAERC would be on a long term basis. Nor
laws. The contractor is considered merely an agent of the
do we believe MAERC to have an independent
principal employer and the latter is responsible to the
business. Not only was it set up to specifically meet the
employees of the labor-only contractor as if such employees
pressing needs of SMC which was then having labor
had been directly employed by the principal employer. The
problems in its segregation division, none of its workers was
principal employer therefore becomes solidarily liable with
also ever assigned to any other establishment, thus
the labor-only contractor for all the rightful claims of the
convincing us that it was created solely to service the needs
employees.
of SMC. Naturally, with the severance of relationship
between MAERC and SMC followed MAERCs cessation of This distinction between job contractor and labor-only
operations, the loss of jobs for the whole MAERC workforce contractor, however, will not discharge SMC from paying the
and the resulting actions instituted by the workers. separation benefits of the workers, inasmuch as MAERC
237
was shown to be a labor-only contractor; in which case, Case No. O6-1165-91
petitioner's liability is that of a direct employer and thus
1. Rogelio Prado, Jr P3,056.00 P8,190.00 P11,246.00
solidarily liable with MAERC.
2. Eddie Selle 3,056.00 8,190.00 11,246.00
SMC also failed to comply with the requirement of written
notice to both the employees concerned and the 3. Alejandro Annabieza 3,056.00 8,190.00 11,246.00
Department of Labor and Employment (DOLE) which must
be given at least one (1) month before the intended date of 4. Ananias Jumao-as 3,056.00 8,190.00 11,246.00
retrenchment.[35] The fines imposed for violations of the 5. Consorcio Manloloyo 3,056.00 8,190.00 11,246.00
notice requirement have varied.[36] The measure of this
award depends on the facts of each case and the gravity of 6. Anananias Alcotin 3,056.00 8,190.00 11,246.00
the omission committed by the employer.[37] For its failure, 7. Rey Gestopa 2,865.00 8,190.00 11,055.00
petitioner was justly ordered to indemnify each displaced
worker P2,000.00. 8. Edgardo Nuez 2,865.00 8,190.00 11,055.00

The NLRC and the Court of Appeals affirmed the Labor 9. Junel Cabatingan 2,865.00 8,190.00 11,055.00
Arbiters award of separation pay to the complainants in the 10. Paul Dumaqueta 2,865.00 8,190.00 11,055.00
total amount of P2,334,150.00 and of wage differentials in
the total amount of P845,117.00. These amounts are the 11. Felimon Echavez 2,843.00 8,190.00 10,673.00
aggregate of the awards due the two hundred ninety-one
12. Vito Sealana 2,843.00 8,190.00 10,673.00
(291) complainants as computed by the Labor Arbiter. The
following is a summary of the computation of the benefits 13. Denecia Palao 2,843.00 8,190.00 10,673.00
due the complainants which is part of the Decision of the
14. Roberto Lapiz 3,056.00 8,190.00 11,246.00
Labor Arbiter.
15. Baltazar Labio 3,056.00 8,190.00 11,246.00
SUMMARY
16. Leonardo Bongo 3,056.00 8,190.00 11,246.00
NAME SALARY SEPARATION TOTAL
17. El Cid Icalina 3,056.00 8,190.00 11,246.00
DIFFERENTIAL PAY
238
18. Jose Diocampo 3,056.00 8,190.00 11,246.00 36. Vicente Alin 3,056.00 8,190.00 11,246.00

19. Adelo Cantillas 3,056.00 8,190.00 11,246.00 37. Rodolfo Pahugot 3,056.00 8,190.00 11,246.00

20. Isaias Branzuela 3,056.00 8,190.00 11,246.00 38. Ruel Navares 3,056.00 8,190.00 11,246.00

21. Ramon Rosales 3,056.00 8,190.00 11,246.00 39. Danilo Anabieza 3,056.00 8,190.00 11,246.00

22. Gaudencio Peson 3,056.00 8,190.00 11,246.00 40. Alex Juen 3,056.00 8,190.00 11,246.00

23. Hector Cabaog 3,056.00 8,190.00 11,246.00 41. Juanito Garces 3,056.00 8,190.00 11,246.00

24. Edgardo Dagmayan 3,056.00 8,190.00 11,246.00 42. Silvino Limbaga 3,056.00 8,190.00 11,246.00

25. Rogelio Cruz 3,056.00 8,190.00 11,246.00 43. Aurelio Jurpacio 3,056.00 8,190.00 11,246.00

26. Rolando Espina 3,056.00 8,190.00 11,246.00 44. Jovito Loon 3,056.00 8,190.00 11,246.00

27. Bernardino Regidor 3,056.00 8,190.00 11,246.00 45. Victor Tenedero 3,056.00 8,190.00 11,246.00

28. Arnelio Sumalinog 3,056.00 8,190.00 11,246.00 46. Sasing Moreno 3,056.00 8,190.00 11,246.00

29. Gumersindo Alcontin 3,056.00 8,190.00 11,246.00 47. Wilfredo Hortezuela 3,056.00 8,190.00 11,246.00

30. Loreto Nuez 3,056.00 8,190.00 11,246.00 48. Joselito Melendez 3,056.00 8,190.00 11,246.00

31. Joebe Boy Dayon 3,056.00 8,190.00 11,246.00 49. Alfredo Gestopa 3,056.00 8,190.00 11,246.00

32. Conrado Mesanque 3,056.00 8,190.00 11,246.00 50. Regino Gabuya 3,056.00 8,190.00 11,246.00

33. Marcelo Pescador 3,056.00 8,190.00 11,246.00 51. Jorge Gamuzarno 3,056.00 8,190.00 11,246.00

34. Marcelino Jabagat 3,056.00 8,190.00 11,246.00 52. Lolito Cocido 3,056.00 8,190.00 11,246.00

35. Vicente Devilleres 3,056.00 8,190.00 11,246.00 53. Efraim Yubal 3,056.00 8,190.00 11,246.00

239
54. Venerando Roamar 3,056.00 8,190.00 11,246.00 72. Marcelo Caracina 3,056.00 8,190.00 11,246.00

55. Gerardo Butalid 3,056.00 8,190.00 11,246.00 73. Raul Borres 3,056.00 8,190.00 11,246.00

56. Hipolito Vidas 3,056.00 8,190.00 11,246.00 74. Lino Tongalamos 3,056.00 8,190.00 11,246.00

57. Vengelito Frias 3,056.00 8,190.00 11,246.00 75. Artemio Bongo, Jr. 3,056.00 8,190.00 11,246.00

58. Vicente Celacio 3,056.00 8,190.00 11,246.00 76. Roy Avila 3,056.00 8,190.00 11,246.00

59. Corlito Pestaas 3,056.00 8,190.00 11,246.00 77. Melchor Freglo 3,056.00 8,190.00 11,246.00

60. Ervin Hyrosa 3,056.00 8,190.00 11,246.00 78. Raul Cabillada 3,056.00 8,190.00 11,246.00

61. Rommel Guerero 3,056.00 8,190.00 11,246.00 79. Eddie Catab 3,056.00 8,190.00 11,246.00

62. Rodrigo Enerlas 3,056.00 8,190.00 11,246.00 80. Melencio Durano 3,056.00 8,190.00 11,246.00

63. Francisco Carbonilla 3,056.00 8,190.00 11,246.00 81. Allan Rago 3,056.00 8,190.00 11,246.00

64. Nicanor Cuizon 3,056.00 8,190.00 11,246.00 82. Dominador Caparida 3,056.00 8,190.00 11,246.00

65. Pedro Briones 3,056.00 8,190.00 11,246.00 83. Jovito Catab 3,056.00 8,190.00 11,246.00

66. Rodolfo Cabalhug 3,056.00 8,190.00 11,246.00 84. Albert Laspias 3,056.00 8,190.00 11,246.00

67. Teofilo Ricardo 3,056.00 8,190.00 11,246.00 85. Alex Anabieza 3,056.00 8,190.00 11,246.00

68. Danilo R. Dizon 3,056.00 8,190.00 11,246.00 86. Nestor Reynante 3,056.00 8,190.00 11,246.00

69. Alberto Embong 3,056.00 8,190.00 11,246.00 87. Eulogio Estopa 3,056.00 8,190.00 11,246.00

70. Alfonso Echavez 3,056.00 8,190.00 11,246.00 88. Mario Bolo 3,056.00 8,190.00 11,246.00

71. Gonzalo Roracea 3,056.00 8,190.00 11,246.00 89. Ederlito A. Balocano 3,056.00 8,190.00 11,246.00

240
90. Joel Pepito 3,056.00 8,190.00 11,246.00 108. Raul Oyao 3,056.00 8,190.00 11,246.00

91. Reynaldo Ludia 3,056.00 5,460.00 8,516.00 109. Victor Celacio 3,056.00 5,460.00 8,516.00

92. Manuel Cinco 3,056.00 5,460.00 8,516.00 TOTAL P330,621.00 P884,520.00 P1,215141.00

93. Allan Agustin 3,056.00 8,190.00 11,246.00 Case No. 07-1177-91

94. Pablito Polegrates 3,056.00 8,190.00 11,246.00 110. Gerardo Roque 3,056.00 P5,460.00 P8,516.00

95. Clyde Prado 3,056.00 8,190.00 11,246.00 Case No. 07-1176-91

96. Dindo Misa 3,056.00 8,190.00 11,246.00 111. Zosimo Cararaton P3,056.00 P8,192.00 11,246.00

97. Roger Sasing 3,056.00 8,190.00 11,246.00 Case No. 07-1219-91

98. Ramon Arcallana 3,056.00 8,190.00 11,246.00 112. Virgilio Zanoria P3,056.00 P5,460.00 P8,516.00

99. Gabriel Salas 3,056.00 8,190.00 11,246.00 113. Jose Zanoria 3,056.00 5,460.00 8,516.00

100. Edwin Sasan 3,056.00 8,190.00 11,246.00 114. Allan Zanoria 3,056.00 5,460.00 8,516.00

101. Diosdado Barriga 3,056.00 8,190.00 11,246.00 115. Victorino Seno 3,056.00 5,460.00 8,516.00

102. Moises Sasan 3,056.00 8,190.00 11,246.00 116. Teodulo Jumao-as 3,056.00 5,460.00 8,516.00

103. Sinforiano Cantago 3,056.00 8,190.00 11,246.00 117. Alexander Hera 3,056.00 5,460.00 8,516.00

104. Leonardo Marturillas 3,056.00 8,190.00 11,246.00 118. Anthony Araneta 3,056.00 5,460.00 8,516.00

105. Mario Ranis 3,056.00 8,190.00 11,246.00 119. Aldrin Suson 3,056.00 5,460.00 8,516.00

106. Alejandro Ranido 3,056.00 8,190.00 11,246.00 120. Victor Verano 3,056.00 5,460.00 8,516.00

107. Jerome Prado 3,056.00 8,190.00 11,246.00 121. Ruel Sufrerencia 3,056.00 5,460.00 8,516.00

241
122. Alfred Naparate 3,056.00 5,460.00 8,516.00 134. Wilfredo Aliviano 2,816.00 8,190.00 11,006.00

123. Wenceslao Baclohon 3,056.00 8,190.00 11,246.00 135. Bienvenido Rosario 2,816.00 8,190.00 11,006.00

124. Eduardo Langita 3,056.00 8,190.00 11,246.00 136. Jesus Capangpangan 2,816.00 8,190.00 11,006.00

TOTAL P39,728.00 P76,440.00 P116,168.00 137. Renato Mendoza 2,816.00 8,190.00 11,006.00

Case No. 07-1283-91 138. Alejandro Catandejan 2,816.00 8,190.00 11,006.00

125. Feliz Ordeneza P2,816.00 P8,190.00 P11,006.00 139. Ruben Talaba 2,816.00 8,190.00 11,006.00

126. Arsenio Logarta 3,056.00 8,190.00 11,246.00 140. Filemon Echavez 2,816.00 8,190.00 11,006.00

127. Eduardo dela Vega 3,056.00 8,190.00 11,246.00 141. Marcelino Caracena 2,816.00 8,190.00 11,006.00

128. Joventino Canoog 3,056.00 8,190.00 11,246.00 142. Ignacio Misa 2,816.00 8,190.00 11,006.00

TOTAL P11,984.00 P32,760.00 P44,744.00 143. Feliciano Agbay 2,816.00 8,190.00 11,006.00

Case No. 10-1584-91 144. Victor Maglasang 2,816.00 8,190.00 11,006.00

129. Regelio Abapo P3,056.00 8,190.00 11,246.00 145. Arturo Heyrosa 2,816.00 8,190.00 11,006.00

Case No. 08-1321-91 146. Alipio Tirol 2,816.00 8,190.00 11,006.00

130. Ricardo Ramas P3,056.00 P8,190.00 P11,246.00 147. Rosendo Mondares 2,816.00 8,190.00 11,006.00

Case No. 09-1507-91 148. Aniceto Ludia 2,816.00 8,190.00 11,006.00

131. Jose Bandialan P2,816.00 P8,190.00 P11,006.00 149. Reynaldo Lavandero 2,816.00 8,190.00 11,006.00

132. Antonio Basalan 2,816.00 8,190.00 11,006.00 150. Reuyan Herculano 2,816.00 8,190.00 11,006.00

133. Lyndon Basalan 2,816.00 8,190.00 11,006.00 151. Teodula Nique 2,816.00 8,190.00 11,006.00

242
TOTAL P59,136.00 P171,990.00 P231,126.00 168. Polegarpo Degamo 2,816.00 8,190.00 11,006.00

Case No. 06-1145-91 169. Mario Cereza 2,816.00 8,190.00 11,006.00

152. Emerberto Orque P2,816.00 P8,190.00 P11,006.00 170. Antonio Laoronilla 2,816.00 8,190.00 11,006.00

153. Zosimo Baobao 2,816.00 8,190.00 11,006.00 171. Proctuso Magallanes 2,816.00 8,190.00 11,006.00

154. Medardo Singson 2,816.00 8,190.00 11,006.00 172. Eladio Torres 2,816.00 8,190.00 11,006.00

155. Antonio Patalinghug 2,816.00 8,190.00 11,006.00 173. Warlito Demana 2,816.00 8,190.00 11,006.00

156. Ernesto Singson 2,816.00 8,190.00 11,006.00 174. Henry Gedaro 2,816.00 8,190.00 11,006.00

157. Roberto Torres 2,816.00 8,190.00 11,006.00 175. Doisederio Gemperao 2,816.00 8,190.00 11,006.00

158. Cesar Escario 2,816.00 8,190.00 11,006.00 176. Aniceto Gemperao 2,816.00 8,190.00 11,006.00

159. Leodegario Dollecin 2,816.00 8,190.00 11,006.00 177. Jerry Caparoso 2,816.00 8,190.00 11,006.00

160 Alberto Anoba 2,816.00 8,190.00 11,006.00 178. Serlito Noynay 2,816.00 8,190.00 11,006.00

161. Rodrigo Bisnar 2,816.00 8,190.00 11,006.00 179. Luciano Recopelacion 2,816.00 8,190.00 11,006.00

162. Zosimo Bingas 2,816.00 8,190.00 11,006.00 180. Juanito Garces 2,816.00 8,190.00 11,006.00

163. Rosalio Duran, Sr. 2,816.00 8,190.00 11,006.00 181. Feliciano Torres 2,816.00 8,190.00 11,006.00

164. Rosalio Duran, Jr. 2,816.00 8,190.00 11,006.00 182. Ranilo Villareal 2,816.00 8,190.00 11,006.00

165. Romeo Duran 2,816.00 8,190.00 11,006.00 183. Fermin Aliviano 2,816.00 8,190.00 11,006.00

166. Antonio Abella 2,816.00 8,190.00 11,006.00 184. Junjie Laviste 2,816.00 8,190.00 11,006.00

167. Mariano Repollo 2,816.00 8,190.00 11,006.00 185. Tomacito de Castro 2,816.00 8,190.00 11,006.00

243
186. Joselito Capilina 2,816.00 8,190.00 11,006.00 204. Paul Cabillada 2,816.00 8,190.00 11,006.00

187. Samuel Casquejo 2,816.00 8,190.00 11,006.00 205. Wilfredo Magalona 2,816.00 8,190.00 11,006.00

188. Leonardo Natad 2,816.00 8,190.00 11,006.00 206. Joel Pepito 2,816.00 8,190.00 11,006.00

189. Benjamin Sayson 2,816.00 8,190.00 11,006.00 207. Prospero Maglasang 2,816.00 8,190.00 11,006.00

190. Pedro Inoc 2,816.00 8,190.00 11,006.00 208. Allan Agustin 2,816.00 8,190.00 11,006.00

191. Edward Flores 2,816.00 8,190.00 11,006.00 209. Fausto Bargayo 2,816.00 8,190.00 11,006.00

192. Edwin Sasan 2,816.00 8,190.00 11,006.00 210. Nomer Sanchez 2,816.00 8,190.00 11,006.00

193. Jose Rey Inot 2,816.00 8,190.00 11,006.00 211. Jolito Alin 2,816.00 8,190.00 11,006.00

194. Edgar Cortes 2,816.00 8,190.00 11,006.00 212. Birning Regidor 2,816.00 8,190.00 11,006.00

195. Romeo Lombog 2,816.00 8,190.00 11,006.00 213. Garry Dignos 2,816.00 8,190.00 11,006.00

196. Nicolas Ribo 2,816.00 8,190.00 11,006.00 214. Edwin Dignos 2,816.00 8,190.00 11,006.00

197. Jaime Rubin 2,816.00 8,190.00 11,006.00 215. Dario Dignos 2,816.00 8,190.00 11,006.00

198. Orlando Regis 2,816.00 8,190.00 11,006.00 216. Rogelio Dignos 2,816.00 8,190.00 11,006.00

199. Ricky Alconza 2,816.00 8,190.00 11,006.00 217. Jimmy Cabigas 2,816.00 8,190.00 11,006.00

200. Rudy Tagalog 2,816.00 8,190.00 11,006.00 218. Fernando Anajao 2,816.00 8,190.00 11,006.00

201. Victorino Tagalog 2,816.00 8,190.00 11,006.00 219. Alex Flores 2,816.00 8,190.00 11,006.00

202. Edward Colina 2,816.00 8,190.00 11,006.00 220. Fernando Remedio 2,816.00 8,190.00 11,006.00

203. Ronie Gonzaga 2,816.00 8,190.00 11,006.00 221. Toto Mosquido 2,816.00 8,190.00 11,006.00

244
222. Alberto Yagonia 2,816.00 8,190.00 11,006.00 240. Jesus Capangpangan 2,816.00 8,190.00 11,006.00

