LABOR LAW READINGS

1.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138051 June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in
CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the
findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case
for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the
Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers
while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as
EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services exclusively
to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of P310,000 for the first year and P317,000 for the
second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of
ABS-CBN with our company relative to our talent JOSE Y. SONZA.

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

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

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

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.

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

In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and directed the parties to file their
respective position papers. The Labor Arbiter ruled:
 In this instant case, complainant for having invoked a claim that he was an employee of respondent company until
April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the
instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the
causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondent’s
plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it
the duty to prove that there really is no employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24
February 1997.

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

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The pertinent
parts of the decision read as follows:

xxx

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

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

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the
parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All these
benefits are merely talent fees and other contractual benefits and should not be deemed as ‘salaries, wages
and/or other remuneration’ accorded to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not controlling,
but the intent of the parties to the Agreement conferring such benefit."

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

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC ‘is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’
(Opposition to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not
between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically
referred to MJMDC as the ‘AGENT’. As a matter of fact, when complainant herein unilaterally rescinded said May
1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed
the same in his capacity as President.

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

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

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

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED THOUSAND PESOS
(P500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the
amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit
amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.’

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

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

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

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

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

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which
upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

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

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and radio networks in the country.

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

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. 15 Substantial
evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 16 A
party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible.17

SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee on
the means and methods by which the work is accomplished. 18 The last element, the so-called "control test", is the most
important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondent’s
claim of independent contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not
have entered into the Agreement with SONZA but would have hired him through its personnel department just like any
other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test being the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and
13th month pay"20 which the law automatically incorporates into every employer-employee contract.21Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship.22

SONZA’s talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.

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

C. Power of Dismissal

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

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza shall
faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees.
Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees during the
remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.25

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

D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("WIPR") 27 that a television
program host is an independent contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled
position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a
master’s degree in public communications and journalism; is trained in dance, singing, and modeling; taught with
the drama department at the University of Puerto Rico; and acted in several theater and television productions
prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities"
necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes,
jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this
factor favors independent contractor status because WIPR provided the "equipment necessary to tape the show."
Alberty’s argument is misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi
Pueblo" related to her appearance on the show. Others provided equipment for filming and producing the show,
but these were not the primary tools that Alberty used to perform her particular function. If we accepted this
argument, independent contractors could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s contracts with
WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi
Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x
x28 (Emphasis supplied)

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

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

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How
SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s control. SONZA did
not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of
the shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZA’s
script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear
implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or
its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming."34 ABS-CBN’s sole concern was the quality of the
shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of
performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show, ABS-
CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means
and methods of SONZA’s performance of his work, or even with the quality or product of his work, ABS-CBN could not
dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN must still
pay his talent fees in full.35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in full
SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s work. ABS-
CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he
delivered his lines and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control
was limited only to the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-CBN
must still pay SONZA’s talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of the skills of the artists, it could only control
the result of the work by deleting objectionable features.37

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

A radio broadcast specialist who works under minimal supervision is an independent contractor. 40 SONZA’s work as
television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of work but
also the quality of his work."

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

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

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this
case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

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

The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative. 45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN
exercised over him.

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

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

MJMDC as Agent of SONZA

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

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly
under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to the
employees of the "labor-only contractor" as if the principal itself directly hired or employed the employees.48 These
circumstances are not present in this case.

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

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

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled
the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the
classification has no basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his
counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the
submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

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

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal
trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.50

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

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like
SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.

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

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

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC") 54 in relation to Republic Act No. 7716,55 as amended by Republic Act No.
8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the
10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee
relationship.57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual relationship are present as in this case.

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZA’s claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code
provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is for
breach of contract which is intrinsically a civil dispute cognizable by the regular courts. 58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP
No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

2.

Republic of the Philippines

SUPREME COURT
Baguio
FIRST DIVISION
G.R. No. 163700 April 18, 2012
CHARLIE JAO, Petitioner,
vs.
BCC PRODUCTS SALES INC., and TERRANCE TY, Respondents.

DECISION

BERSAMIN, J.:

The issue is whether petitioner was respondents’ employee or not. Respondents denied an employer-employee
relationship with petitioner, who insisted the contrary.