223. Victor Bariquit 2,816.00 8,190.00 11,006.00 241. Damian Capangpangan 2,816.00 8,190.00 11,006.00

224. Ignacio Misa 2,816.00 8,190.00 11,006.00 242. Teofilo Capangpangan 2,816.00 8,190.00 11,006.00

225. Eliseo Villareno 2,816.00 8,190.00 11,006.00 243. Nilo Capangpangan 2,816.00 8,190.00 11,006.00

226. Manuel Lavandero 2,816.00 8,190.00 11,006.00 244. Cororeno Capangpangan 2,816.00 8,190.00 11,006.00

227. Vircede 2,816.00 8,190.00 11,006.00 245. Emilio Mondares 2,816.00 8,190.00 11,006.00

228. Mario Ranis 2,816.00 8,190.00 11,006.00 246. Ponciano Agana 2,816.00 8,190.00 11,006.00

229. Jaime Responso 2,816.00 8,190.00 11,006.00 247. Vicente Devilleres 2,816.00 8,190.00 11,006.00

230. Marianito Aguirre 2,816.00 8,190.00 11,006.00 248. Mario Alipan 2,816.00 8,190.00 11,006.00

231. Marcial Heruela 2,816.00 8,190.00 11,006.00 249. Romanito Alipan 2,816.00 8,190.00 11,006.00

232. Godofredo Tuacao 2,816.00 8,190.00 11,006.00 250. Aldeon Robinson 2,816.00 8,190.00 11,006.00

233. Perfecto Regis 2,816.00 8,190.00 11,006.00 251. Fortunato Soco 2,816.00 8,190.00 11,006.00

234. Roel Demana 2,816.00 8,190.00 11,006.00 252. Celso Compuesto 2,816.00 8,190.00 11,006.00

235. Elmer Castillo 2,816.00 8,190.00 11,006.00 253. William Itoralde 2,816.00 8,190.00 11,006.00

236. Wilfredo Calamohoy 2,816.00 8,190.00 11,006.00 254. Antonio Pescador 2,816.00 8,190.00 11,006.00

237. Rudy Lucernas 2,816.00 8,190.00 11,006.00 255. Jeremias Rondero 2,816.00 8,190.00 11,006.00

238. Antonio Caete 2,816.00 8,190.00 11,006.00 256. Estropio Punay 2,816.00 8,190.00 11,006.00

239. Efraim Yubal 2,816.00 8,190.00 11,006.00 257. Leovijildo Punay 2,816.00 8,190.00 11,006.00

245
258. Romeo Quilongquilong 2,816.00 8,190.00 11,006.00 276. Fernando Lopez 2,816.00 8,190.00 11,006.00

259. Wilfredo Gestopa 2,816.00 8,190.00 11,006.00 277. Alfonso Echavez 2,816.00 8,190.00 11,006.00

260. Eliseo Santos 2,816.00 8,190.00 11,006.00 278. Nicanor Cuizon 2,816.00 8,190.00 11,006.00

261. Henry Orio 2,816.00 8,190.00 11,006.00 279. Dominador Caparida 2,816.00 8,190.00 11,006.00

262. Jose Yap 2,816.00 8,190.00 11,006.00 280. Zosimo Cororation 2,816.00 8,190.00 11,006.00

263. Nicanor Manayaga 2,816.00 8,190.00 11,006.00 281. Artemio Loveranes 2,816.00 8,190.00 11,006.00

264. Teodoro Salinas 2,816.00 8,190.00 11,006.00 282. Dionisio Yagonia 2,816.00 8,190.00 11,006.00

265. Aniceto Montero 2,816.00 8,190.00 11,006.00 283. Victor Celocia 2,816.00 8,190.00 11,006.00

266. Rafaelito Versoza 2,816.00 8,190.00 11,006.00 284. Hipolito Vidas 2,816.00 8,190.00 11,006.00

267. Alejandro Ranido 2,816.00 8,190.00 11,006.00 285. Teodoro Arcillas 2,816.00 8,190.00 11,006.00

268. Henry Talaba 2,816.00 8,190.00 11,006.00 286. Marcelino Habagat 2,816.00 8,190.00 11,006.00

269. Romulo Talaba 2,816.00 8,190.00 11,006.00 287. Gaudioso Labasan 2,816.00 8,190.00 11,006.00

270. Diosdado Besabela 2,816.00 8,190.00 11,006.00 288. Leopoldo Regis 2,816.00 8,190.00 11,006.00

271. Sylvestre Toring 2,816.00 8,190.00 11,006.00 289. Aquillo Damole 2,816.00 8,190.00 11,006.00

272. Edilberto Padilla 2,816.00 8,190.00 11,006.00 290. Willy Roble 2,816.00 8,190.00 11,006.00

273. Allan Herosa 2,816.00 8,190.00 11,006.00 TOTAL P391,424.00 P1,138,410.00 P1,529,834.00

274. Ernesto Sumalinog 2,816.00 8,190.00 11,006.00 RECAP

275. Ariston Velasco, Jr. 2,816.00 8,190.00 11,006.00 CASE NO. SALARY SEPARATION TOTAL

246
DIFFERENTIAL PAY where they were impleaded as parties because the
allegations of the length and period of their employment for
06-1165-91 P330,621.00 P884,520.00 P1,215,141.00
the separate cases, though overlapping, were also
07-1177-91 3,056.00 5,460.00 8,516.00 different. The records before us are incomplete and do not
aid in verifying whether these names belong to the same
06-1176-91 3,056.00 8,190.00 11,246.00 persons but at least three (3) of those names were found to
07-1219-91 39,728.00 76,440.00 116,168.00 have identical signatures in the complaint forms they filed in
the separate cases. It is likely therefore that the Labor
07-1283-91 11,984.00 32,760.00 44,744.00 Arbiter erroneously granted some complainants separation
10-1584-91 3,056.00 8,190.00 11,246.00 benefits and wage differentials twice. Apart from this, we
also discovered some names that are almost identical.39 It is
08-1321-91 3,056.00 8,190.00 11,246.00 possible that the minor variance in the spelling of some
09-1507-91 59,136.00 171,990.00 231,126.00 names may have been a typographical error and refer to the
same persons although the records seem to be
06-1145-91 391,424.00 1,138,410.00 1,529,834.00 inconclusive.
GRAND Furthermore, one of the original complainants40 was
TOTAL P845,117.00 P2,334,150.00 P3,179,267.00 inadvertently omitted by the Labor Arbiter from his
computations.41 The counsel for the complainants promptly
However, certain matters have cropped up which require a
filed a motion for inclusion/correction42 which motion was
review of the awards to some complainants and a
treated as an appeal of the Decision as the Labor Arbiter
recomputation by the Labor Arbiter of the total amounts.
was prohibited by the rules of the NLRC from entertaining
A scrutiny of the enumeration of all the complainants shows any motion at that stage of the proceedings.43 The NLRC for
that some names38 appear twice by virtue of their being its part acknowledged the omission44 but both the
included in two (2) of the nine (9) consolidated cases. A Commission and subsequently the Court of Appeals failed
check of the Labor Arbiters computation discloses that most to rectify the oversight in their decisions.
of these names were awarded different amounts of
Finally, the NLRC ordered both MAERC and SMC to
separation pay or wage differential in each separate case
pay P84,511.70 in attorneys fees which is ten percent (10%)
247
of the salary differentials awarded to the complainants in complainants whose entitlement to separation pay and
accordance with Art. 111 of the Labor Code. The Court of wage differentials and the amounts thereof are no longer in
Appeals also affirmed the award. Consequently, with the question. Costs against petitioner.
recomputation of the salary differentials, the award of
SO ORDERED.
attorneys fees must also be modified.

WHEREFORE, the petition is DENIED. The assailed COCA-COLA BOTTLERS G.R. No. 184977
PHILIPPINES, INC.,
Decision of the Court of Appeals dated 28 April 2000 and
Petitioner,
the Resolution dated 26 July 2000 Present:
are AFFIRMED with MODIFICATION. Respondent Maerc
Integrated Services, Inc. is declared to be a labor-only CARPIO, J., Chairperson,
contractor. Accordingly, both petitioner San Miguel - versus - LEONARDO-DE CASTRO,
Corporation and respondent Maerc Integrated Services, BRION,
Inc., are ordered to jointly and severally pay complainants DEL CASTILLO, and
ABAD, JJ.
(private respondents herein) separation benefits and wage RICKY E. DELA CRUZ,
differentials as may be finally recomputed by the Labor ROLANDO M. GUASIS,
Arbiter as herein directed, plus attorneys fees to be MANNY C. PUGAL,
computed on the basis of ten percent (10%) of the amounts RONNIE L. HERMO, Promulgated:
which complainants may recover pursuant to Art. 111 of the ROLANDO C. SOMERO,
Labor Code, as well as an indemnity fee of P2,000.00 to JR., DIBSON D. DIOCARES, December 7, 2009
and IAN B. ICHAPARE,
each complainant.
Respondents.
The Labor Arbiter is directed to review and recompute the x ----------------------------------------------------------------------------
award of separation pays and wage differentials due -------------- x
complainants whose names appear twice or are notably
similar, compute the monetary award due to complainant DECISION
Niel Zanoria whose name was omitted in the Labor Arbiters
Decision and immediately execute the monetary awards as
BRION, J.:
found in the Labor Arbiters computations insofar as those
248
 The present petition for review on certiorari[1] challenges In defense, the petitioner contended that it entered into
the decision[2] and resolution[3] of the Court of Appeals (CA) contracts of services with Peerless[6] and Excellent Partners
rendered on August 29, 2008 and October 13, 2008, respectively, Cooperative, Inc. (Excellent)[7] to provide allied services; under
in CA-G.R. SP No. 102988. these contracts, Peerless and Excellent retained the right to select,
hire, dismiss, supervise, control and discipline and pay the salaries
THE ANTECEDENTS of all personnel they assign to the petitioner; in return for these
services, Peerless and Excellent were paid a stipulated fee. The
Respondents Ricky E. Dela Cruz, Rolando M. Guasis, Manny C. petitioner posited that there is no employer-employee relationship
Pugal, Ronnie L. Hermo, Rolando C. Somero, Jr., Dibson D. between the company and the respondents and the complaints
Diocares, and Ian Ichapare (respondents) filed in July 2000 two should be dismissed for lack of jurisdiction on the part of the
separate complaints[4] for regularization with money claims National Labor Relations Commission (NLRC). Peerless did not
against Coca-Cola Bottlers Philippines, Inc., (petitioner or the file a position paper, although nothing on record indicates that it
company). The complaints were consolidated and subsequently was ever notified of the amended complaint.
amended to implead Peerless Integrated Service, Inc. (Peerless) In reply, the respondents countered that they worked under
as a party-respondent. the control and supervision of the companys supervisors who
Before the Labor Arbiter, the respondents alleged that they prepared their work schedules and assignments. Peerless and
are route helpers assigned to work in the petitioners trucks. They Excellent, too, did not have sufficient capital or investment to
go from the Coca- Cola sales offices or plants to customer outlets provide services to the petitioner. The respondents thus argued
such as sari-sari stores, restaurants, groceries, supermarkets and that the petitioners contracts of services with Peerless and
similar establishments; they were hired either directly by the Excellent are in the nature of labor-only contracts prohibited by
petitioner or by its contractors, but they do not enjoy the full law.[8]
remuneration, benefits and privileges granted to the petitioners In rebuttal, the petitioner belied the respondents
regular sales force. They argued that the services they render are submission that their jobs are usually necessary and desirable in
necessary and desirable in the regular business of the petitioner.[5] its main business. It claimed that its main business is softdrinks
249
manufacturing and the respondents tasks of handling, loading The respondents appealed to the NLRC.[13] On October 31,
and unloading of the manufactured softdrinks are not part of the 2007, the NLRC denied the appeal and affirmed the labor
manufacturing process. It stressed that its only interest in the arbiters ruling,[14] and subsequently denied the respondents
respondents is in the result of their work, and left to them the motion for reconsideration.[15] The respondents thus sought
means and the methods of achieving this result. It thus argued relief from the CA through a petition for certiorari under Rule
that there is no basis for the respondents claim that without 65 of the Rules of Court.
them, there would be over-production in the company and its
operations would come to a halt.[9] The petitioner lastly argued THE CA DECISION
that in any case, the respondents did not present evidence in
support of their claims of company control and supervision so The main substantive issue the parties submitted to the CA was
that these claims cannot be considered and given weight.[10] whether Excellent and Peerless were independent contractors or
THE COMPULSORY ARBITRATION RULINGS labor-only contractors. Procedurally, the petitioner questioned
the sufficiency of the petition and asked for its dismissal on the
Labor Arbiter Joel S. Lustria dismissed the complaint for following grounds: (1) the petition was filed out of time; (2)
lack of jurisdiction in his decision of September 28, failure to implead Peerless and Excellent as necessary parties;
2004,[11] after finding that the respondents were the employees (3) absence of the notarized proof of service that Rule 13 of the
of either Peerless or Excellent and not of the petitioner. He Rules of Court requires; and (4) defective verification and
brushed aside for lack of evidence the respondents claim that certification.
they were directly hired by the petitioner and that company The CA examined the circumstances of the contractual
personnel supervised and controlled their work. The Labor arrangements between Peerless and Excellent, on the one hand,
Arbiter likewise ordered Peerless to accord to the appropriate and the company, on the other, and found that Peerless and
complainants all employment benefits and privileges befitting Excellent were engaged in labor-only contracting, a prohibited
its regular employees.[12] undertaking.[16] The appellate court explained that based on the
respondents assertions and the petitioners admissions, the
250
contractors simply supplied the company with manpower, and status and rights of regular employees and to grant them all
that the sale and distribution of the companys products are the benefits as provided by existing collective bargaining agreement
same allied services found by this Court in Magsalin v. National or by law.
Organization of Workingmen[17] to be necessary and desirable The CA generally brushed aside the companys procedural
functions in the companys business. questions.

On the matter of capitalization, the CA invoked our ruling in 7K It ruled that the petition was filed on time, noting that April 7,
Corporation v. NLRC[18] presuming a contractor supplying labor 2008, a Monday and the last day for filing the petition, was
to be engaged in prohibited labor-only contracting, unless the declared a holiday in lieu of April 9 (Araw ng Kagitingan), a
contractor can show that it has substantial capital, investment, Wednesday,[19] and that the petition was filed on April 8, 2008,
and tools to undertake the contract. The CA found no proof in a Tuesday and a working day.
the records showing the required capitalization and tools; thus,
the CA concluded that Peerless and Excellent were engaged in That the contractors were not impleaded as necessary parties
labor-only contracting. was not a fatal infirmity, according to the CA, relying on the
The CA faulted the labor tribunals for relying solely on the ruling of the Court in Cabutihan v. Landcenter Construction
contract of services in determining who the real employer and Development Corporation.[20] On the other hand, the
is. Again invoking our 7K Corporation ruling, it pointed out alleged lack of proof of service was brushed aside on the finding
that the language of a contract is not wholly determinative of the that there is in the records of the case (page 35 of the petition)
relationship of the parties; whether a labor-only or a job an affidavit of service executed by Rufino San Antonio
contractor relationship exists must be determined using the indicating compliance with the rule on service. Finally, the CA
criteria established by law. Finding that the Labor Arbiters and ruled that the defect in the verification and certification was a
the NLRCs conclusions were not supported by substantial mere formal requirement that can be excused in the interest of
evidence, the CA nullified the challenged NLRC decision and substantial justice, following the ruling of this Court in Uy v.
ordered the company to reinstate the petitioners with the full Landbank of the Philippines.[21]
251
Petitioner moved for reconsideration of the decision, but the CA identity) and Section 2, Rule IV (prohibition against the
denied the motion in its resolution of October 13, 2008.[22] notarization without appropriate proof of identity); the
verification and certification attached to the petition before the
THE PETITION CA do not indicate that the affiants were personally known to the
notary public, nor did the notary identify the affiants through
The company filed the present appeal on November 4, 2008 on competent evidence of identity other than their community tax
the grounds that the CA erred when it:[23] certificate. These violations, according to the petitioner,
collectively resulted in a petition filed without the proper
1. gave due course to the petition despite the failure of the
respondents to comply with the Rules on Notarial verification and certification required by Section 4, Rule 7 of the
Practice in its verification and certification; Rules of Court.
On the necessary party issue, the petitioner posits that the CA
2. excluded the contractors as necessary parties in
violation of Section 8, Rule 3, in relation with Section ruling excluding the contractors as necessary parties results in the
5, Rule 65 of the Rules of Court; and absurd situation whereby the grant of regularization by the Labor
Arbiter in favor of the respondents and against the contractors, is
3. refused to follow established jurisprudence holding that
the findings of fact of the NLRC are accorded respect, actually the same award the CA held in their favor and against
if not finality, when supported by substantial evidence. the Company thereby making them regular employees of both the
Company and the contractors, a situation which is precisely what
On the notarial issue, the petitioner argues that Rule 65 of the Section 8, Rule 3, in relation to Section 5, Rule 65 of the Rules of
Rules of Court requires that a petition filed before the CA must Court seeks to prevent.
be verified and accompanied with a properly notarized
certification of non-forum shopping. It claims that the The petitioner also takes exception to the CAs reliance on the
verification and certification accompanying the petition were not ruling of the Court in Cabutihan v. Landcenter Construction and
notarized as required by Section 12, Rule II of the 2004 Rules on Development Corporation.[24] It posits that the ruling
Notarial Practice (for failure to present competent evidence of in Cabutihan was taken out of context; in that case, the subject
252
matter was divisible as it pertained to the conveyance of 36.5% We resolve to deny the petition for lack of merit.
of the property under litigation or, in the alternative, to the value
corresponding to this portion. On this fact situation, the Court The Notarial Issue.
found that the non-joinder of the companions of the petitioner as
party-litigants was not prejudicial to their rights. After due consideration, we deem the respondents to have
substantially complied with the verification and certification
In the present case, the petitioner posits that supposed cause of requirements in their petition for certiorari before the CA.
action (for regularization of the respondents) and the issue of
employer-employee relationship cannot be ruled upon without We find from our examination of the records that the fact
including the parties who had already been held liable by the situation that gave rise to the notarial issue before the CA was not
NLRC. It adds that as a result of the CA ruling, the respondents a new one; the same situation obtained before the NLRC where
are now regular employees of both the petitioner and the the verification and certification of the respondents appeal were
contractors. also notarized before the same notary public Diosdado V.
In their comment of March 4, 2009,[25] the respondents, aside Macapagal and where the respondents presented the same
from the reiteration of their previously expressed positions on evidence of identity (their community tax certificates).[26]
necessary parties and the labor-only contracting issues, argued
that the rules of procedure are not controlling in labor cases and The petitioners belated attention to the imputed defect
that every and all the reasonable means shall be used to indicates to us that the petitioner did not consider this defect
ascertain the facts for the full adjudication of the merits of the worth raising when things were going its way, but considered it a
case. They argue that it is more in accord with substantial serious one when things turned the other way. This opportunistic
justice and equity to overlook procedural questions raised. stance is not our idea of how technical deficiencies should be
viewed. We are aware, too, that under the circumstances of this
THE COURTS RULING case, the defect is a technical and minor one; the respondents did
file the required verification and certification of non-forum
253
shopping with all the respondents properly participating, marred contracting situation because in the latter, the contractor simply
only by a glitch in the evidence of their identity.[27] In the interest becomes an agent of the principal; either directly or through the
of justice, this minor defect should not defeat their petition and is agent, the principal then controls the results as well as the means
one that we can overlook in the interest of substantial justice, and manner of achieving the desired results. In other words, the
taking into account the merits of the case as discussed below. party who would have been the principal in a legitimate job
contracting relationship and who has no direct relationship with
The Necessary Party Issue. the contractor's employees, simply becomes the employer in the
labor-only contracting situation with direct supervision and
In our view, the petitioners necessary party issue proceeds control over the contracted employees. As Azucena astutely
from a misapprehension of the relationships in a contracting observed: in labor-contracting, there is really no contracting and
relationship. As lucidly pointed out in Azucenas The Labor Code no contractor; there is only the employers representative who
with Comments and Cases,[28] there are three parties in a gathers and supplies people for the employer; labor-contracting
legitimate contracting relationship, namely: the principal, the is therefore a misnomer.[29]
contractor, and the contractors employees. In this trilateral
relationship, the principal controls the contractor and his Where, as in this case, the main issue is labor contracting
employees with respect to the ultimate results or output of the and a labor-only contracting situation is found to exist as
contract; the contractor, on the other hand, controls his discussed below, the question of whether or not the purported
employees with respect, not only to the results to be obtained, but contractors are necessary parties is a non-issue; these purported
with respect to the means and manner of achieving this result. contractors are mere representatives of the principal/employer
This pervasive control by the contractor over its employees whose personality, as against that of the workers, is merged with
results in an employer-employee relationship between them. that of the principal/employer. Thus, this issue is rendered
academic by our conclusion that labor-only contracting exists.
This trilateral relationship under a legitimate job Our labor-only contracting conclusion, too, answers the
contracting is different from the relationship in a labor-only
254
petitioners argument that confusion results because the workers The law allows contracting and subcontracting involving
will have two employers. services but closely regulates these activities for the protection
The Contracting Out Issue. of workers. Thus, an employer can contract out part of its
operations, provided it complies with the limits and standards
Contracting and sub-contracting are hot labor issues for provided in the Code and in its implementing rules.
two reasons. The first is that job contracting and labor-only
contracting are technical Labor Code concepts that are easily The directly applicable provision of the Labor Code on
misunderstood. For one, there is a lot of lay misunderstanding of contracting and subcontracting is Article 106 which provides:
what kind of contracting the Labor Code prohibits or allows.
Whenever, an employer enters into a contract with another
The second, echoing the cry from the labor sector, is that the person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor
Labor Code provisions on contracting are blatantly and
shall be paid in accordance with the provisions of this Code.
pervasively violated, effectively defeating workers right to
The Secretary of Labor may, by appropriate regulations,
security of tenure. 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
This Court, through its decisions, can directly help address distinctions between labor-only contracting and job
the problem of misunderstanding. The second problem, however, contracting as well as differentiations within these types of
contracting and determine who among the parties involved
largely relates to implementation issues that are outside the shall be considered the employer for purposes of this Code.
Courts legitimate scope of activities; the Court can only passively
There is labor-only contracting where the person supplying
address the problem through the cases that are brought before us. workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries,
Either way, however, the need is for clear decisions that the
work premises, among others, and the workers recruited and
workers, most especially, will easily understand and placed by such persons are performing activities which are
directly related to the principal business of such employer. In
appreciate. We resolve the present case with these thoughts in such cases, the person or intermediary shall be considered
mind. merely as an agent of the employer who shall be responsible

255
 to the workers in the same manner and extent as if the alter of the job, work or service contracted out. [Emphasis
were directly employed by him (underscoring supplied). supplied]
The Department of Labor and Employment implements this
Labor Code provision through its Department Order No. 18-02 The right to control refers to the prerogative of a party to
[30]
(D.O. 18-02). On the matter of labor-only contracting, Section determine, not only the end result sought to be achieved, but also
5 thereof provides: the means and manner to be used to achieve this end.
Prohibition against labor-only contracting. - Labor-only
contracting is hereby declared prohibited x x x labor-only In strictly laymans terms, a manufacturer can sell its products on
contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers its own, or allow contractors, independently operating on their
to perform a job, work or service for a principal, and any of
own, to sell and distribute these products in a manner that does
the following elements are present:
not violate the regulations.From the terms of the above-quoted
i) The contractor or subcontractor does
not have sufficient capital or D.O. 18-02, the legitimate job contractor must have the
investment which relates to the job, capitalization and equipment to undertake the sale and
work or service to be performed and
the employees recruited, supplied or distribution of the manufacturers products, and must do it on its
placed by such contractor or own using its own means and selling methods.
subcontractor are performing
activities which are directly related to
the main business of the principal; or In the present case, both the capitalization of Peerless and
ii) The contractor does not exercise the Excellent and their control over the means and manner of their
right to control over the performance
operations are live sub-issues before us.
of the work of the contractual-
employee. A key consideration in resolving these issues is the
Substantial capital or investment refers to capital contract between the company and the purported contractors. The
stocks and subscribed capitalization in the case of contract[31] with Peerless, which is almost identical with the
corporations, tools or equipment, implements, machineries
and work premises, actually and directly used by the contract with Excellent, among others, states:
contractor or subcontractor in the performance or completion

256
 1. The CONTRACTOR agrees and undertakes to perform
and/or provide for the COMPANY, on a non-exclusive basis,
The Court of Appeals viewed matters differently and
the services of contractual employees for a temporary period faulted the labor tribunals for relying solely on the service
for task or activities that are considered contractible under
DOLE Department Order No. 10, Series of 1 997, such as contracts to prove that the respondents were employees of
lead helpers and replacement for absences as well as other Peerless and Excellent. The CA cited in this regard what we said
contractible jobs that may be needed by the Company from
time to time.[32] in 7K Corporation v. NLRC:[35]
xxxx
5. The CONTRACTOR shall have exclusive discretion in the The fact that the service contract entered into by
selection, engagement and discharge of its personnel, petitioner and Universal stipulated that private respondents
employees or agents or otherwise in the direction and control shall be the employees of Universal, would not help
hereunder. The determination of the wages, salaries and petitioner, as the language of a contract is not determinative
compensation of the personnel, workers and employees of the of the relationship of the parties. Petitioner and Universal
CONTRACTOR shall be within its full control.[33] cannot dictate, by the mere expedient of a declaration in a
xxxx contract, the character of Universal business, i.e., whether as
. . . Although it is understood and agreed between the parties labor-only contractor , or job contractor, it being crucial that
hereto that the CONTRACTOR, in the performance of its Universals character be mentioned in terms of and
obligations hereunder, is subject to the control and direction determined by the criteria set by the statute.[36]
of he COMPANY merely as to result to be accomplished by
the work or services herein specified, and not as to the means
and methods of accomplishing such result, the as basis for looking at how the contracted workers really related
CONTRACTOR hereby warrants that it will perform such with the company in performing their contracted tasks. In other
work or services in such manner as will be consistent with the
achievement of the result herein contracted for.[34] words, the contract between the principal and the contractor is
not the final word on how the contracted workers relate to the
These provisions particularly, that Peerless and Excellent retain
principal and the purported contractor; the relationships must be
the right to select, hire, dismiss, supervise, control, and discipline
tested on the basis of how they actually operate.
all personnel they will assign to the petitioner, as well as pay
their salaries were cited by the labor arbiter and the NLRC as
Even before going into the realities of workplace
basis for their conclusion that no employer-employee relationship
operations, the CA found that the service contracts[37] themselves
existed between the respondents and the petitioner.
provide ample leads into the relationship between the company,
on the one hand, and Peerless and Excellent, on the other. The
257
CA noted that both the Peerless and the Excellent contracts show were thus necessarily under the companys control and
that their obligation was solely to provide the company with the supervision in doing these tasks.
services of contractual employees,[38] and nothing more. These
contracted services were for the handling and delivery of the Still another way of putting it is that the contractors were
companys products and allied services.[39] Following D.O. 18-02 not independently selling and distributing company products,
and the contracts that spoke purely of the supply of labor, the CA using their own equipment, means and methods of selling and
concluded that Peerless and Excellent were labor-only distribution; they only supplied the manpower that helped the
contractors unless they could prove that they had the required company in the handing of products for sale and distribution. In
capitalization and the right of control over their contracted the context of D.O. 18-02, the contracting for sale and
workers. distribution as an independent and self-contained operation is a
The CA concluded that other than the petitioners bare legitimate contract, but the pure supply of manpower with the
allegation, there is no indication in the records that Peerless and task of assisting in sales and distribution controlled by a principal
Excellent had substantial capital, tools or investment used falls within prohibited labor-only contracting.
directly in providing the contracted services to the petitioner. The role of sales route helpers in company operations is
Thus, in the handling and delivery of company products, the not a new issue before this Court as we have ruled on this issue
contracted personnel used company trucks and equipment in an in Magsalin v. National Organization of Workingmen[40] which
operation where company sales personnel primarily handled sales the CA itself cited in the assailed decision. We held in this cited
and distribution, merely utilizing the contracted personnel as case that:
sales route helpers.
The argument of petitioner that its usual business or trade is
softdrink manufacturing and that the work assigned to the
respondent workers so involves merely postproduction
In plainer terms, the contracted personnel (acting as sales
activities, one which is not indispensable in the manufacture
route helpers) were only engaged in the marginal work of helping of its products, scarcely can be persuasive. If, as so argued by
petitioner company, only those whose work are directly
in the sale and distribution of company products; they only involved in the production of softdrinks may be held
provided the muscle work that sale and distribution required and performing functions necessary and desirable in its usual
258
 business or trade, there would have been no need for it to
even maintain regular truck sales route helpers. The nature of
supervision over the contracted personnel. They are therefore
the work performed must be viewed from a perspective of the labor-only contractors. Consequently, the contracted personnel,
business or trade in its entirety and not only in a confined
scope.[41] engaged in component functions in the main business of the
company under the latters supervision and control, cannot but be
While the respondents were not direct parties to this ruling, the regular company employees. In these lights, the petition is totally
petitioner was the party involved and Magsalin described in a without merit and hence must be denied.
very significant way the manufacture of softdrinks and the WHEREFORE, premises considered, we
companys sales and distribution activities in relation with one hereby DENY the petition and accordingly AFFIRM the
another. Following the lead we gave in Magsalin, the CA challenged decision and resolution of the Court of Appeals in
concluded that the contracted personnel who served as route CA-G.R. SP No. 102988. Costs against the petitioner.
helpers were really engaged in functions directly related to the SO ORDERED.
overall business of the petitioner. This led to the further CA
conclusion that the contracted personnel were under the G.R. No. 170054 January 21, 2013
companys supervision and control since sales and distribution
GOYA, INC., Petitioner,
were in fact not the purported contractors independent, discrete
vs.
and separable activities, but were component parts of sales and GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
distribution operations that the company controlled in its
DECISION
softdrinks business.
PERALTA, J.:
Based on these considerations, we fully agree with the CA This petition for review on certiorari under Rule 45 of the
that Peerless and Excellent were mere suppliers of labor who had Rules of Civil Procedure seeks to reverse and set aside the
no sufficient capitalization and equipment to undertake sales and June 16, 2005 Decision1 and October 12, 2005
distribution of softdrinks as independent activities separate from Resolution2 of the Court of Appeals in CA-G.R. SP No.
the manufacture of softdrinks, and who had no control and 87335, which sustained the October 26, 2004 Decision3 of
259
Voluntary Arbitrator Bienvenido E. Laguesma, the Bienvenido E. Laguesma that amicable settlement was no
dispositive portion of which reads: longer possible; hence, they agreed to submit for resolution
the solitary issue of "[w]hether or not the Company is guilty
WHEREFORE, judgment is hereby rendered declaring that
of unfair labor acts in engaging the services of PESO, a
the Company is NOT guilty of unfair labor practice in
third party service provider, under the existing CBA, laws,
engaging the services of PESO.
and jurisprudence."6 Both parties thereafter filed their
The company is, however, directed to observe and comply respective pleadings.
with its commitment as it pertains to the hiring of casual
The Union asserted that the hiring of contractual employees
employees when necessitated by business circumstances.4
from PESO is not a management prerogative and in gross
The facts are simple and appear to be undisputed. violation of the CBA tantamount to unfair labor practice
(ULP). It noted that the contractual workers engaged have
Sometime in January 2004, petitioner Goya, Inc. been assigned to work in positions previously handled by
(Company), a domestic corporation engaged in the
regular workers and Union members, in effect violating
manufacture, importation, and wholesale of top quality food
Section 4, Article I of the CBA, which provides for three
products, hired contractual employees from PESO
categories of employees in the Company, to wit:
Resources Development Corporation (PESO) to perform
temporary and occasional services in its factory in Parang, Section 4. Categories of Employees.– The parties agree on
Marikina City. This prompted respondent Goya, Inc. the following categories of employees:
Employees Union–FFW (Union) to request for a grievance
(a) Probationary Employee. – One hired to occupy a regular
conference on the ground that the contractual workers do
rank-and-file position in the Company and is serving a
not belong to the categories of employees stipulated in the
probationary period. If the probationary employee is hired or
existing Collective Bargaining Agreement (CBA).5 When the
comes from outside the Company (non-Goya, Inc.
matter remained unresolved, the grievance was referred to
employee), he shall be required to undergo a probationary
the National Conciliation and Mediation Board (NCMB) for
period of six (6) months, which period, in the sole judgment
voluntary arbitration.
of management, may be shortened if the employee has
During the hearing on July 1, 2004, the Company and the already acquired the knowledge or skills required of the job.
Union manifested before Voluntary Arbitrator (VA) If the employee is hired from the casual pool and has
260
worked in the same position at any time during the past two Section 1. Condition of Employment. – As a condition of
(2) years, the probationary period shall be three (3) months. continued employment in the Company, all regular rank-
and-file employees shall remain members of the Union in
(b) Regular Employee. – An employee who has
good standing and that new employees covered by the
satisfactorily completed his probationary period and
appropriate bargaining unit shall automatically become
automatically granted regular employment status in the
regular employees of the Company and shall remain
Company.
members of the Union in good standing as a condition of
(c) Casual Employee, – One hired by the Company to continued employment.
perform occasional or seasonal work directly connected with
The Union moreover advanced that sustaining the
the regular operations of the Company, or one hired for
Company’s position would easily weaken and ultimately
specific projects of limited duration not connected directly
destroy the former with the latter’s resort to retrenchment
with the regular operations of the Company.
and/or retirement of employees and not filling up the vacant
It was averred that the categories of employees had been a regular positions through the hiring of contractual workers
part of the CBA since the 1970s and that due to this from PESO, and that a possible scenario could also be
provision, a pool of casual employees had been maintained created by the Company wherein it could "import" workers
by the Company from which it hired workers who then from PESO during an actual strike.
became regular workers when urgently necessary to employ
In countering the Union’s allegations, the Company argued
them for more than a year. Likewise, the Company
that: (a) the law expressly allows contracting and
sometimes hired probationary employees who also later
subcontracting arrangements through Department of Labor
became regular workers after passing the probationary
and Employment (DOLE) Order No. 18-02; (b) the
period. With the hiring of contractual employees, the Union
engagement of contractual employees did not, in any way,
contended that it would no longer have probationary and
prejudice the Union, since not a single employee was
casual employees from which it could obtain additional
terminated and neither did it result in a reduction of working
Union members; thus, rendering inutile Section 1, Article III
hours nor a reduction or splitting of the bargaining unit; and
(Union Security) of the CBA, which states:
(c) Section 4, Article I of the CBA merely provides for the
definition of the categories of employees and does not put a
limitation on the Company’s right to engage the services of
261
job contractors or its management prerogative to address "occasional or seasonal work directly connected with the
temporary/occasional needs in its operation. regular operations of the COMPANY," or "specific projects
of limited duration not connected directly with the regular
On October 26, 2004, VA Laguesma dismissed the Union’s
operations of the COMPANY", the Company can hire casual
charge of ULP for being purely speculative and for lacking in
employees which is akin to contractual employees. If we
factual basis, but the Company was directed to observe and
note the Company’s own declaration that PESO was
comply with its commitment under the CBA. The VA opined:
engaged to perform "temporary or occasional services" (See
We examined the CBA provision Section 4, Article I of the the Company’s Position Paper, at p. 1), then it should have
CBAallegedly violated by the Company and indeed the directly hired the services of casual employees rather than
agreement prescribes three (3) categories of employees in do it through PESO.
the Company and provides for the definition, functions and
It is evident, therefore, that the engagement of PESO is not
duties of each. Material to the case at hand is the definition
in keeping with the intent and spirit of the CBA provision in
as regards the functions of a casual employee described as
question. It must, however, be stressed that the right of
follows:
management to outsource parts of its operations is not
Casual Employee – One hired by the COMPANY to perform totally eliminated but is merely limited by the CBA. Given
occasional or seasonal work directly connected with the the foregoing, the Company’s engagement of PESO for the
regular operations of the COMPANY, or one hired for given purpose is indubitably a violation of the CBA.7
specific projects of limited duration not connected directly
While the Union moved for partial reconsideration of the VA
with the regular operations of the COMPANY.
Decision,8 the Company immediately filed a petition for
While the foregoing agreement between the parties did review9 before the Court of Appeals (CA) under Rule 43 of
eliminate management’s prerogative of outsourcing parts of the Revised Rules of Civil Procedure to set aside the
its operations, it serves as a limitation on such prerogative directive to observe and comply with the CBA commitment
particularly if it involves functions or duties specified under pertaining to the hiring of casual employees when
the aforequoted agreement. It is clear that the parties necessitated by business circumstances. Professing that
agreed that in the event that the Company needs to engage such order was not covered by the sole issue submitted for
the services of additional workers who will perform voluntary arbitration, the Company assigned the following
errors:
262
THE HONORABLE VOLUNTARY ARBITRATOR x x x x While the engagement of PESO is in violation of
EXCEEDED HIS POWER WHICH WAS EXPRESSLY Section 4, Article I of the CBA, it does not constitute unfair
GRANTED AND LIMITED BY BOTH PARTIES IN RULING labor practice as it (sic) not characterized under the law as a
THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING gross violation of the CBA. Violations of a CBA, except
WITH THE INTENT AND SPIRIT OF THE CBA.10 those which are gross in character, shall no longer be
treated as unfair labor practice. Gross violations of a CBA
THE HONORABLE VOLUNTARY ARBITRATOR
means flagrant and/or malicious refusal to comply with the
COMMITTED A PATENT AND PALPABLE ERROR IN
economic provisions of such agreement. x x x
DECLARING THAT THE ENGAGEMENT OF PESO IS
NOT IN KEEPING WITH THE INTENT AND SPIRIT OF Anent the second assigned error, the Company contends
THE CBA.11 that the Hon. Voluntary Arbitrator erred in declaring that the
engagement of PESO is not in keeping with the intent and
On June 16, 2005, the CA dismissed the petition. In
spirit of the CBA. The Company justified its engagement of
dispensing with the merits of the controversy, it held:
contractual employees through PESO as a management
This Court does not find it arbitrary on the part of the Hon. prerogative, which is not prohibited by law. Also, it further
Voluntary Arbitrator in ruling that "the engagement of PESO alleged that no provision under the CBA limits or prohibits
is not in keeping with the intent and spirit of the CBA." The its right to contract out certain services in the exercise of
said ruling is interrelated and intertwined with the sole issue management prerogatives.
to be resolved that is, "Whether or not the Company is guilty
Germane to the resolution of the above issue is the
of unfair labor practice in engaging the services of PESO, a
provision in their CBA with respect to the categories of the
third party service provider, under existing CBA, laws, and
employees:
jurisprudence." Both issues concern the engagement of
PESO by the Company which is perceived as a violation of xxxx
the CBA and which constitutes as unfair labor practice on
A careful reading of the above-enumerated categories of
the part of the Company. This is easily discernible in the
employees reveals that the PESO contractual employees do
decision of the Hon. Voluntary Arbitrator when it held:
not fall within the enumerated categories of employees
stated in the CBA of the parties. Following the said