Through his petition for review on certiorari, petitioner appeals the decision promulgated by the Court of Appeals (CA) on
February 27, 2004,1 finding no employee-employer relationship between him and respondents, thereby reversing the
ruling by the National Labor Relations Commission (NLRC) to the effect that he was the employee of respondents.

Antecedents

Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent Terrance Ty (Ty),
employed him as comptroller starting from September 1995 with a monthly salary of P20,000.00 to handle the financial
aspect of BCC’s business;2 that on October 19,1995, the security guards of BCC, acting upon the instruction of Ty, barred
him from entering the premises of BCC where he then worked; that his attempts to report to work in November and
December 12, 1995 were frustrated because he continued to be barred from entering the premises of BCC; 3 and that he
filed a complaint dated December 28, 1995 for illegal dismissal, reinstatement with full backwages, non-payment of
wages, damages and attorney’s fees.4

Respondents countered that petitioner was not their employee but the employee of Sobien Food Corporation (SFC), the
major creditor and supplier of BCC; and that SFC had posted him as its comptroller in BCC to oversee BCC’s finances
and business operations and to look after SFC’s interests or investments in BCC.5

Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996, 6 the NLRC vacated the ruling and
remanded the case for further proceedings.7 Thereafter, Labor Arbiter Jovencio Ll. Mayor rendered a new decision on
September 20, 2001, dismissing petitioner’s complaint for want of an employer-employee relationship between the
parties.8 Petitioner appealed the September 20, 2001 decision of Labor Arbiter Mayor.

On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayor’s decision, and declaring that petitioner
had been illegally dismissed. It ordered the payment of unpaid salaries, backwages and 13th month pay, separation pay
and attorney’s fees.9 Respondents moved for the reconsideration of the NLRC decision, but their motion for
reconsideration was denied on September 30, 2002.10 Thence, respondents assailed the NLRC decision on certiorari in
the CA.

Ruling of the CA

On February 27, 2004, the CA promulgated its assailed decision,11 holding:

After a judicious review of the records vis-à-vis the respective posturing of the contending parties, we agree with the
finding that no employer-employee relationship existed between petitioner BCC and the private respondent. On this note,
the conclusion of the public respondent must be reversed for being issued with grave abuse of discretion.

"Etched in an unending stream of cases are the four (4) standards in determining the existence of an employer-employee
relationship, namely, (a) the manner of selection and engagement of the putative employee; (b) the mode of payment of
wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control of the putative
employee’s conduct." Of these powers the power of control over the employee’s conduct is generally regarded as
determinative of the existence of the relationship.

Apparently, in the case before us, all these four elements are absent. First, there is no proof that the services of the
private respondent were engaged to perform the duties of a comptroller in the petitioner company. There is no proof that
the private respondent has undergone a selection procedure as a standard requisite for employment, especially with such
a delicate position in the company. Neither is there any proof of his appointment nor is there any showing that the parties
entered into an employment contract, stipulating thereof that he will receive P20,000.00/month salary as comptroller,
before the private respondent commenced with his work as such. Second, as clearly established on record, the private
respondent was not included in the petitioner company’s payroll during the time of his alleged employment with the
former. True, the name of the private respondent Charlie Jao appears in the payroll however it does not prove that he has
received his remuneration for his services. Notably, his name was not among the employees who will receive their
salaries as represented by the payrolls. Instead, it appears therein as a comptroller who is authorized to approve the
same. Suffice it to state that it is rather obscure for a certified public accountant doing the functions of a comptroller from
September 1995 up to December 1995 not to receive his salary during the said period. Verily, such scenario does not
conform with the usual and ordinary experience of man. Coming now to the most controlling factor, the records indubitably
reveal the undisputed fact that the petitioner company did not have nor did not exercise the power of control over the
private respondent. It did not prescribe the manner by which the work is to be carried out, or the time by which the private
respondent has to report for and leave from work. As already stated, the power of control is such an important factor that
other requisites may even be disregarded. In Sevilla v. Court of Appeals, the Supreme Court emphatically held, thus:

"The "control test," under which the person for whom the services are rendered reserves the right to direct not
only the end to be achieved but also the means for reaching such end, is generally relied on by the courts."