263
categories, the Company should have observed and arbitrary actions. In the case at bench, the CBA of the
complied with the provision of their CBA. Since the parties has already provided for the categories of the
Company had admitted that it engaged the services of employees in the Company’sestablishment. These
PESO to perform temporary or occasional services which is categories of employees particularly with respect to casual
akin to those performed by casual employees, the Company employees serve as limitation to the Company’s prerogative
should have tapped the services of casual employees to outsource parts of its operations especially when hiring
instead of engaging PESO. contractual employees. As stated earlier, the work to be
performed by PESO was similar to that of the casual
In justifying its act, the Company posits that its engagement
employees. With the provision on casual employees, the
of PESO was a management prerogative. It bears stressing
hiring of PESO contractual employees, therefore, is not in
that a management prerogative refers to the right of the
keeping with the spirit and intent of their CBA. (Citations
employer to regulate all aspects of employment, such as the
omitted)12
freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of The Company moved to reconsider the CA Decision,13 but it
employees, supervision of their work, lay-off and discipline, was denied;14 hence, this petition.
and dismissal and recall of work, presupposing the
Incidentally, on July 16, 2009, the Company filed a
existence of employer-employee relationship. On the basis
Manifestation15 informing this Court that its stockholders and
of the foregoing definition, the Company’s engagement of
directors unanimously voted to shorten the Company’s
PESO was indeed a management prerogative. This is in
corporate existence only until June 30, 2006, and that the
consonance with the pronouncement of the Supreme Court
three-year period allowed by law for liquidation of the
in the case of Manila Electric Company vs. Quisumbing
Company’s affairs already expired on June 30, 2009.
where it ruled that contracting out of services is an exercise
Referring to Gelano v. Court of Appeals,16 Public Interest
of business judgment or management prerogative.
Center, Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged
This management prerogative of contracting out services, Us, however, to still resolve the case for future guidance of
however, is not without limitation. In contracting out the bench and the bar as the issue raised herein allegedly
services, the management must be motivated by good faith calls for a clarification of a legal principle, specifically,
and the contracting out should not be resorted to circumvent whether the VA is empowered to rule on a matter not
the law or must not have been the result of malicious covered by the issue submitted for arbitration.
264
Even if this Court would brush aside technicality by ignoring Thereafter, said employees joined LEU, which acted as the
the supervening event that renders this case moot and exclusive bargaining agent of the rank-and-file employees.
academic19 due to the permanent cessation of the When LEU entered into a CBA with Ludo, providing for
Company’s business operation on June 30, 2009, the certain benefits to the employees (the amount of which vary
arguments raised in this petition still fail to convince Us. according to the length of service rendered), it requested to
include in its members’ period of service the time during
We confirm that the VA ruled on a matter that is covered by
which they rendered arrastre services so that they could get
the sole issue submitted for voluntary arbitration.
higher benefits. The matter was submitted for voluntary
Resultantly, the CA did not commit serious error when it
arbitration when Ludo failed to act. Per submission
sustained the ruling that the hiring of contractual employees
agreement executed by both parties, the sole issue for
from PESO was not in keeping with the intent and spirit of
resolution was the date of regularization of the workers. The
the CBA. Indeed, the opinion of the VA is germane to, or, in
VA Decision ruled that: (1) the subject employees were
the words of the CA, "interrelated and intertwined with," the
engaged in activities necessary and desirable to the
sole issue submitted for resolution by the parties. This being
business of Ludo, and (2) CLAS is a labor-only contractor of
said, the Company’s invocation of Sections 4 and 5, Rule
Ludo. It then disposed as follows: (a) the complainants were
IV20 and Section 5, Rule VI21 of the Revised Procedural
considered regular employees six months from the first day
Guidelines in the Conduct of Voluntary Arbitration
of service at CLAS; (b) the complainants, being entitled to
Proceedings dated October 15, 2004 issued by the NCMB
the CBA benefits during the regular employment, were
is plainly out of order.
awarded sick leave, vacation leave, and annual wage and
Likewise, the Company cannot find solace in its cited case salary increases during such period; (c) respondents shall
of Ludo & Luym Corporation v. Saornido.22 In Ludo, the pay attorney’s fees of 10% of the total award; and (d) an
company was engaged in the manufacture of coconut oil, interest of 12% per annum or 1% per month shall be
corn starch, glucose and related products. In the course of imposed on the award from the date of promulgation until
its business operations, it engaged the arrastre services of fully paid. The VA added that all separation and/or
CLAS for the loading and unloading of its finished products retirement benefits shall be construed from the date of
at the wharf. The arrastre workers deployed by CLAS to regularization subject only to the appropriate government
perform the services needed were subsequently hired, on laws and other social legislation. Ludo filed a motion for
different dates, as Ludo’s regular rank-and-file employees. reconsideration, but the VA denied it. On appeal, the CA
265
affirmed in toto the assailed decision; hence, a petition was In one case, the Supreme Court stressed that "xxx the
brought before this Court raising the issue, among others, of Voluntary Arbitrator had plenary jurisdiction and authority to
whether a voluntary arbitrator can award benefits not interpret the agreement to arbitrate and to determine the
claimed in the submission agreement. In denying the scope of his own authority subject only, in a proper case, to
petition, We ruled: the certiorari jurisdiction of this Court. The Arbitrator, as
already indicated, viewed his authority as embracing not
Generally, the arbitrator is expected to decide only those
merely the determination of the abstract question of whether
questions expressly delineated by the submission
or not a performance bonus was to be granted but also, in
agreement. Nevertheless, the arbitrator can assume that he
the affirmative case, the amount thereof.
has the necessary power to make a final settlement since
arbitration is the final resort for the adjudication of disputes. By the same token, the issue of regularization should be
The succinct reasoning enunciated by the CA in support of viewed as two-tiered issue. While the submission
its holding, that the Voluntary Arbitrator in a labor agreement mentioned only the determination of the date or
controversy has jurisdiction to render the questioned arbitral regularization, law and jurisprudence give the voluntary
awards, deserves our concurrence, thus: arbitrator enough leeway of authority as well as adequate
prerogative to accomplish the reason for which the law on
In general, the arbitrator is expected to decide those
voluntary arbitration was created – speedy labor justice. It
questions expressly stated and limited in the submission
bears stressing that the underlying reason why this case
agreement. However, since arbitration is the final resort for
arose is to settle, once and for all, the ultimate question of
the adjudication of disputes, the arbitrator can assume that
whether respondent employees are entitled to higher
he has the power to make a final settlement. Thus,
benefits. To require them to file another action for payment
assuming that the submission empowers the arbitrator to
of such benefits would certainly undermine labor
decide whether an employee was discharged for just cause,
proceedings and contravene the constitutional mandate
the arbitrator in this instance can reasonably assume that
providing full protection to labor.23
his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back Indubitably, Ludo fortifies, not diminishes, the soundness of
pay. the questioned VA Decision. Said case reaffirms the plenary
jurisdiction and authority of the voluntary arbitrator to
interpret the CBA and to determine the scope of his/her own
266
authority. Subject to judicial review, the leeway of authority contracting out services, however, is not without limitation. x
as well as adequate prerogative is aimed at accomplishing x x These categories of employees particularly with respect
the rationale of the law on voluntary arbitration – speedy to casual employees serve as limitation to the Company’s
labor justice. In this case, a complete and final adjudication prerogative to outsource parts of its operations especially
of the dispute between the parties necessarily called for the when hiring contractual employees."
resolution of the related and incidental issue of whether the
A collective bargaining agreement is the law between the
Company still violated the CBA but without being guilty of
parties:
ULP as, needless to state, ULP is committed only if there is
gross violation of the agreement. It is familiar and fundamental doctrine in labor law that the
CBA is the law between the parties and they are obliged to
Lastly, the Company kept on harping that both the VA and
comply with its provisions. We said so in Honda Phils., Inc.
the CA conceded that its engagement of contractual
v. Samahan ng Malayang Manggagawa sa Honda:
workers from PESO was a valid exercise of management
prerogative. It is confused. To emphasize, declaring that a A collective bargaining agreement or CBA refers to the
particular act falls within the concept of management negotiated contract between a legitimate labor organization
prerogative is significantly different from acknowledging that and the employer concerning wages, hours of work and all
such act is a valid exercise thereof. What the VA and the other terms and conditions of employment in a bargaining
CA correctly ruled was that the Company’s act of unit.1âwphi1 As in all contracts, the parties in a CBA may
contracting out/outsourcing is within the purview of establish such stipulations, clauses, terms and conditions as
management prerogative. Both did not say, however, that they may deem convenient provided these are not contrary
such act is a valid exercise thereof. Obviously, this is due to to law, morals, good customs, public order or public policy.
the recognition that the CBA provisions agreed upon by the Thus, where the CBA is clear and unambiguous, it becomes
Company and the Union delimit the free exercise of the law between the parties and compliance therewith is
management prerogative pertaining to the hiring of mandated by the express policy of the law.
contractual employees. Indeed, the VA opined that "the right
Moreover, if the terms of a contract, as in a CBA, are clear
of the management to outsource parts of its operations is
not totally eliminated but is merely limited by the CBA," and leave no doubt upon the intention of the contracting
while the CA held that "this management prerogative of
267
parties, the literal meaning of their stipulations shall control. SO ORDERED.
x x x.24
JOEB M. ALIVIADO, ARTHUR G.R. No. 160506
In this case, Section 4, Article I (on categories of CORPUZ, ERIC ALIVIADO,
employees) of the CBA between the Company and the MONCHITO AMPELOQUIO,
Union must be read in conjunction with its Section 1, Article ABRAHAM BASMAYOR,
JONATHAN MATEO,
III (on union security). Both are interconnected and must be
LORENZO
given full force and effect. Also, these provisions are clear PLATON, JOSE FERNANDO
and unambiguous. The terms are explicit and the language GUTIERREZ, ESTANISLAO
of the CBA is not susceptible to any other interpretation. BUENAVENTURA, LOPE
Hence, the literal meaning should prevail. As repeatedly SALONGA,
held, the exercise of management prerogative is not FRANZ DAVID, NESTOR
unlimited; it is subject to the limitations found in law, IGNACIO,
JULIO REY, RUBEN
collective bargaining agreement or the general principles of
MARQUEZ, JR.,
fair play and justice25 Evidently, this case has one of the MAXIMINO PASCUAL,
restrictions- the presence of specific CBA provisions-unlike ERNESTO
in San Miguel Corporation Employees Union-PTGWO v. CALANAO, ROLANDO
Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol ROMASANTA, RHUEL AGOO,
Corporation v. NLRC,28 and Serrano v. NLRC29cited by the BONIFACIO ORTEGA,
Company. To reiterate, the CBA is the norm of conduct ARSENIO
SORIANO, JR., ARNEL
between the parties and compliance therewith is mandated
ENDAYA,
by the express policy of the law.30 ROBERTO ENRIQUEZ,
NESTOR
WHEREFORE, the petition is DENIED. The assailed June
BAQUILA, EDGARDO
16, 2005 Decision, as well as the October 12, 2005 QUIAMBAO,
Resolution of the Court of Appeals, which sustained the SANTOS BACALSO, SAMSON
October 26, 2004 Decision of the Voluntary Arbitrator, are BASCO,
hereby AFFIRMED. ALADINO GREGORO, JR.,
EDWIN
268
GARCIA, ARMANDO VILLAR, MELCHOR CARDANO,
EMIL MARIANO
TAWAT, MARIO P. LIONGSON, NARANIAN, JOHN
CRESENTE J. GARCIA, SUMERGIDO,
FERNANDO ROBERTO ROSALES, GERRY
MACABENTE, MELECIO C.
CASAPAO, GATPO, GERMAN N. Present:
REYNALDO JACABAN, GUEVARRA,
FERDINAND GILBERT Y. MIRANDA,
SALVO, ALSTANDO MONTOS, RODOLFO C.
RAINER N. SALVADOR, RAMIL TOLEDO, ARNOLD D. CARPIO, J., Chairperson,
REYES, PEDRO G. ROY, LASTONA,
LEONARDO PHILIP M. LOZA, MARIO N. BRION,
P. TALLEDO, ENRIQUE F. CULDAYON, ORLANDO P. DEL CASTILLO,
TALLEDO, JIMENEZ,
WILLIE ORTIZ, ERNESTO FRED P. JIMENEZ, RESTITUTO ABAD, and
SOYOSA, C.
ROMEO VASQUEZ, JOEL PAMINTUAN, JR., ROLANDO J. PEREZ, JJ.
BILLONES, DE
ALLAN BALTAZAR, NOLI ANDRES, ARTUZ BUSTENERA,
GABUYO, ROBERTO B. CRUZ, ROSEDY
EMMANUEL E. LABAN, RAMIR O.
E. YORDAN, DENNIS DACASIN,
PIAT, RAUL DULAY, TADEO ALEJANDRINO ABATON, and
DURAN, ORLANDO S. BALANGUE,
JOSEPH BANICO, ALBERT Petitioners,
LEYNES,
ANTONIO DACUNA, RENATO - versus -
DELA
CRUZ, ROMEO VIERNES, JR., PROCTER & GAMBLE PHILS., Promulgated:
ELAIS INC.,
BASEO, WILFREDO TORRES, and PROMM-GEM INC., March 9, 2010
269
 Respondents. Petitioners worked as merchandisers of P&G from various
x---------------------------------------------------- dates, allegedly starting as early as 1982 or as late as June 1991, to
---------------x
either May 5, 1992 or March 11, 1993, more specifically as follows:

Name Date Employed Date Dismissed

DECISION 1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
DEL CASTILLO, J.: 3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
Labor laws expressly prohibit labor-only contracting. To prevent its 5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
circumvention, the Labor Code establishes an employer-employee 6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
relationship between the employer and the employees of the labor-only
8. Jose Fernando Gutierrez 1988 May 5, 1992
contractor. 9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
The instant petition for review assails the March 21, 2003 Decision[1] of 11. Franz David 1989 March 11, 1993
the Court of Appeals (CA) in CA-G.R. SP No. 52082 and its October 12. Nestor Ignacio 1982 March 11, 1993
20, 2003 Resolution[2] denying the motions for reconsideration 13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
separately filed by petitioners and respondent Procter & Gamble Phils. 15. Maximino Pascual 1990 May 5, 1992
Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of 16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
the National Labor Relations Commission (NLRC), which in turn 17. Rolando Romasanta 1983 March 11, 1993
affirmed the November 29, 1996 Decision[3]of the Labor Arbiter. All 18. [Roehl] Agoo 1988 March 11, 1993
these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and 19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
Promotions Services (SAPS) to be legitimate independent contractors
21. Arnel Endaya 1983 March 11, 1993
and the employers of the petitioners. 22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992
Factual Antecedents 24. Ed[g]ardo Quiambao 1989 March 11, 1993
25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
270
28. Edwin Garcia 1987 May 5, 1992 61. [Marino] [Maranion] 1989 May 5, 1992
29. Armando Villar 1990 May 5, 1992 62. John Sumergido 1987 May 5, 1992
30. Emil Tawat 1988 March 11, 1993 63. Roberto Rosales May, 1987 May 5, 1992
31. Mario P. Liongson 1991 May 5, 1992 64. Gerry [G]. Gatpo November, 1990 March 11, 1993
32. Cresente J. Garcia 1984 March 11, 1993 65. German N. Guevara May, 1990 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992 66. Gilbert Y. Miranda June, 1991 March 11, 1993
34. Melecio Casapao 1987 March 11, 1993 67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992 68. Arnold D. [Laspoa] June 1991 March 11, 1993
36. Ferdinand Salvo 1985 May 5, 1992 69. Philip M. Loza March 5, 1992 March 11, 1993
37. Alstando Montos 1984 March 11, 1993 70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992 71. Orlando P. Jimenez November 6, 1992 March 11, 1993
39. Ramil Reyes 1984 March 11, 1993 72. Fred P. Jimenez September, 1991 March 11, 1993
40. Pedro G. Roy 1987 73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11,
41. Leonardo [F]. Talledo 1985 March 11, 1993 1993
42. Enrique [F]. Talledo 1988 March 11, 1993 74. Rolando J. de Andres June, 1991 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992 75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
44. Ernesto Soyosa 1988 May 5, 1992 76. Roberto B. Cruz May 4, 1990 March 11, 1993
45. Romeo Vasquez 1985 March 11, 1993 77. Rosedy O. Yordan June, 1991 May 5, 1992
46. Joel Billones 1987 March 11, 1993 78. Dennis Dacasin May. 1990 May 5, 1992
47. Allan Baltazar 1989 March 11, 1993 79. Alejandrino Abaton 1988 May 5, 1992
48. Noli Gabuyo 1991 March 11, 1993 80. Orlando S. Balangue March, 1989 March 11, 1993[4]
49. Emmanuel E. Laban 1987 May 5, 1992 They all individually signed employment contracts with either Promm-
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
Gem or SAPS for periods of more or less five months at a time.[5] They
52. Tadeo Duran[o] 1988 May 5, 1992 were assigned at different outlets, supermarkets and stores where they
53. Joseph Banico 1988 March 11, 1993 handled all the products of P&G. They received their wages from
54. Albert Leynes 1990 May 5, 1992 Promm-Gem or SAPS.[6]
55. Antonio Dacu[m]a 1990 May 5, 1992 SAPS and Promm-Gem imposed disciplinary measures on
56. Renato dela Cruz 1982
erring merchandisers for reasons such as habitual absenteeism,
57. Romeo Viernes, Jr. 1986
58. El[ia]s Bas[c]o 1989 dishonesty or changing day-off without prior notice.[7]
59. Wilfredo Torres 1986 May 5, 1992
60. Melchor Carda[]o 1991 May 5, 1992
271
P&G is principally engaged in the manufacture and production of Ruling of the NLRC
different consumer and health products, which it sells on a wholesale
basis to various supermarkets and distributors.[8] To enhance consumer Appealing to the NLRC, petitioners disputed the Labor Arbiters
awareness and acceptance of the products, P&G entered into contracts findings. On July 27, 1998, the NLRC rendered a Decision[13] disposing
with Promm-Gem and SAPS for the promotion and merchandising of as follows:
its products.[9]
WHEREFORE, premises considered, the appeal of
complainants is hereby DISMISSED and the decision
In December 1991, petitioners filed a complaint[10] against P&G
appealed from AFFIRMED.
for regularization, service incentive leave pay and other benefits with
damages. The complaint was later amended[11] to include the matter of SO ORDERED.[14]
their subsequent dismissal. Petitioners filed a motion for reconsideration but the motion was denied
in the November 19, 1998 Resolution.[15]
Ruling of the Labor Arbiter
Ruling of the Court of Appeals
On November 29, 1996, the Labor Arbiter dismissed the
complaint for lack of merit and ruled that there was no employer- Petitioners then filed a petition for certiorari with the CA,
employee relationship between petitioners and P&G. He found that the alleging grave abuse of discretion amounting to lack or excess of
selection and engagement of the petitioners, the payment of their jurisdiction on the part of the Labor Arbiter and the NLRC. However,
wages, the power of dismissal and control with respect to the means said petition was also denied by the CA which disposed as follows:
and methods by which their work was accomplished, were all done and
exercised by Promm-Gem/SAPS. He further found that Promm-Gem WHEREFORE, the decision of the National Labor
and SAPS were legitimate independent job contractors. The dispositive Relations Commission dated July 27, 1998 is AFFIRMED
with the MODIFICATION that respondent Procter &
portion of his Decision reads:
Gamble Phils., Inc. is ordered to pay service incentive leave
pay to petitioners.
WHEREFORE, premises considered, judgment is hereby
rendered Dismissing the above-entitled cases against SO ORDERED.[16]
respondent Procter & Gamble (Phils.), Inc. for lack of merit.

SO ORDERED.[12]
272
Petitioners filed a motion for reconsideration but the motion was also Simply stated, the issues are: (1) whether P&G is the employer
denied. Hence, this petition. of petitioners; (2) whether petitioners were illegally dismissed; and (3)
whether petitioners are entitled for payment of actual, moral and
Issues exemplary damages as well as litigation costs and attorneys fees.

Petitioners now come before us raising the following issues: Petitioners Arguments
I.
WHETHER X X X THE HONORABLE COURT OF Petitioners insist that they are employees of P&G. They claim
APPEALS HAS COMMITTED [A] REVERSIBLE
that they were recruited by the salesmen of P&G and were engaged to
ERROR WHEN IT DID NOT FIND THE PUBLIC
RESPONDENTS TO HAVE ACTED WITH undertake merchandising chores for P&G long before the existence of
GRAVE ABUSE OF DISCRETION AMOUNTING TO Promm-Gem and/or SAPS. They further claim that when the latter had
LACK OF OR IN EXCESS OF JURISDICTION IN its so-called re-alignment program, petitioners were instructed to fill up
RENDERING THE QUESTIONED JUDGMENT application forms and report to the agencies which P&G created.[18]
WHEN, OBVIOUSLY, THE PETITIONERS WERE
ABLE TO PROVE AND ESTABLISH THAT
RESPONDENT PROCTER & GAMBLE PHILS., INC. IS Petitioners further claim that P&G instigated their dismissal
THEIR EMPLOYER AND THAT THEY WERE from work as can be gleaned from its letter[19] to SAPS dated February
ILLEGALLY DISMISSED BY THE FORMER. 24, 1993, informing the latter that their Merchandising Services
Contract will no longer be renewed.
II. Petitioners further assert that Promm-Gem and SAPS are labor-
WHETHER X X X THE HONORABLE COURT OF
only contractors providing services of manpower to their client. They
APPEALS HAS COMMITTED [A] REVERSIBLE
ERROR WHEN IT DID NOT DECLARE THAT THE claim that the contractors have neither substantial capital nor tools and
PUBLIC RESPONDENTS HAD ACTED WITH GRAVE equipment to undertake independent labor contracting. Petitioners insist
ABUSE OF DISCRETION WHEN THE LATTER DID that since they had been engaged to perform activities which are
NOT FIND THE PRIVATE RESPONDENTS LIABLE necessary or desirable in the usual business or trade of P&G, then they
TO THE PETITIONERS FOR PAYMENT OF ACTUAL,
are its regular employees.[20]
MORAL AND EXEMPLARY DAMAGES AS WELL
AS LITIGATION COSTS AND ATTORNEYS FEES.[17]
Respondents Arguments

273
 On the other hand, P&G points out that the instant petition raises Our Ruling
only questions of fact and should thus be thrown out as the Court is not
a trier of facts. It argues that findings of facts of the NLRC, particularly The petition has merit.
where the NLRC and the Labor Arbiter are in agreement, are deemed
binding and conclusive on the Supreme Court. As a rule, the Court refrains from reviewing factual assessments
of lower courts and agencies exercising adjudicative functions, such as
P&G further argues that there is no employment relationship the NLRC. Occasionally, however, the Court is constrained to wade
between it and petitioners. It was Promm-Gem or SAPS that (1) into factual matters when there is insufficient or insubstantial evidence
selected petitioners and engaged their services; (2) paid their salaries; on record to support those factual findings; or when too much is
(3) wielded the power of dismissal; and (4) had the power of control concluded, inferred or deduced from the bare or incomplete facts
over their conduct of work. appearing on record.[23] In the present case, we find the need to review
the records to ascertain the facts.
P&G also contends that the Labor Code neither defines nor
limits which services or activities may be validly outsourced. Thus, an Labor-only contracting and job contracting
employer can farm out any of its activities to an independent
contractor, regardless of whether such activity is peripheral or core in In order to resolve the issue of whether P&G is the employer of
nature. It insists that the determination of whether to engage the petitioners, it is necessary to first determine whether Promm-Gem and
services of a job contractor or to engage in direct hiring is within the SAPS are labor-only contractors or legitimate job contractors.
ambit of management prerogative.
The pertinent Labor Code provision on the matter states:
At this juncture, it is worth mentioning that on January 29, 2007,
we deemed as waived the filing of the Comment of Promm-Gem on ART. 106. Contractor or subcontractor. Whenever
an employer enters into a contract with another person for
the petition.[21] Also, although SAPS was impleaded as a party in the
the performance of the formers work, the employees of the
proceedings before the Labor Arbiter and the NLRC, it was no longer contractor and of the latters subcontractor, if any, shall be
impleaded as a party in the proceedings before the CA.[22] Hence, our paid in accordance with the provisions of this Code.
pronouncements with regard to SAPS are only for the purpose of
determining the obligations of P&G, if any. In the event that the contractor or subcontractor fails
to pay the wages of his employees in accordance with this
274
 Code, the employer shall be jointly and severally liable with
his contractor or subcontractor to such employees to the xxxx
extent of the work performed under the contract, in the
same manner and extent that he is liable to employees Section 3. Trilateral Relationship in Contracting
directly employed by him. Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a
The Secretary of Labor may, by appropriate specific job, work or service between the principal and the
regulations, restrict or prohibit the contracting out of labor contractor or subcontractor, and a contract of employment
to protect the rights of workers established under this between the contractor or subcontractor and its workers.
Code. In so prohibiting or restricting, he may make Hence, there are three parties involved in these
appropriate distinctions between labor-only contracting arrangements, the principal which decides to farm out a job
and job contracting as well as differentiations within these or service to a contractor or subcontractor, the contractor or
types of contracting and determine who among the parties subcontractor which has the capacity to independently
involved shall be considered the employer for purposes of undertake the performance of the job, work or service, and
this Code, to prevent any violation or circumvention of any the contractual workers engaged by the contractor or
provision of this Code. subcontractor to accomplish the job[,] work or service.

There is labor-only contracting where the person xxxx

supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, Section 5. Prohibition against labor-only
machineries, work premises, among others, and the workers contracting. Labor-only contracting is hereby declared
recruited and placed by such person are performing prohibited. For this purpose, labor-only contracting shall
activities which are directly related to the principal business refer to an arrangement where the contractor or
of such employer. In such cases, the person or intermediary subcontractor merely recruits, supplies or places workers to
shall be considered merely as an agent of the employer who perform a job, work or service for a principal, and any of
shall be responsible to the workers in the same manner and the following elements are present:
extent as if the latter were directly employed by him.
(Emphasis and underscoring supplied.) i) The contractor or subcontractor does not have
substantial capital or investment which relates to the job,
Rule VIII-A, Book III of the Omnibus Rules Implementing the work or service to be performed and the employees
recruited, supplied or placed by such contractor or
Labor Code, as amended by Department Order No. 18-
subcontractor are performing activities which are directly
02,[24] distinguishes between legitimate and labor-only contracting: related to the main business of the principal; or
275
 To emphasize, there is labor-only contracting when the
ii) [T]he contractor does not exercise the right to contractor or sub-contractor merely recruits, supplies or places workers
control over the performance of the work of the contractual
employee.
to perform a job, work or service for a principal[25] and any of the
following elements are present:
The foregoing provisions shall be without prejudice
to the application of Article 248 (c) of the Labor Code, as i) The contractor or subcontractor does not have
amended. substantial capital or investment which relates to the job,
work or service to be performed and the employees
Substantial capital or investment refers to capital stocks recruited, supplied or placed by such contractor or
and subscribed capitalization in the case of corporations, tools, subcontractor are performing activities which are directly
equipment, implements, machineries and work premises, related to the main business of the principal; or
actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service ii) The contractor does not exercise the right to
contracted out. control over the performance of the work of
the contractual employee. (Underscoring supplied)
The right to control shall refer to the right reserved to the
person for whom the services of the contractual workers are In the instant case, the financial statements[26] of Promm-Gem
performed, to determine not only the end to be achieved, but show that it
also the manner and means to be used in reaching that end.
has authorized capital stock of P1 million and a paid-in capital, or
x x x x (Underscoring supplied.) capital available for operations, of P500,000.00 as of 1990.[27] It also
Clearly, the law and its implementing rules allow contracting has long term assets worth P432,895.28 and current assets
arrangements for the performance of specific jobs, works or of P719,042.32. Promm-Gem has also proven that it maintained its
services. Indeed, it is management prerogative to farm out any of its own warehouse and office space with a floor area of 870 square
activities, regardless of whether such activity is peripheral or core in meters.[28] It also had under its name three registered vehicles which
nature. However, in order for such outsourcing to be valid, it must be were used for its promotional/merchandising business.[29] Promm-Gem
made to an independent contractor because the current labor rules also has other clients[30] aside from P&G.[31] Under the circumstances,
expressly prohibit labor-only contracting. we find that Promm-Gem has substantial investment which relates to
the work to be performed. These factors negate the existence of the

276
element specified in Section 5(i) of DOLE Department Order No. 18- In Vinoya v. National Labor Relations Commission,[34] the Court
02. held that [w]ith the current economic atmosphere in the country, the
paid-in capitalization of PMCI amounting to P75,000.00 cannot be
The records also show that Promm-Gem supplied its considered as substantial capital and, as such, PMCI cannot qualify as
complainant-workers with the relevant materials, such as markers, an independent contractor.[35] Applying the same rationale to the
tapes, liners and cutters, necessary for them to perform their present case, it is clear that SAPS having a paid-in capital of
work. Promm-Gem also issued uniforms to them. It is also relevant to only P31,250 - has no substantial capital. SAPS lack of substantial
mention that Promm-Gem already considered the complainants capital is underlined by the records[36] which show that its payroll for its
working under it as its regular, not merely contractual or project, merchandisers alone for one month would already total P44,561.00. It
employees.[32] This circumstance negates the existence of element (ii) had 6-month contracts with P&G.[37] Yet SAPS failed to show that it
as stated in Section 5 of DOLE Department Order No. 18-02, which could complete the 6-month contracts using its own capital and
speaks of contractual employees. This, furthermore, negates on the part investment. Its capital is not even sufficient for one months payroll.
of Promm-Gem bad faith and intent to circumvent labor laws which SAPS failed to show that its paid-in capital of P31,250.00 is sufficient
factors have often been tipping points that lead the Court to strike down for the period required for it to generate its needed revenue to sustain its
the employment practice or agreement concerned as contrary to public operations independently. Substantial capital refers to capitalization
policy, morals, good customs or public order.[33] used in the performance or completion of the job, work or service
contracted out. In the present case, SAPS has failed to show substantial
Under the circumstances, Promm-Gem cannot be considered as capital.
a labor-only contractor. We find that it is a legitimate independent
contractor. Furthermore, the petitioners have been charged with the
merchandising and promotion of the products of P&G, an activity that
On the other hand, the Articles of Incorporation of SAPS shows has already been considered by the Court as doubtlessly directly related
that it has a paid-in capital of only P31,250.00. There is no other to the manufacturing business,[38] which is the principal business of
evidence presented to show how much its working capital and assets P&G. Considering that SAPS has no substantial capital or investment
are. Furthermore, there is no showing of substantial investment in tools, and the workers it recruited are performing activities which are directly
equipment or other assets. related to the principal business of P&G, we find that the former is
engaged in labor-only contracting.