We have carefully examined the evidence submitted by the private respondent in the formal offer of evidence and
unfortunately, other than the bare assertions of the private respondent which he miserably failed to substantiate, we find
nothing therein that would decisively indicate that the petitioner BCC exercised the fundamental power of control over the
private respondent in relation to his employment—not even the ID issued to the private respondent and the affidavits
executed by Bertito Jemilla and Rogelio Santias. At best, these pieces of documents merely suggest the existence of
employer-employee relationship as intimated by the NLRC. On the contrary, it would appear that the said sworn statement
provided a substantial basis to support the contention that the private respondent worked at the petitioner BCC as SFC’s
representative, being its major creditor and supplier of goods and merchandise. Moreover, as clearly pointed out by the
petitioner in his Reply to the private respondent’s Comment, it is unnatural for SFC to still employ the private respondent
"to oversee and supervise collections of account receivables due SFC from its customers or clients" like the herein
petitioner BCC on a date later than December, 1995 considering that a criminal complaint has already been instituted
against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with legal certainty that employee-
employer relationship existed between the parties. On the other hand, it was clearly shown by the petitioner that it neither
exercised control nor supervision over the conduct of the private respondent’s employment. Hence, the allegation that
there is employer-employee relationship must necessarily fail.

Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the public respondent NLRC
dated July 31, 2002 and the Resolution dated September 30, 2002 are REVERSED and SET ASIDE. Accordingly, the
decision of the Labor Arbiter dated September 20, 2001 is hereby REINSTATED.

SO ORDERED.

After the CA denied petitioner’s motion for reconsideration on May 14, 2004, 12 he filed a motion for extension to file
petition for review, which the Court denied through the resolution dated July 7, 2004 for failure to render an explanation on
why the service of copies of the motion for extension on respondents was not personally made. 13The denial
notwithstanding, he filed his petition for review on certiorari. The Court denied the petition on August 18, 2004 in view of
the denial of the motion for extension of time and the continuing failure of petitioner to render the explanation as to the
non-personal service of the petition on respondents. 14 However, upon a motion for reconsideration, the Court reinstated
the petition for review on certiorari and required respondents to comment. 15

Issue

The sole issue is whether or not an employer-employee relationship existed between petitioner and BCC. A finding on the
existence of an employer-employee relationship will automatically warrant a finding of illegal dismissal, considering that
respondents did not state any valid grounds to dismiss petitioner.

Ruling

The petition lacks merit.

The existence of an employer-employee relationship is a question of fact. Generally, a re-examination of factual findings
cannot be done by the Court acting on a petition for review on certiorari because the Court is not a trier of facts but
reviews only questions of law. Nor may the Court be bound to analyze and weigh again the evidence adduced and
considered in the proceedings below.16 This rule is not absolute, however, and admits of exceptions. For one, the Court
may look into factual issues in labor cases when the factual findings of the Labor Arbiter, the NLRC, and the CA are
conflicting.17

Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict among such adjudicating
offices compels the Court’s exercise of its authority to review and pass upon the evidence presented and to draw its own
conclusions therefrom.

To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID) issued to him stating
his name and his position as "comptroller," and bearing his picture, his signature, and the signature of Ty; (b) a payroll of
BCC for the period of October 1-15, 1996 that petitioner approved as comptroller; (c) various bills and receipts related to
expenditures of BCC bearing the signature of petitioner; (d) various checks carrying the signatures of petitioner and Ty,
and, in some checks, the signature of petitioner alone; (e) a court order showing that the issuing court considered
petitioner’s ID as proof of his employment with BCC; (f) a letter of petitioner dated March 1, 1997 to the Department of
Justice on his filing of a criminal case for estafa against Ty for non-payment of wages; (g) affidavits of some employees of
BCC attesting that petitioner was their co-employee in BCC; and (h) a notice of raffle dated December 5, 1995 showing
that petitioner, being an employee of BCC, received the notice of raffle in behalf of BCC. 18

Respondents denied that petitioner was BCC’s employee. They affirmed that SFC had installed petitioner as its
comptroller in BCC to oversee and supervise SFC’s collections and the account of BCC to protect SFC’s interest; that
their issuance of the ID to petitioner was only for the purpose of facilitating his entry into the BCC premises in relation to
his work of overseeing the financial operations of BCC for SFC; that the ID should not be considered as evidence of
petitioner’s employment in BCC;19 that petitioner executed an affidavit in March 1996,20 stating, among others, as follows:

1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or employed by, Sobien
Food Corporation with the same business address as abovestated;

2. In the course of my association with, or employment by, Sobien Food Corporation (SFC, for short), I have been
entrusted by my employer to oversee and supervise collections on account of receivables due SFC from its
customers or clients; for instance, certain checks due and turned over by one of SFC’s customers is BCC Product
Sales, Inc., operated or run by one Terrance L. Ty, (President and General manager), pursuant to, or in
accordance with, arrangements or agreement thereon; such arrangement or agreement is duly confirmed by said
Terrance Ty, as shown or admitted by him in a public instrument executed therefor, particularly par. 2 of that
certain Counter-Affidavit executed and subscribed on December 11, 1995, xerox copy of which is hereto
attached, duly marked as Annex "A" and made integral part hereof.