277
 Where labor-only contracting exists, the Labor Code itself The following petitioners, having worked under, and been
establishes an employer-employee relationship between the employer dismissed by Promm-Gem, are considered the employees of Promm-
and the employees of the labor-only contractor.[39] The statute Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia,
establishes this relationship for a comprehensive purpose: to prevent a Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton,
circumvention of labor laws. The contractor is considered merely an Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil
agent of the principal employer and the latter is responsible to the Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando
employees of the labor-only contractor as if such employees had been Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta,
directly employed by the principal employer.[40] Nestor Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto
Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino
Consequently, the following petitioners, having been recruited Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and
and supplied Joeb Aliviado.[42]
by SAPS[41] -- which engaged in labor-only contracting -- are
considered as the employees of P&G: Arthur Corpuz, Eric Aliviado, Termination of services
Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo,
Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, We now discuss the issue of whether petitioners were illegally
Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio dismissed. In cases of regular employment, the employer shall not
Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, terminate the services of an employee except for a just[43] or
Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, authorized[44] cause.
Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F.
Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, In the instant case, the termination letters given by Promm-Gem to its
German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold employees uniformly specified the cause of dismissal as grave
D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, misconduct and breach of trust, as follows:
Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres,
Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. xxxx
Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo This informs you that effective May 5, 1992, your
Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and employment with our company, Promm-Gem, Inc. has
Dennis Dacasin. been terminated. We find your expressed admission, that
you considered yourself as an employee of Procter &
278
 Gamble Phils., Inc. and assailing the integrity of the them guilty of only simple misconduct for assailing the integrity of
Company as legitimate and independent promotion firm, is Promm-Gem as a legitimate and independent promotion firm. A
deemed as an act of disloyalty prejudicial to the interests of
our Company: serious misconduct and breach of trust
misconduct which is not serious or grave, as that existing in the instant
reposed upon you as employee of our Company which case, cannot be a valid basis for dismissing an employee.
[co]nstitute just cause for the termination of your
employment. Meanwhile, loss of trust and confidence, as a ground for dismissal,
x x x x[45] must be based on the willful breach of the trust reposed in the
employee by his employer. Ordinary breach will not suffice. A breach
Misconduct has been defined as improper or wrong conduct; the of trust is willful if it is done intentionally, knowingly and purposely,
transgression of some established and definite rule of action, a without justifiable excuse, as distinguished from an act done carelessly,
forbidden act, a dereliction of duty, unlawful in character implying thoughtlessly, heedlessly or inadvertently.[49]
wrongful intent and not mere error of judgment. The misconduct to be
serious must be of such grave and aggravated character and not merely Loss of trust and confidence, as a cause for termination of
trivial and unimportant.[46] To be a just cause for dismissal, such employment, is premised on the fact that the employee concerned holds
misconduct (a) must be serious; (b) must relate to the performance of a position of responsibility or of trust and confidence. As such, he must
the employees duties; and (c) must show that the employee has become be invested with confidence on delicate matters, such as custody,
unfit to continue working for the employer.[47] handling or care and protection of the property and assets of the
employer. And, in order to constitute a just cause for dismissal, the act
In other words, in order to constitute serious misconduct which will complained of must be work-related and must show that the employee
warrant the dismissal of an employee under paragraph (a) of Article is unfit to continue to work for the employer.[50] In the instant case, the
282 of the Labor Code, it is not sufficient that the act or conduct petitioners-employees of Promm-Gem have not been shown to be
complained of has violated some established rules or policies. It is occupying positions of responsibility or of trust and confidence.
equally important and required that the act or conduct must have been Neither is there any evidence to show that they are unfit to continue to
performed with wrongful intent.[48] In the instant case, petitioners- work as merchandisers for Promm-Gem.
employees of Promm-Gem may have committed an error of judgment
in claiming to be employees of P&G, but it cannot be said that they All told, we find no valid cause for the dismissal of petitioners-
were motivated by any wrongful intent in doing so. As such, we find employees of Promm-Gem.

279
 While Promm-Gem had complied with the procedural aspect of Attention: Mr. Saturnino A. Ponce
President & General Manager
due process in terminating the employment of petitioners-
employees, i.e., giving two notices and in between such notices, an Gentlemen:

opportunity for the employees to answer and rebut the charges against Based on our discussions last 5 and 19 February 1993, this
them, it failed to comply with the substantive aspect of due process as formally informs you that we will not be renewing our
Merchandising Services Contract with your agency.
the acts complained of neither constitute serious misconduct nor breach
of trust. Hence, the dismissal is illegal. Please immediately undertake efforts to ensure that your
services to the Company will terminate effective close of
business hours of 11 March 1993.
With regard to the petitioners placed with P&G by SAPS, they were
This is without prejudice to whatever obligations you may
given no written notice of dismissal. The records show that upon have to the company under the abovementioned contract.
receipt by SAPS of P&Gs letter terminating their Merchandising Very truly yours,
Services Contact effective March 11, 1993, they in turn verbally
(Sgd.)
informed the concerned petitioners not to report for work anymore. The EMMANUEL M. NON
concerned petitioners related their dismissal as follows: Sales Merchandising III

xxxx 6. On March 12, 1993, we reported to our respective outlet

assignments. But, we were no longer allowed to work and
5. On March 11, 1993, we were called to a meeting at we were refused entrance by the security guards
SAPS office. We were told by Mr. Saturnino A. Ponce that posted. According to the security guards, all merchandisers
we should already stop working immediately because that of Procter and Gamble under S[APS] who filed a case in
was the order of Procter and Gamble. According to him he the Dept. of Labor are already dismissed as per letter of
could not do otherwise because Procter and Gamble was Procter and Gamble dated February 25, 1993. x x x[52]
the one paying us. To prove that Procter and Gamble was
the one responsible in our dismissal, he showed to us the Neither SAPS nor P&G dispute the existence of these
letter[51] dated February 24, 1993, x x x circumstances. Parenthetically, unlike Promm-Gem which dismissed
February 24, 1993
its employees for grave misconduct and breach of trust due to
disloyalty, SAPS dismissed its employees upon the initiation of
Sales and Promotions Services P&G. It is evident that SAPS does not carry on its own business
Armons Bldg., 142 Kamias Road,
Quezon City because the termination of its contract with P&G automatically meant
280
for it also the termination of its employees services. It is obvious from With regard to the employees of Promm-Gem, there being no evidence
its act that SAPS had no other clients and had no intention of seeking of bad faith, fraud or any oppressive act on the part of the latter, we find
other clients in order to further its merchandising business. From all no support for the award of damages.
indications SAPS, existed to cater solely to the need of P&G for the
supply of employees in the latters merchandising concerns only. Under As for P&G, the records show that it dismissed its employees through
the circumstances prevailing in the instant case, we cannot consider SAPS in a manner oppressive to labor. The sudden and peremptory
SAPS as an independent contractor. barring of the concerned petitioners from work, and from admission to
the work place, after just a one-day verbal notice, and for no valid
Going back to the matter of dismissal, it must be emphasized cause bellows oppression and utter disregard of the right to due process
that the onus probandi to prove the lawfulness of the dismissal rests of the concerned petitioners. Hence, an award of moral damages is
with the employer.[53] In termination cases, the burden of proof rests called for.
upon the employer to show that the dismissal is for just and valid
cause.[54] In the instant case, P&G failed to discharge the burden of Attorneys fees may likewise be awarded to the concerned
proving the legality and validity of the dismissals of those petitioners petitioners who
who are considered its employees. Hence, the dismissals necessarily were illegally dismissed in bad faith and were compelled to litigate or i
were not justified and are therefore illegal. ncur expenses to protect their rights by reason of the oppressive
acts[56] of P&G.
Damages
Lastly, under Article 279 of the Labor Code, an employee who is
We now go to the issue of whether petitioners are entitled to unjustly dismissed from work shall be entitled to reinstatement without
damages. Moral loss of seniority rights and other privileges, inclusive of allowances,
and exemplary damages are recoverable where the dismissal of an and other benefits or their monetary equivalent from the time the
employee was attended by bad faith or fraud or constituted an act compensation was withheld up to the time of actual
oppressive to labor or was done in a manner contrary to morals, good reinstatement.[57] Hence, all the petitioners, having been illegally
customs or public policy.[55] dismissed are entitled to reinstatement without loss of seniority rights
and with full back wages and other benefits from the time of their
illegal dismissal up to the time of their actual reinstatement.

281
WHEREFORE, the petition is GRANTED. The Decision petitioners backwages and other benefits; and ten percent of the total
dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No. sum as and for attorneys fees as stated above; and for immediate
52082 and the Resolution dated October 20, execution.
2003 are REVERSED and SET ASIDE. Procter & Gamble Phils.,
Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective
employees immediately without loss of seniority rights and with full SO ORDERED.
backwages and other benefits from the time of their illegal dismissal up
to the time of their actual reinstatement. Procter & Gamble Phils., Inc.
RAMY GALLEGO, G.R. No. 179807
is further ORDERED to pay each of those petitioners considered as its
employees, namely Arthur Corpuz, Eric Aliviado, Monchito Petitioner,
Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo
Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Present:
Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio
Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao,
Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, QUISUMBING, J., Chairpers
Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, - versus - CARPIO MORALES,
Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert
Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, CHICO-NAZARIO,*
Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
LEONARDO-DE CASTRO,**
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B.
Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente PERALTA,*** JJ.
J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz,
BAYER PHILIPPINES, INC.,
Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as
DANPIN GUILLERMO, PRODUCT
moral damages plus ten percent of the total sum as and for attorneys
IMAGE MARKETING, INC., and
fees.
EDGARDO BERGONIA, Promulgated:
Let this case be REMANDED to the Labor Arbiter for the Respondents. July 31, 2009
computation, within 30 days from receipt of this Decision, of
282
 protection technician promoting BAYER products to farmers
and dealers in Panay Island solely for the benefit of
x------------------------------------------
BAYER.[3]
--------x

By petitioners claim, in October, 2001, he was directed by

DECISION
Pet Pascual, the newly assigned BAYER sales
representative, to submit a resignation letter, but he refused;
and that in January, 2002, he was summoned by his
CARPIO MORALES, J.: immediate supervisors including respondent Danpin
Guillermo (Guillermo), BAYER District Sales Manager for
Panay, and was ordered to quit his employment which
Ramy Gallego (petitioner) was contracted in April 1992 by called for him to return all pieces of service equipment
Bayer Philippines, Inc. (BAYER) as crop protection issued to him, but that again he refused.[4]
technician to promote and market BAYER products.[1] Under
the supervision of Aristeo Filipino, BAYER sales
representative for Panay Island, petitioner made farm visits Still by petitioners claim, he continued performing his duties
to different municipalities in Panay Island to convince
and receiving compensation until the end of January,
farmers to buy BAYER products.[2] 2002; that on April 7, 2002, he received a memorandum that
his area of responsibility would be transferred to Luzon, of
which memorandum he sought reconsideration but to no
In 1996, petitioners employment with BAYER came to a avail; and that Guillermo and Bergonia spread rumors that
halt, prompting him to seek employment with another reached the dealers in Antique to the effect that he was not
company. BAYER eventually reemployed petitioner, anymore connected with BAYER and any transaction with
however, in 1997 through Product Image and Marketing him would no longer be honored as of April 30, 2002.[5]
Services, Inc. (PRODUCT IMAGE) of which respondent
Edgardo Bergonia (Bergonia) was the President and
General Manager, performing the same task as that of crop
283
Believing that his employment was terminated, petitioner contractual basis to promote and market BAYER products
lodged on June 6, 2002 a complaint for illegal dismissal with pursuant to the Contract of Promotional Services forged
the National Labor Relations Commission (NLRC) against between it and BAYER. They alleged that petitioner was a
herein respondents BAYER, Guillermo, PRODUCT IMAGE, field worker who had no fixed hours and worked under
and Bergonia, with claims for reinstatement, backwages minimal supervision, his performance being gauged only by
and/or separation pay, unpaid wages, holiday pay, premium his accomplishment reports duly certified to by BAYER
pay, service incentive leave and allowances, damages and acting as his de facto supervisor;[8] that petitioner was
attorneys fees.[6] originally assigned to Iloilo but later transferred to
Antique; that petitioner was not dismissed, but went on
official leave from January 23 to 31, 2002, and stopped
Respondents BAYER and Guillermo denied the existence of reporting for work thereafter; and that petitioner was
an employer-employee relationship between BAYER and supposed to have been reassigned to South Luzon effective
petitioner, explaining that petitioners work at BAYER was March 15, 2002 in accordance with a personnel
simply occasioned by the Contract of Promotional Services reorganization program, but he likewise failed to report to
that BAYER had executed with PRODUCT IMAGE whereby his new work station.[9]
PRODUCT IMAGE was to promote and market BAYER
By Decision of May 6, 2004,[10] the Labor Arbiter declared
products on its (PRODUCT IMAGE) own account and in its
respondents guilty of illegal dismissal, disposing as follows:
own manner and method. They added that as an
independent contractor, PRODUCT IMAGE retained the
exclusive power of control over petitioner as it assigned full-
WHEREFORE, judgment is rendered declaring
time supervisors to exercise control and supervision over its
respondents, Bayer Phil. Inc./Danpin Guillermo and Product
employees assigned at BAYER.[7]
Image Marketing Services, Inc./Edgardo Begornia [sic]
guilty of Illegal Dismissal and is
hereby ORDERED to Reinstatecomplainant to his former or
Respondents PRODUCT IMAGE and Bergonia, on the
equivalent position ten (10) days from receipt hereof and to
other hand, admitted that petitioner was hired as an
immediately pay complainant upon receipt of this decision
employee of PRODUCT IMAGE on April 7, 1997 on a
the following:
284
 petitioner was dismissed by either PRODUCT IMAGE or
BAYER. Sustaining PRODUCT IMAGEs claim of
Backwages Php 228,000.00
abandonment, it held that an employee is deemed to have
13th Month Pay Php 19,000.00 abandoned his job if he failed to report for work after the
expiration of a duly approved leave of absence or if, after
Holiday Pay Php 9,500.00 being transferred to a new assignment, he did not report for
Service Incentive Leave Pay Php 4,750.00 work anymore.

Attorneys Fees ` Php 26,125.00

Petitioners Motion for Reconsideration having been denied
by Resolution of May 25, 2006,[12] he appealed to the Court
Total: Php 287,375.00 of Appeals via Certiorari.[13]

By Resolution of September 25, 2006, the appellate court

In so deciding, the Labor Arbiter found, among other things, dismissed petitioners petition for failure to attach to it the
that there was an employer-employee relationship between complaint and the parties respective position papers filed
BAYER and petitioner since BAYER furnished petitioner the with the Labor Arbiter.[14] His Motion for Reconsideration
needed facilities and paraphernalia, and fixed the having been denied by Resolution of August 14,
methodology to be used in the performance of his work. 2007,[15] petitioner comes before this Court via the present
Petition for Review on Certiorari.

On appeal by respondents, the NLRC reversed the Decision

of the Labor Arbiter and dismissed petitioners complaint by Petitioner argues that the appellate court erred in dismissing
Decision of February 22, 2006,[11] holding that as an his petition outright considering that it had previously
independent contractor, PRODUCT IMAGE was the allowed subsequent submission of required documents not
employer of petitioner but there was no evidence that attached to a petition for certiorari; and that he attached the

285
required pleadings to his Motion for Reconsideration with an affidavit of service; (2) it is not accompanied by
the appellate court. Moreover, he contends that petitioners Petition for Certiorari before the appellate court;
respondents failed to discharge the burden of proving the (3) it does not specify the errors of law allegedly committed
validity of his dismissal in order to overturn the finding of the by the appellate court; (4) it is not accompanied by proof of
Labor Arbiter that he was illegally dismissed.[16] service upon the adverse party of a copy of the payment of
docket fees; (5) it raises questions of fact; and (6) it
impleads the NLRC and imputes grave abuse of discretion
BAYER and Guillermo counter that petitioner raised factual to the appellate court, thereby implying that the petition is
issues in his petition before the appellate court which are likewise made under Rule 65 of the Rules of Court. Lastly,
not reviewable by certiorari; that petitioners failure to attach they maintain that petitioner was not dismissed as he
the required pleadings to his petition before the appellate actually abandoned his job.[18]
court, coupled with his failure to offer any justification
therefor, provides no occasion for a liberal application of the
rules in his favor; that petitioner has no cause of action The Court shall first resolve the procedural issues.
against them as his employer is PRODUCT IMAGE; and
that assuming that petitioner is entitled to his money claims,
the same should be enforced against the performance bond Only errors of law are generally reviewed by this Court in
posted by PRODUCT IMAGE to cover the claims of its petitions for review on certiorari of the appellate courts
employees assigned at BAYER.[17] decisions,[19] and the question of whether an employer-
employee relationship exists in a given case is essentially a
question of fact.[20] Be that as it may, when, as here, the
PRODUCT IMAGE and Bergonia postulate in their findings of the NLRC contradict those of the Labor Arbiter,
Comment that the appellate courts outright dismissal of this Court, in the exercise of its equity jurisdiction, may look
petitioners appeal was proper in view of, among other into the records of the case and reexamine the questioned
things, the summary nature of proceedings in labor findings.[21]
cases. They also contend that petitioners present petition
suffers from the following infirmities: (1) it does not contain

286
Respecting the appellate courts dismissal of petitioners Permissible job contracting or subcontracting refers to an
Petition for Certiorari for his failure to attach thereto the arrangement whereby a principal agrees to farm out with a
relevant pleadings filed with the Labor Arbiter, the contractor or subcontractor the performance of a specific
requirement to attach the same under Section 1, Rule job, work, or service within a definite or predetermined
65[22] is considered vis a vis Section 3, Rule 46[23] which period, regardless of whether such job, work or, service is to
states that the failure of the petitioner to comply with any of be performed or completed within or outside the premises of
the documentary requirements, such as the attachment of the principal.[25] Under this arrangement, the following
relevant pleadings, shall be sufficient ground for the conditions must be met: (a) the contractor carries on a
dismissal of the petition. By and large, the outright dismissal distinct and independent business and undertakes the
of a petition for failure to comply with said requirement contract work on his account under his own responsibility
cannot be assailed as constituting either grave abuse of according to his own manner and method, free from the
discretion or reversible error of law.[24] control and direction of his employer or principal in all
matters connected with the performance of his work except
as to the results thereof; (b) the contractor
The Court, however, is inclined to, as it does, overlook has substantial capital or investment; and (c) the agreement
petitioners failure to attach the subject relevant pleadings to between the principal and contractor or subcontractor
his Petition for Certiorari before the appellate court in view assures the contractual employees entitlement to all labor
of the serious matters dealt with in this case. That brings the and occupational safety and health standards, free exercise
Court to consider the substantial merits of the case, thus of the right to self-organization, security of tenure, and
rendering it unnecessary to still discuss the other procedural social welfare benefits.[26]
matters raised by respondents.

In the main, the substantive issues are: whether PRODUCT

In distinguishing between permissible job contracting and
IMAGE is a labor-only contactor and BAYER should be
prohibited labor-only contracting,[27] the totality of the facts
deemed petitioners principal employer; and whether
and the surrounding circumstances of the case are to be
petitioner was illegally dismissed from his employment.

287
considered,[28] each case to be determined by its own facts, Mandaluyong City
and all the features of the relationship assessed.[29]

for having complied with the requirements as provided for

In the case at bar, the Court finds substantial evidence to under the Labor Code, as amended, and its implementing
support the finding of the NLRC that PRODUCT IMAGE is a Rules and having paid the registration fee in the amount
legitimate job contractor. of ONE HUNDRED (P100) PESOS per Official Receipt
Number 6530485Y, dated 21 June 2002.[30]

The Court notes that PRODUCT IMAGE was issued by the

Department of Labor and Employment (DOLE) Certificate of
Registration Numbered NCR-8-0602-176 reading:
The DOLE certificate having been issued by a public officer,
it carries with it the presumption that it was issued in the
regular performance of official duty.[31] Petitioners bare
CERTIFICATE OF REGISTRATION
assertions fail to rebut this presumption. Further, since the
Numbered NCR-8-0602-176 DOLE is the agency primarily responsible for regulating the
business of independent job contractors, the Court can
presume, in the absence of evidence to the contrary, that it
issued to had thoroughly evaluated the requirements submitted by
PRODUCT IMAGE before issuing the Certificate of
Registration.
Mr. Edgardo V. Bergonia Independently of the DOLEs Certification, among the
President circumstances that establish the status of PRODUCT
IMAGE as a legitimate job contractor are: (1) PRODUCT
PRODUCT IMAGE & MARKETING SERVICES, INC. IMAGE had, during the period in question, a contract with
Unit 5& 6 GF J & L Bldg., 251 EDSA Greenhills, BAYER for the promotion and marketing of BAYER

288
products;[32] (2) PRODUCT IMAGE has an independent The presence of the first requisite which refers to selection
business and provides services nationwide to big and engagement is evidenced by a document entitled Job
companies such as Ajinomoto Philippines and Procter and Offer, whereby PRODUCT IMAGE offered to hire petitioner
Gamble Corporation;[33] and (3) PRODUCT IMAGEs total as crop protection technician effective April 7, 1997, which
assets from 1998 to 2000 amounted offer petitioner accepted.[37]
to P405,639, P559,897, and P644,728,
[34]
respectively. PRODUCT IMAGE also posted a bond in
the amount of P100,000 to answer for any claim of its On the second requisite regarding the payment of wages, it
employees for unpaid wages and other benefits that may was PRODUCT IMAGE that paid the wages and other
arise out of the implementation of its contract with benefits of petitioner, pursuant to the stipulation in the
BAYER.[35] contract between PRODUCT IMAGE and BAYER that
BAYER shall pay PRODUCT IMAGE an amount based on
services actually rendered without regard to the number of
PRODUCT IMAGE cannot thus be considered a labor-only personnel employed by PRODUCT IMAGE; and that
contractor. PRODUCT IMAGE shall faithfully comply with the provisions
of the Labor Code and hold BAYER free and harmless from
any claim of its employees arising from the contract.[38]
The existence of an employer-employee relationship is
determined on the basis of four standards, namely: (a) the
manner of selection and engagement of the putative As to the third requisite which relates to the power of
employee; (b) the mode of payment of wages; (c) the dismissal, and the fourth requisite which relates to the
presence or absence of power of dismissal; and (d) the power of control, both powers are vested in PRODUCT
presence or absence of control of the putative employees IMAGE. The Contract of Promotional Services provides that
conduct. Most determinative among these factors is the so- PRODUCT IMAGE shall have the power to discipline its
called control test.[36] employees assigned at BAYER, such that no control
whatsoever shall be exercised by BAYER over those
personnel on the manner and method by which they

289
perform their duties,[39] and that all directives, complaints, or stopped reporting for work before filing a complaint for
observations of BAYER relating to the performance of the illegal dismissal, based on his belief that Guillermo and
employees of PRODUCT IMAGE shall be addressed to the Bergonia had spread rumors that his transactions on behalf
latter.[40] of BAYER would no longer be honored as of April 30,
2002. This belief remains just that it is
unsubstantiated.While in cases of illegal dismissal, the
If at all, the only control measure retained by BAYER over employer bears the burden of proving that the dismissal is
petitioner was to act as his de facto supervisor in certifying for a valid or authorized cause, the employee must first
to the veracity of the accomplishment reports he submitted establish by substantial evidence the fact of dismissal.[43]
to PRODUCT IMAGE. This is by no means the kind of
control that establishes an employer-employee relationship
as it pertains only to the results and not the manner and WHEREFORE, the petition is, in light of the
method of doing the work. It would be a rare contract of foregoing, DENIED.
service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his
performance of the engagement.[41] Surely, it would be SO ORDERED.
foolhardy for any company to completely give the reins and
totally ignore the operations it has contracted out.[42] G.R. No. 205300, March 18, 2015

FONTERRA BRANDS PHILS.,

INC., Petitioner, v. LEONARDO1 LARGADO AND
In fine, PRODUCT IMAGE is ineluctably the employer of TEOTIMO ESTRELLADO, Respondents.
petitioner.
DECISION

VELASCO JR., J.:

Respecting the issue of illegal dismissal, the Court
appreciates no evidence that petitioner was The Case
dismissed. What it finds is that petitioner unilaterally

290
 Desirous of continuing their work as TMRs, respondents
This is a Petition for Review on Certiorari under Rule 45 of submitted their job applications with A.C. Sicat, which hired
the Rules of Court seeking the reversal and setting aside of them for a term of five (5) months, beginning June 7, 2006
the Decision of the Court of Appeals (CA) dated September up to November 6, 2006.
6, 2012, as well as its January 11, 2013 Resolution denying
reconsideration thereof, in CA-G.R. SP No. 114227, When respondents’ 5-month contracts with A.C. Sicat were
entitled Leonardo Largado and Teotimo P. Estrellado v. about to expire, they allegedly sought renewal thereof, but
National Labor Relations Commission (NLRC), Fonterra wereallegedly refused. This prompted respondents to file
Brands Phils., Inc./Carlo Mendoza, Zytron Marketing & complaints for illegal dismissal, regularization, non-payment
Promotions Corp./Francisco Valencia, A.C. Sicat Marketing of service incentive leave and 13th month pay, and actual
& Promotional Services/Arturo Sicat. and moral damages, against petitioner, Zytron, and A.C.
Sicat.
The Facts
The Labor Arbiter dismissed the complaint and ruled that:
Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted (1) respondents were not illegally dismissed. As a matter of
the services of Zytron Marketing and Promotions Corp. fact, they were the ones who refused to renew their contract
(Zytron) for the marketing and promotion of its milk and and that they voluntarily complied with the requirements for
dairy products. Pursuant to the contract, Zytron provided them to claim their corresponding monetary benefits in
Fonterra with trade merchandising representatives (TMRs), relation thereto; and (2) they were consecutively employed
including respondents Leonardo Largado (Largado) and by Zytron and A.C. Sicat, not by Fonterra. The dispositive
Teotimo Estrellado (Estrellado). The engagement of their portion of the Decision2 reads:chanRoblesvirtualLawlibrary
services began on September 15, 2003 and May 27, 2002,
WHEREFORE, in view of the foregoing, judgment is hereby
respectively, and ended on June 6, 2006.
rendered DISMISSING the instant case for utter lack of
merit.
On May 3, 2006, Fonterra sent Zytron a letter terminating its
promotions contract, effective June 5, 2006. Fonterra then
SO ORDERED.cralawred
entered into an agreement for manpower supply with A.C.
Sicat Marketing and Promotional Services (A.C. Sicat).
291
The NLRC affirmed the Labor Arbiter, finding that business is unsubstantiated. Therefore, according to the
respondents’ separation from Zytron was brought about by CA, respondents were Fonterra’s employees.
the execution of the contract between Fonterra and A.C.
Sicat where the parties agreed to absorb Zytron’s Additionally, the CA held that respondents were illegally
personnel, including respondents. Too, respondents failed dismissed since Fonterra itself failed to prove that their
to present any evidence that they protested this set-up. dismissal is lawful. However, the illegal dismissal should be
Furthermore, respondents failed to refute the allegation that reckoned from the termination of their supposed
they voluntarily refused to renew their contract with A.C. employment with Zytron on June 6, 2006. Furthermore,
Sicat. Also, respondents did not assert any claim against respondents’ transfer to A.C. Sicat is tantamount to a
Zytron and A.C. Sicat. The NLRC disposed of the case in completely new engagement by another employer. Lastly,
this wise:chanRoblesvirtualLawlibrary the termination of their contract with A.C. Sicat arose from
the expiration of their respective contracts with the latter.
WHEREFORE, premises considered, the appeals are
The CA, thus, ruled that Fonterra is liable to respondents
hereby ordered DISMISSED and the Decision of the Labor
and ordered the reinstatement of respondents without loss
Arbiter is AFFIRMED [in]toto.
of seniority rights, with full backwages, and other benefits
from the time of their illegal dismissal up to the time of their
SO ORDERED.3
actual reinstatement. The fallo of the Decision
The NLRC decision was assailed in a petition under Rule 65 reads:chanRoblesvirtualLawlibrary
before the CA.
WHEREFORE, premises considered, the petition is
hereby GRANTED. The assailed Decision dated 20
Ruling on the petition, the CA, in the questioned
November 2009 and Resolution dated 5 March 2010 of the
Decision,4 found that A.C. Sicat satisfies the requirements of
National Labor Relations Commission (NLRC), Seventh
legitimate job contracting, but Zytron does not. According to
Division, are hereby ANULLED and SET ASIDE. Private
the CA: (1) Zytron’s paid-in capital of P250,000 cannot be
respondent Fonterra Brand, Inc. is hereby ordered to
considered as substantial capital; (2) its Certificate of
REINSTATE [respondents] without loss of seniority rights.
Registration was issued by the DOLE months after
Private respondents Fonterra Brand, Inc. and Zytron
respondents’ supposed employment ended; and (3) its
Marketing and Promotional Corp. are hereby
claim that it has the necessary tools and equipment for its
292
further ORDERED to jointly and severally pay petitioners b. As shown in its Articles of Incorporation, Zytron
their full backwages and other benefits from the time of their had been in business since 1990, or more than
illegal dismissal up to the time of their actual reinstatement; a decade before it signed a merchandising
and attorney’s fees. agreement with petitioner
Fonterra;chanrobleslaw
SO ORDERED.
c. Very importantly, petitioner Fonterra never
Zytron and Fonterra moved for reconsideration, but to no exercised the right to control respondents and
avail. Hence, this petition. other employees of Zytron. Indeed, respondents
neither alleged that petitioner exercised control
The Issues
over them nor presented proof in support thereof
in any of their previous pleadings.
Petitioner presents the following issues for Our
resolution:chanRoblesvirtualLawlibrary
II. Respondents never claimed nor adduced evidence
I. The CA erred in ruling that Zytron was a mere labor-
that they were dismissed from employment by Zytron.
only contractor to petitioner Fonterra, in
In fact, Zytron denies terminating them from work. The
that:chanRoblesvirtualLawlibrary
CA, thus, erred in finding that respondents were
a. As held by the Court, there is no absolute figure “illegally dismissed.”
that constitutes “substantial” capital for an
Succinctly, the issues in the case at bar are: (1) whether or
independent contractor, and the same should
not Zytron and A.C. Sicat are labor-only contractors, making
instead be measured against the type of work it
Fonterra the employer of herein respondents; and (2)
is obligated to do for the principal. It is most
whether or not respondents were illegally dismissed.
respectfully submitted that, here, the
merchandising work undertaken by Zytron’s Our Ruling
paid-in capital of P250,000 was as of 1990, the
year it was incorporated;chanrobleslaw
We find merit in the petition.

293
 interested in continuing their employment with Zytron. Their
As regards the CA’s conclusion that Zytron is not a voluntary refusal to renew their contracts was brought about
legitimate job contractor, We are of the view that such is by their desire to continue their assignment in Fonterra
immaterial to the resolution of the illegal dismissal issue for which could not happen in view of the conclusion of Zytron’s
one reason: We find that respondents voluntarily terminated contract with Fonterra. Hence, to be able to continue with
their employment with Zytron, contrary to their allegation their assignment, they applied for work with A.C. Sicat with
that their employment with Zytron was illegally terminated. the hope that they will be able to continue rendering
services as TMRs at Fonterra since A.C. Sicat is Fonterra’s
We do not agree with the CA that respondents’ employment new manpower supplier. This fact is even acknowledged by
with Zytron was illegally terminated. the CA in the assailed Decision where it recognized the
reason why respondents applied for work at A.C. Sicat. The
As correctly held by the Labor Arbiter and the NLRC, the CA stated that “[t]o continuously work as merchandisers of
termination of respondents’ employment with Zytron was Fonterra products, [respondents] submitted their job
brought about by the cessation of their contracts with the applications to A.C. Sicat xxx.”6 This is further bolstered by
latter. We give credence to the Labor Arbiter’s conclusion the fact that respondents voluntarily complied with the
that respondents were the ones who refused to renew their requirements for them to claim their corresponding
contracts with Zytron, and the NLRC’s finding that they monetary benefits in relation to the cessation of their
themselves acquiesced to their transfer to A.C. Sicat. employment contract with Zytron.