3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were delivered to, or turned
over in favor of SFC, Mr. Terrance Ty, in a desire to blemish my reputation or to cause me dishonor as well as to
impute unto myself the commission of a crime, state in another public instrument executed therefor in that:

"3. That all the said 158 checks were unlawfully appropriated by a certain Charlie Jao absolutely without any authority
from BCC and the same were reportedly turned over by said Mr. Jao to a person who is not an agent or is not authorized
representative of BCC."

xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex "B" and made integral part hereof.
(emphasis supplied)

and that the affidavit constituted petitioner’s admission of the arrangement or agreement between BCC and SFC for the
latter to appoint a comptroller to oversee the former’s operations.

Petitioner counters, however, that the affidavit did not establish the absence of an employer-employee relationship
between him and respondents because it had been executed in March 1996, or after his employment with respondents
had been terminated on December 12, 1995; and that the affidavit referred to his subsequent employment by SFC
following the termination of his employment by BCC.21

We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and the Labor Arbiter to
the effect that the affidavit actually supported the contention that petitioner had really worked in BCC as SFC’s
representative. It does seem more natural and more believable that petitioner’s affidavit was referring to his employment
by SFC even while he was reporting to BCC as a comptroller in behalf of SFC. As respondents pointed out, it was
implausible for SFC to still post him to oversee and supervise the collections of accounts receivables due from BCC
beyond December 1995 if, as he insisted, BCC had already illegally dismissed him and had even prevented him from
entering the premises of BCC. Given the patent animosity and strained relations between him and respondents in such
circumstances, indeed, how could he still efficiently perform in behalf of SFC the essential responsibility to "oversee and
supervise collections" at BCC? Surely, respondents would have vigorously objected to any arrangement with SFC
involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in his own affidavit
dated December 11, 1995 to the effect that petitioner had illegally appropriated some checks without authority from
BCC.22 Petitioner thereby sought to show that he had the authority to receive the checks pursuant to the arrangements
between SFC and BCC. This showing would aid in fending off the criminal charge respondents filed against him arising
from his mishandling of the checks. Naturally, the circumstances petitioner adverted to in his March 1996 affidavit
concerned those occurring before December 11, 1995, the same period when he actually worked as comptroller in BCC.

Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner offered as a rebuttal
witness, lent credence to respondents’ denial of petitioner’s employment. So declared in that affidavit, among others, that
he had known petitioner for being "earlier his retained accountant having his own office but did not hold office" in SFC’s
premises; that Ty had approached him (So) "looking for an accountant or comptroller to be employed by him (Ty) in
[BCC’s] distribution business" of SFC’s general merchandise, and had later asked him on his opinion about petitioner; and
that he (So) had subsequently learned that "Ty had already employed [petitioner] as his comptroller as of September
1995."23

The statements of So really supported respondents’ position in that petitioner’s association with SFC prior to his supposed
employment by BCC went beyond mere acquaintance with So. That So, who had earlier merely "retained" petitioner as
his accountant, thereafter employed petitioner as a "retained" accountant after his supposed illegal dismissal by BCC
raised a doubt as to his employment by BCC, and rather confirmed respondents’ assertion of petitioner being an
employee of SFC while he worked at BCC.

Moreover, in determining the presence or absence of an employer-employee relationship, the Court has consistently
looked for the following incidents, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control the employee on the means and methods by which the
work is accomplished. The last element, the so-called control test, is the most important element.24

Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly employed by BCC that
debunked his claim against respondents.

It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to deliver some
158 checks to SFC. Considering that he contested respondents’ challenge by pointing to the existing arrangements
between BCC and SFC, it should be clear that respondents did not exercise the power of control over him, because he
thereby acted for the benefit and in the interest of SFC more than of BCC.

In addition, petitioner presented no document setting forth the terms of his employment by BCC.1âwphi1 The failure to
present such agreement on terms of employment may be understandable and expected if he was a common or ordinary
laborer who would not jeopardize his employment by demanding such document from the employer, but may not square
well with his actual status as a highly educated professional.