By refusing to renew their contracts with Zytron, In short, respondents voluntarily terminated their
respondents effectively resigned from the latter. Resignation employment with Zytron by refusing to renew their
is the voluntary act of employees who are compelled by employment contracts with the latter, applying with A.C.
personal reasons to dissociate themselves from their Sicat, and working as the latter’s employees, thereby
employment, done with the intention of relinquishing an abandoning their previous employment with Zytron. Too, it
office, accompanied by the act of is well to mention that for obvious reasons, resignation is
5
abandonment. chanroblesvirtuallawlibrary inconsistent with illegal dismissal. This being the case,
Zytron cannot be said to have illegally dismissed
Here, it is obvious that respondents were no longer respondents, contrary to the findings of the CA.
294
 performance of the work except as to the results
As regards respondents’ employment with A.C. Sicat and its thereof;chanrobleslaw
termination via non-renewal of their contracts, considering
2. The contractor or subcontractor has substantial capital
that in labor-only contracting, the law creates an employer-
or investment; and
employee relationship between the principal and the labor-
only contractor’s employee as if such employees are directly 3. The agreement between the principal and contractor
employed by the principal employer, and considers the or subcontractor assures the contractual employees
contractor as merely the agent of the principal,7it is proper to entitlement to all labor and occupational safety and
dispose of the issue on A.C. Sicat’s status as a job health standards, free exercise of the right to self-
contractor first before resolving the issue on the legality of organization, security of tenure, and social and
the cessation of respondents’ employment. welfare benefits.8

In this regard, We defer to the findings of the CA anent A.C. On the other hand, contracting is prohibited when the
contractor or subcontractor merely recruits, supplies or
Sicat’s status as a legitimate job contractor, seeing that it is
places workers to perform a job, work or service for a
consistent with the rules on job contracting and is
sufficiently supported by the evidence on record. principal and if any of the following elements are present,
thus:chanRoblesvirtualLawlibrary
A person is considered engaged in legitimate job 1. The contractor or subcontractor does not have
contracting or subcontracting if the following conditions substantial capital or investment which relates to the
concur:chanRoblesvirtualLawlibrary job, work or service to be performed and the
employees recruited, supplied or placed by such
1. The contractor or subcontractor carries on a distinct
and independent business and undertakes to perform contractor or subcontractor are performing activities
the job, work or service on its own account and under which are directly related to the main business of the
its own responsibility according to its own manner and principal; or
method, and free from the control and direction of the 2. The contractor does not exercise the right to control
principal in all matters connected with the over the performance of the work of the contractual
employee.9
295
The CA correctly found that A.C. Sicat is engaged in relevant laws.
legitimate job contracting. It duly noted that A.C. Sicat was
able to prove its status as a legitimate job contractor for The appellate court further correctly held that Fonterra’s
having presented the following evidence, to issuance of Merchandising Guidelines, stock monitoring and
wit:chanRoblesvirtualLawlibrary inventory forms, and promo mechanics, for compliance and
use of A.C. Sicat’s employees assigned to them, does not
1. Certificate of Business Registration;chanrobleslaw
establish that Fonterra exercises control over A.C. Sicat.
2. Certificate of Registration with the Bureau of Internal We agree with the CA’s conclusion that these were imposed
Revenue;chanrobleslaw only to ensure the effectiveness of the promotion services to
be rendered by the merchandisers as it would be risky, if not
3. Mayor’s Permit;chanrobleslaw imprudent, for any company to completely entrust the
4. Certificate of Membership with the Social Security performance of the operations it has contracted out.
System;chanrobleslaw
These sufficiently show that A.C. Sicat carries out its
5. Certificate of Registration with the Department of merchandising and promotions business, independent of
Labor and Employment;chanrobleslaw Fonterra’s business. Thus, having settled that A.C. Sicat is
6. Company Profile; and a legitimate job contractor, We now determine whether the
termination of respondents’ employment with the former is
7. Certifications issued by its clients.10 valid.
Furthermore, A.C. Sicat has substantial capital, having
assets totaling P5,926,155.76 as of December 31, 2006. We agree with the findings of the CA that the termination of
Too, its Agreement with Fonterra clearly sets forth that A.C. respondents’ employment with the latter was simply brought
Sicat shall be liable for the wages and salaries of its about by the expiration of their employment contracts.
employees or workers, including benefits, premiums, and
protection due them, as well as remittance to the proper Foremost, respondents were fixed-term employees. As
government entities of all withholding taxes, Social Security previously held by this Court, fixed-term employment
Service, and Medicare premiums, in accordance with contracts are not limited, as they are under the present

296
Labor Code, to those by nature seasonal or for specific non-renewal of their contracts by A.C. Sicat is a
projects with predetermined dates of completion; they also management prerogative, and failure of respondents to
include those to which the parties by free choice have prove that such was done in bad faith militates against their
assigned a specific date of termination.11 The determining contention that they were illegally dismissed. The expiration
factor of such contracts is not the duty of the employee of their contract with A.C. Sicat simply caused the natural
but the day certain agreed upon by the parties for the cessation of their fixed-term employment there at. We, thus,
commencement and termination of the employment see no reason to disturb the ruling of the CA in this respect.
relationship.12chanroblesvirtuallawlibrary
With these, We need not belabor the other assigned errors.
In the case at bar, it is clear that respondents were
employed by A.C. Sicat as project employees. In their IN VIEW OF THE FOREGOING, the instant Petition for
employment contract with the latter, it is clearly stated that Review is GRANTED. The assailed Decision of the Court of
“[A.C. Sicat is] temporarily employing [respondents] as Appeals dated September 6, 2012 and its January 11, 2013
TMR[s] effective June 6[, 2006] under the following terms Resolution denying reconsideration thereof, in CA-G.R. SP
and conditions: The need for your service being only for a No. 114227, are hereby REVERSED and SET ASIDE. The
specific project, your temporary employment will be for the Decision of the National Labor Relations Commission dated
duration only of said project of our client, namely to promote November 20, 2009 and its Resolution dated March 5, 2010
FONTERRA BRANDS products xxx which is expected to be in NLRC Case No. RAB IV 12-23927-06-Q are
finished on or before Nov. 06, hereby REINSTATED.
2006.” chanroblesvirtuallawlibrary
13

SO ORDERED.
Respondents, by accepting the conditions of the contract
with A.C. Sicat, were well aware of and even acceded to the [G.R. No. 128845. June 1, 2000]
condition that their employment thereat will end on said pre- INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS
determined date of termination. They cannot now argue that (ISAE), petitioner, vs. HON. LEONARDO A.
they were illegally dismissed by the latter when it refused to QUISUMBING in his capacity as the Secretary of Labor
renew their contracts after its expiration. This is so since the and Employment; HON. CRESENCIANO B. TRAJANO in

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his capacity as the Acting Secretary of Labor and other nationalities, such personnel being exempt from
Employment; DR. BRIAN MACCAULEY in his capacity otherwise applicable laws and regulations attending their
as the Superintendent of International School-Manila; employment, except laws that have been or will be enacted
and INTERNATIONAL SCHOOL, INC., respondents. for the protection of employees.

DECISION Accordingly, the School hires both foreign and local

teachers as members of its faculty, classifying the same into
KAPUNAN, J.:
two: (1) foreign-hires and (2) local-hires. The School
Receiving salaries less than their counterparts hired abroad, employs four tests to determine whether a faculty member
the local-hires of private respondent School, mostly should be classified as a foreign-hire or a local hire:
Filipinos, cry discrimination. We agree. That the local-hires
a.....What is one's domicile?
are paid more than their colleagues in other schools is, of
course, beside the point. The point is that employees should b.....Where is one's home economy?
be given equal pay for work of equal value. That is a
c.....To which country does one owe economic allegiance?
principle long honored in this jurisdiction. That is a principle
that rests on fundamental notions of justice. That is the d.....Was the individual hired abroad specifically to work in
principle we uphold today. the School and was the School responsible for bringing that
individual to the Philippines?[2]
Private respondent International School, Inc. (the School,
for short), pursuant to Presidential Decree 732, is a Should the answer to any of these queries point to the
domestic educational institution established primarily for Philippines, the faculty member is classified as a local hire;
dependents of foreign diplomatic personnel and other otherwise, he or she is deemed a foreign-hire.
temporary residents.[1] To enable the School to continue
The School grants foreign-hires certain benefits not
carrying out its educational program and improve its
standard of instruction, Section 2(c) of the same decree accorded local-hires. These include housing, transportation,
shipping costs, taxes, and home leave travel allowance.
authorizes the School to
Foreign-hires are also paid a salary rate twenty-five percent
employ its own teaching and management personnel (25%) more than local-hires. The School justifies the
selected by it either locally or abroad, from Philippine or difference on two "significant economic disadvantages"
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foreign-hires have to endure, namely: (a) the "dislocation members"[4] of the School, contested the difference in salary
factor" and (b) limited tenure. The School explains: rates between foreign and local-hires. This issue, as well as
the question of whether foreign-hires should be included in
A foreign-hire would necessarily have to uproot himself from
the appropriate bargaining unit, eventually caused a
his home country, leave his family and friends, and take the
deadlock between the parties.
risk of deviating from a promising career path-all for the
purpose of pursuing his profession as an educator, but this On September 7, 1995, petitioner filed a notice of strike.
time in a foreign land. The new foreign hire is faced with The failure of the National Conciliation and Mediation Board
economic realities: decent abode for oneself and/or for to bring the parties to a compromise prompted the
one's family, effective means of transportation, allowance Department of Labor and Employment (DOLE) to assume
for the education of one's children, adequate insurance jurisdiction over the dispute. On June 10, 1996, the DOLE
against illness and death, and of course the primary benefit Acting Secretary, Crescenciano B. Trajano, issued an Order
of a basic salary/retirement compensation. resolving the parity and representation issues in favor of the
School. Then DOLE Secretary Leonardo A. Quisumbing
Because of a limited tenure, the foreign hire is confronted
subsequently denied petitioner's motion for reconsideration
again with the same economic reality after his term: that he
in an Order dated March 19, 1997. Petitioner now seeks
will eventually and inevitably return to his home country
relief in this Court.
where he will have to confront the uncertainty of obtaining
suitable employment after a long period in a foreign land. Petitioner claims that the point-of-hire classification
employed by the School is discriminatory to Filipinos and
The compensation scheme is simply the School's adaptive
that the grant of higher salaries to foreign-hires constitutes
measure to remain competitive on an international level in
racial discrimination.
terms of attracting competent professionals in the field of
international education.[3] The School disputes these claims and gives a breakdown of
its faculty members, numbering 38 in all, with nationalities
When negotiations for a new collective bargaining
other than Filipino, who have been hired locally and
agreement were held on June 1995, petitioner International
classified as local hires.[5]The Acting Secretary of Labor
School Alliance of Educators, "a legitimate labor union and
found that these non-Filipino local-hires received the same
the collective bargaining representative of all faculty
benefits as the Filipino local-hires:
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The compensation package given to local-hires has been A perusal of the parties' 1992-1995 CBA points us to the
shown to apply to all, regardless of race. Truth to tell, there conditions and provisions for salary and professional
are foreigners who have been hired locally and who are compensation wherein the parties agree as follows:
paid equally as Filipino local hires.[6]
All members of the bargaining unit shall be compensated
The Acting Secretary upheld the point-of-hire classification only in accordance with Appendix C hereof provided that the
for the distinction in salary rates: Superintendent of the School has the discretion to recruit
and hire expatriate teachers from abroad, under terms and
The principle "equal pay for equal work" does not find
conditions that are consistent with accepted international
application in the present case. The international character
practice.
of the School requires the hiring of foreign personnel to deal
with different nationalities and different cultures, among the Appendix C of said CBA further provides:
student population.
The new salary schedule is deemed at equity with the
We also take cognizance of the existence of a system of Overseas Recruited Staff (OSRS) salary schedule. The
salaries and benefits accorded to foreign hired personnel 25% differential is reflective of the agreed value of system
which system is universally recognized. We agree that displacement and contracted status of the OSRS as
certain amenities have to be provided to these people in differentiated from the tenured status of Locally Recruited
order to entice them to render their services in the Staff (LRS).
Philippines and in the process remain competitive in the
To our mind, these provisions demonstrate the parties'
international market.
recognition of the difference in the status of two types of
Furthermore, we took note of the fact that foreign hires have employees, hence, the difference in their salaries.
limited contract of employment unlike the local hires who
The Union cannot also invoke the equal protection clause to
enjoy security of tenure. To apply parity therefore, in wages
justify its claim of parity. It is an established principle of
and other benefits would also require parity in other terms
constitutional law that the guarantee of equal protection of
and conditions of employment which include the
the laws is not violated by legislation or private covenants
employment contract.
based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and
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apply to all members of the same class. Verily, there is a Convention against Discrimination in Education,[15] the
substantial distinction between foreign hires and local hires, Convention (No. 111) Concerning Discrimination in Respect
the former enjoying only a limited tenure, having no of Employment and Occupation[16] - all embody the general
amenities of their own in the Philippines and have to be principle against discrimination, the very antithesis of
given a good compensation package in order to attract them fairness and justice. The Philippines, through its
to join the teaching faculty of the School.[7] Constitution, has incorporated this principle as part of its
national laws.
We cannot agree.
In the workplace, where the relations between capital and
That public policy abhors inequality and discrimination is
labor are often skewed in favor of capital, inequality and
beyond contention. Our Constitution and laws reflect the
discrimination by the employer are all the more
policy against these evils. The Constitution[8] in the Article
reprehensible.
on Social Justice and Human Rights exhorts Congress to
"give highest priority to the enactment of measures that The Constitution[17] specifically provides that labor is entitled
protect and enhance the right of all people to human dignity, to "humane conditions of work." These conditions are not
reduce social, economic, and political inequalities." The very restricted to the physical workplace - the factory, the office
broad Article 19 of the Civil Code requires every person, "in or the field - but include as well the manner by which
the exercise of his rights and in the performance of his employers treat their employees.
duties, [to] act with justice, give everyone his due, and
The Constitution[18] also directs the State to promote
observe honesty and good faith."
"equality of employment opportunities for all." Similarly, the
International law, which springs from general principles of Labor Code[19] provides that the State shall "ensure equal
law,[9] likewise proscribes discrimination. General principles work opportunities regardless of sex, race or creed." It
of law include principles of equity,[10] i.e., the general would be an affront to both the spirit and letter of these
principles of fairness and justice, based on the test of what provisions if the State, in spite of its primordial obligation to
is reasonable.[11] The Universal Declaration of Human promote and ensure equal employment opportunities,
Rights,[12] the International Covenant on Economic, Social, closes its eyes to unequal and discriminatory terms and
and Cultural Rights,[13] the International Convention on the conditions of employment.[20]
Elimination of All Forms of Racial Discrimination,[14] the
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Discrimination, particularly in terms of wages, is frowned conditions, should be paid similar salaries.[22] This rule
upon by the Labor Code. Article 135, for example, prohibits applies to the School, its "international character"
and penalizes[21] the payment of lesser compensation to a notwithstanding.
female employee as against a male employee for work of
The School contends that petitioner has not adduced
equal value. Article 248 declares it an unfair labor practice
evidence that local-hires perform work equal to that of
for an employer to discriminate in regard to wages in order
foreign-hires.[23] The Court finds this argument a little
to encourage or discourage membership in any labor
cavalier. If an employer accords employees the same
organization.
position and rank, the presumption is that these employees
Notably, the International Covenant on Economic, Social, perform equal work. This presumption is borne by logic and
and Cultural Rights, supra, in Article 7 thereof, provides: human experience. If the employer pays one employee less
than the rest, it is not for that employee to explain why he
The States Parties to the present Covenant recognize the
receives less or why the others receive more. That would be
right of everyone to the enjoyment of just and favourable
adding insult to injury. The employer has discriminated
conditions of work, which ensure, in particular:
against that employee; it is for the employer to explain why
a.....Remuneration which provides all workers, as a the employee is treated unfairly.
minimum, with:
The employer in this case has failed to discharge this
i.....Fair wages and equal remuneration for work of equal burden. There is no evidence here that foreign-hires
value without distinction of any kind, in particular women perform 25% more efficiently or effectively than the local-
being guaranteed conditions of work not inferior to those hires. Both groups have similar functions and
enjoyed by men, with equal pay for equal work; responsibilities, which they perform under similar working
conditions.
x x x.
The School cannot invoke the need to entice foreign-hires to
The foregoing provisions impregnably institutionalize in this leave their domicile to rationalize the distinction in salary
jurisdiction the long honored legal truism of "equal pay for rates without violating the principle of equal work for equal
equal work." Persons who work with substantially equal
pay.
qualifications, skill, effort and responsibility, under similar

302
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a protection."[26] The State, therefore, has the right and duty to
reward or recompense for services performed." Similarly, regulate the relations between labor and capital.[27]These
the Philippine Legal Encyclopedia states that "salary" is the relations are not merely contractual but are so impressed
"[c]onsideration paid at regular intervals for the rendering with public interest that labor contracts, collective bargaining
of services." In Songco v. National Labor Relations agreements included, must yield to the common
Commission,[24] we said that: good.[28] Should such contracts contain stipulations that are
contrary to public policy, courts will not hesitate to strike
"salary" means a recompense or consideration made to a
down these stipulations.
person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully In this case, we find the point-of-hire classification employed
from "sal," the pay of the Roman soldier, it carries with it the by respondent School to justify the distinction in the salary
fundamental idea of compensation for services rates of foreign-hires and local hires to be an invalid
rendered. (Emphasis supplied.) classification. There is no reasonable distinction between
the services rendered by foreign-hires and local-hires. The
While we recognize the need of the School to attract
practice of the School of according higher salaries to
foreign-hires, salaries should not be used as an enticement
foreign-hires contravenes public policy and, certainly, does
to the prejudice of local-hires. The local-hires perform the
not deserve the sympathy of this Court.
same services as foreign-hires and they ought to be paid
the same salaries as the latter. For the same reason, the We agree, however, that foreign-hires do not belong to the
"dislocation factor" and the foreign-hires' limited tenure also same bargaining unit as the local-hires.
cannot serve as valid bases for the distinction in salary
A bargaining unit is "a group of employees of a given
rates. The dislocation factor and limited tenure affecting
employer, comprised of all or less than all of the entire body
foreign-hires are adequately compensated by certain
of employees, consistent with equity to the employer
benefits accorded them which are not enjoyed by local-
indicate to be the best suited to serve the reciprocal rights
hires, such as housing, transportation, shipping costs, taxes
and duties of the parties under the collective bargaining
and home leave travel allowances.
provisions of the law."[29] The factors in determining the
The Constitution enjoins the State to "protect the rights of appropriate collective bargaining unit are (1) the will of the
workers and promote their welfare,"[25] "to afford labor full employees (Globe Doctrine); (2) affinity and unity of the
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employees' interest, such as substantial similarity of work Secretary of Labor and Employment dated June 10, 1996
and duties, or similarity of compensation and working and March 19, 1997, are hereby REVERSED and SET
conditions (Substantial Mutual Interests Rule); (3) prior ASIDE insofar as they uphold the practice of respondent
collective bargaining history; and (4) similarity of School of according foreign-hires higher salaries than local-
employment status.[30] The basic test of an asserted hires.
bargaining unit's acceptability is whether or not it is
SO ORDERED.
fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining
rights.[31]

It does not appear that foreign-hires have indicated their

intention to be grouped together with local-hires for
purposes of collective bargaining. The collective bargaining
history in the School also shows that these groups were
always treated separately. Foreign-hires have limited
tenure; local-hires enjoy security of tenure. Although
foreign-hires perform similar functions under the same
working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs,
taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the
exclusion of the former from the latter. To include foreign-
hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective
bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The

petition is hereby GRANTED IN PART. The Orders of the
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