Petitioner’s admission that he did not receive his salary for the three months of his employment by BCC, as his complaint
for illegal dismissal and non-payment of wages25 and the criminal case for estafa he later filed against the respondents for
non-payment of wages26 indicated, further raised grave doubts about his assertion of employment by BCC. If the assertion
was true, we are puzzled how he could have remained in BCC’s employ in that period of time despite not being paid the
first salary of P20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him having approved
the payroll as comptroller.

Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the insincerity of
petitioner’s assertion of employment by BCC. In the petition for review on certiorari, he averred that he had been barred
from entering the premises of BCC on October 19, 1995, 27 and thus was illegally dismissed. Yet, his complaint for illegal
dismissal stated that he had been illegally dismissed on December 12, 1995 when respondents’ security guards barred
him from entering the premises of BCC,28 causing him to bring his complaint only on December 29, 1995, and after BCC
had already filed the criminal complaint against him. The wide gap between October 19, 1995 and December 12, 1995
cannot be dismissed as a trivial inconsistency considering that the several incidents affecting the veracity of his assertion
of employment by BCC earlier noted herein transpired in that interval.

With all the grave doubts thus raised against petitioner’s claim, we need not dwell at length on the other proofs he
presented, like the affidavits of some of the employees of BCC, the ID, and the signed checks, bills and receipts. Suffice it
to be stated that such other proofs were easily explainable by respondents and by the aforestated circumstances showing
him to be the employee of SFC, not of BCC.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAM

3.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 167622 January 25, 2011
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS,Respondents.
RESOLUTION

BRION, J.:

We resolve petitioner Gregorio V. Tongko’s bid, through his Motion for Reconsideration,1 to set aside our June 29, 2010
Resolution that reversed our Decision of November 7, 2008. 2 With the reversal, the assailed June 29, 2010 Resolution
effectively affirmed the Court of Appeals’ ruling3 in CA-G.R. SP No. 88253 that the petitioner was an insurance agent, not
the employee, of the respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife).

In his Motion for Reconsideration, petitioner reiterates the arguments he had belabored in his petition and various other
submissions. He argues that for 19 years, he performed administrative functions and exercised supervisory authority over
employees and agents of Manulife, in addition to his insurance agent functions. 4 In these 19 years, he was designated as
a Unit Manager, a Branch Manager and a Regional Sales Manager, and now posits that he was not only an insurance
agent for Manulife but was its employee as well.

We find no basis or any error to merit the reconsideration of our June 29, 2010 Resolution.

A. Labor Law Control = Employment Relationship

Control over the performance of the task of one providing service – both with respect to the means and manner, and the
results of the service – is the primary element in determining whether an employment relationship exists. We resolve the
petitioner’s Motion against his favor since he failed to show that the control Manulife exercised over him was the control
required to exist in an employer-employee relationship; Manulife’s control fell short of this norm and carried only the
characteristic of the relationship between an insurance company and its agents, as defined by the Insurance Code and by
the law of agency under the Civil Code.

The petitioner asserts in his Motion that Manulife’s labor law control over him was demonstrated (1) when it set the
objectives and sales targets regarding production, recruitment and training programs; and (2) when it prescribed the Code
of Conduct for Agents and the Manulife Financial Code of Conduct to govern his activities. 5 We find no merit in these
contentions.
In our June 29, 2010 Resolution, we noted that there are built-in elements of control specific to an insurance agency,
which do not amount to the elements of control that characterize an employment relationship governed by the Labor
Code. The Insurance Code provides definite parameters in the way an agent negotiates for the sale of the company’s
insurance products, his collection activities and his delivery of the insurance contract or policy. 6 In addition, the Civil Code
defines an agent as a person who binds himself to do something in behalf of another, with the consent or authority of the
latter.7 Article 1887 of the Civil Code also provides that in the execution of the agency, the agent shall act in accordance
with the instructions of the principal.

All these, read without any clear understanding of fine legal distinctions, appear to speak of control by the insurance
company over its agents. They are, however, controls aimed only at specific results in undertaking an insurance agency,
and are, in fact, parameters set by law in defining an insurance agency and the attendant duties and responsibilities an
insurance agent must observe and undertake. They do not reach the level of control into the means and manner of doing
an assigned task that invariably characterizes an employment relationship as defined by labor law. From this perspective,
the petitioner’s contentions cannot prevail.

To reiterate, guidelines indicative of labor law "control" do not merely relate to the mutually desirable result intended by
the contractual relationship; they must have the nature of dictating the means and methods to be employed in attaining
the result.8 Tested by this norm, Manulife’s instructions regarding the objectives and sales targets, in connection with the
training and engagement of other agents, are among the directives that the principal may impose on the agent to achieve
the assigned tasks. They are targeted results that Manulife wishes to attain through its agents. Manulife’s codes of
conduct, likewise, do not necessarily intrude into the insurance agents’ means and manner of conducting their sales.
Codes of conduct are norms or standards of behavior rather than employer directives into how specific tasks are to be
done. These codes, as well as insurance industry rules and regulations, are not per se indicative of labor law control
under our jurisprudence.9

The duties10 that the petitioner enumerated in his Motion are not supported by evidence and, therefore, deserve scant
consideration. Even assuming their existence, however, they mostly pertain to the duties of an insurance agent such as
remitting insurance fees to Manulife, delivering policies to the insured, and after-sale services. For agents leading other
agents, these include the task of overseeing other insurance agents, the recruitment of other insurance agents engaged
by Manulife as principal, and ensuring that these other agents comply with the paperwork necessary in selling insurance.
That Manulife exercises the power to assign and remove agents under the petitioner’s supervision is in keeping with its
role as a principal in an agency relationship; they are Manulife agents in the same manner that the petitioner had all along
been a Manulife agent.

The petitioner also questions Manulife’s act of investing him with different titles and positions in the course of their
relationship, given the respondents’ position that he simply functioned as an insurance agent. 11 He also considers it an
unjust and inequitable situation that he would be unrewarded for the years he spent as a unit manager, a branch
manager, and a regional sales manager.12

Based on the evidence on record, the petitioner’s occupation was to sell Manulife’s insurance policies and products from
1977 until the termination of the Career Agent’s Agreement (Agreement). The evidence also shows that through the
years, Manulife permitted him to exercise guiding authority over other agents who operate under their own agency
agreements with Manulife and whose commissions he shared. 13 Under this scheme – an arrangement that pervades the
insurance industry – petitioner in effect became a "lead agent" and his own commissions increased as they included his
share in the commissions of the other agents; 14 he also received greater reimbursements for expenses and was allowed
to use Manulife’s facilities. His designation also changed from unit manager to branch manager and then to regional sales
manager, to reflect the increase in the number of agents he recruited and guided, as well as the increase in the area
where these agents operated.

As our assailed Resolution concluded and as we now similarly conclude, these arrangements, and the titles and positions
the petitioner was invested with, did not change his status from the insurance agent that he had always been (as
evidenced by the Agreement that governed his relationship with Manulife from the start to its disagreeable end). The
petitioner simply progressed from his individual agency to being a lead agent who could use other agents in selling
insurance and share in the earnings of these other agents.

In sum, we find absolutely no evidence of labor law control, as extensively discussed in our Resolution of June 29, 2010,
granting Manulife’s motion for reconsideration. The Dissent, unfortunately, misses this point.

B. No Resulting Inequity

We also do not agree that our assailed Resolution has the effect of fostering an inequitable or unjust situation. The
records show that the petitioner was very amply paid for his services as an insurance agent, who also shared in the
commissions of the other agents under his guidance. In 1997, his income was P2,822,620; in 1998, P4,805,166.34; in
1999, P6,797,814.05; in 2001, P6,214,737.11; and in 2002, P8,003,180.38. All these he earned as an insurance agent, as
he failed to ever prove that he earned these sums as an employee. In technical terms, he could not have earned all these
as an employee because he failed to provide the substantial evidence required in administrative cases to support the
finding that he was a Manulife employee. No inequity results under this legal situation; what would be unjust is an award
of backwages and separation pay – amounts that are not due him because he was never an employee.

The Dissent’s discussion on this aspect of the case begins with the wide disparity in the status of the parties – that
Manulife is a big Canadian insurance company while Tongko is but a single agent of Manulife. The Dissent then went on
to say that "[i]f is but just, it is but right, that the Court interprets the relationship between Tongko and Manulife as one of
employment under labor laws and to uphold his constitutionally protected right, as an employee, to security of tenure and
entitlement to monetary award should such right be infringed." 15 We cannot simply invoke the magical formula by creating
an employment relationship even when there is none because of the unavoidable and inherently weak position of an
individual over a giant corporation.

The Dissent likewise alluded to an ambiguity in the true relationship of the parties after Tongko’s successive
appointments. We already pointed out that the legal significance of these appointments had not been sufficiently
explained and that it did not help that Tongko never bothered to present evidence on this point. The Dissent recognized
this but tried to excuse Tongko from this failure in the subsequent discussion, as follows:

[o]ther evidence was adduced to show such duties and responsibilities. For one, in his letter of November 6, 2001,
respondent De Dios addressed petitioner as sales manager. And as I wrote in my Dissent to the June 29, 2010
Resolution, it is difficult to imagine that Manulife did not issue promotional appointments to petitioner as unit manager,
branch manager, and, eventually, regional sales manager. Sound management practice simply requires an appointment
for any upward personnel movement, particularly when additional functions and the corresponding increase in
compensation are involved. Then, too, the adverted affidavits of the managers of Manulife as to the duties and
responsibilities of a unit manager, such as petitioner, point to the conclusion that these managers were employees of
Manulife, applying the "four-fold" test.16

This Court (and all adjudicators for that matter) cannot and should not fill in the evidentiary gaps in a party’s case that the
party failed to support; we cannot and should not take the cudgels for any party. Tongko failed to support his cause and
we should simply view him and his case as they are; our duty is to sit as a judge in the case that he and the respondent
presented.

To support its arguments on equity, the Dissent uses the Constitution and the Civil Code, using provisions and principles
that are all motherhood statements. The mandate of the Court, of course, is to decide cases based on the facts and the
law, and not to base its conclusions on fundamental precepts that are far removed from the particular case presented
before it. When there is no room for their application, of capacity of principles, reliance on the application of these
fundamental principles is misplaced.

C. Earnings were Commissions

That his earnings were agent’s commissions arising from his work as an insurance agent is a matter that the petitioner
cannot deny, as these are the declarations and representations he stated in his income tax returns through the years. It
would be doubly unjust, particularly to the government, if he would be allowed at this late point to turn around and
successfully claim that he was merely an employee after he declared himself, through the years, as an independent self-
employed insurance agent with the privilege of deducting business expenses. This aspect of the case alone – considered
together with the probative value of income tax declarations and returns filed prior to the present controversy — should be
enough to clinch the present case against the petitioner’s favor.

D. The Dissent’s Solution:

Unwieldy and Legally Infirm

The Dissent proposes that Tongko should be considered as part employee (as manager) and part insurance agent;
hence, the original decision should be modified to pertain only to the termination of his employment as a manager and not
as an insurance agent. Accordingly, the backwages component of the original award to him should not include the
insurance sales commissions. This solution, according to the line taken by the Dissent then, was justified on the view that
this was made on a case-to-case basis.

Decisions of the Supreme Court, as the Civil Code provides, form part of the law of the land. When the Court states that
the determination of the existence of an employment relationship should be on a case-to-case basis, this does not mean
that there will be as many laws on the issue as there are cases. In the context of this case, the four-fold test is the
established standard for determining employer-employee relationship and the existence of these elements, most notably
control, is the basis upon which a conclusion on the absence of employment relationship was anchored. This simply
means that a conclusion on whether employment relationship exists in a particular case largely depends on the facts and,
in no small measure, on the parties’ evidence vis-à-vis the clearly defined jurisprudential standards. Given that the parties
control what and how the facts will be established in a particular case and/or how a particular suit is to be litigated,
deciding the issues on a case-to-case basis becomes an imperative.

Another legal reality, a more important one, is that the duty of a court is to say what the law is. 17 This is the same duty of
the Supreme Court that underlies the stare decisis principle. This is how the public, in general and the insurance industry
in particular, views the role of this Court and courts in general in deciding cases. The lower courts and the bar, most
specially, look up to the rulings of this Court for guidance. Unless extremely unavoidable, the Court must, as a matter of
sound judicial policy, resist the temptation of branding its ruling pro hac vice.

The compromise solution of declaring Tongko both an employee and an agent is legally unrealistic, unwieldy and is, in
fact, legally infirm, as it goes against the above basic principles of judicial operation. Likewise, it does not and cannot
realistically solve the problem/issue in this case; it actually leaves more questions than answers.

As already pointed out, there is no legal basis (be it statutory or jurisprudential) for the part-employee/part-insurance
agent status under an essentially principal-agent contractual relation which the Dissent proposes to accord to Tongko. If
the Dissent intends to establish one, this is highly objectionable for this would amount to judicial legislation. A legal
relationship, be it one of employment or one based on a contract other than employment, exists as a matter of law
pursuant to the facts, incidents and legal consequences of the relationship; it cannot exist devoid of these legally defined
underlying facts and legal consequences unless the law itself creates the relationship – an act that is beyond the authority
of this Court to do.

Additionally, the Dissent’s conclusion completely ignores an unavoidable legal reality – that the parties are bound by a
contract of agency that clearly subsists notwithstanding the successive designation of Tongko as a unit manager, a
branch manager and a regional sales manager. (As already explained in our Resolution granting Manulife’s motion for
reconsideration, no evidence on record exists to provide the Court with clues as to the precise impact of all these
designations on the contractual agency relationship.) The Dissent, it must be pointed out, concludes that Tongko’s
employment as manager was illegally terminated; thus, he should be accordingly afforded relief therefor. But, can Tongko
be given the remedies incidental to his dismissal as manager separately from his status as an insurance agent? In other
words, since the respondents terminated all relationships with Tongko through the termination letter, can we simply rule
that his role as a manager was illegally terminated without touching on the consequences of this ruling on his status as an
insurance agent? Expressed in these terms, the inseparability of his contract as agent with any other relationship that
springs therefrom can thus be seen as an insurmountable legal obstacle.

The Dissent’s compromise approach would also sanction split jurisdiction. The labor tribunals shall have jurisdiction over
Tongko’s employment as manager while another entity shall decide the issues/cases arising from the agency relationship.
If the managerial employment is anchored on the agency, how will the labor tribunals decide an issue that is inextricably
linked with a relationship that is outside the loop of their jurisdiction? As already mentioned in the Resolution granting
Manulife’s reconsideration, the DOMINANT relationship in this case is agency and no other.

E. The Dissent’s Cited Cases

The Dissent cites the cases of Great Pacific Life Assurance Corporation v. National Labor Relations Commission 18and
Insular Life Assurance Co., Ltd. v. National Labor Relations Commission19 to support the allegation that Manulife
exercised control over the petitioner as an employer.

In considering these rulings, a reality that cannot but be recognized is that cases turn and are decided on the basis of their
own unique facts; the ruling in one case cannot simply be bodily lifted and applied to another, particularly when notable
differences exist between the cited cases and the case under consideration; their respective facts must be strictly
examined to ensure that the ruling in one applies to another. This is particularly true in a comparison of the cited cases
with the present case. Specifically, care should be taken in reading the cited cases and applying their rulings to the
present case as the cited cases all dealt with the proper legal characterization of subsequent management contracts that
superseded the original agency contract between the insurance company and the agent.

In Great Pacific Life, the Ruiz brothers were appointed to positions different from their original positions as insurance
agents, whose duties were clearly defined in a subsequent contract. Similarly, in Insular, de los Reyes, a former insurance
agent, was appointed as acting unit manager based on a subsequent contract. In both cases, the Court anchored its
findings of labor control on the stipulations of these subsequent contracts.

In contrast, the present case is remarkable for the absence of evidence of any change in the nature of the petitioner’s
employment with Manulife. As previously stated above and in our assailed Resolution, the petitioner had always been
governed by the Agreement from the start until the end of his relationship with Manulife. His agency status never changed
except to the extent of being a lead agent. Thus, the cited cases – where changes in company-agent relationship
expressly changed and where the subsequent contracts were the ones passed upon by the Court – cannot be totally
relied upon as authoritative.

We cannot give credit as well to the petitioner’s claim of employment based on the affidavits executed by other Manulife
agents describing their duties, because these same affidavits only affirm their status as independent agents, not as
employees. To quote these various claims:20

1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the
computed premiums paid in full on the policies obtained thereat;

1.b. I have no fixed working hours and employ my own method in soliciting insurance at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;

xxxx

6. I have my own staff that handles day to day operations of my office;

7. My staff are my own employees and received salaries from me;

xxxx

9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-employed
individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for professionals.

The petitioner cannot also rely on the letter written by respondent Renato Vergel de Dios to prove that Manulife exercised
control over him. As we already explained in the assailed Resolution:

Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into Tongko’s exercise of
his role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives are merely operational guidelines on
how Tongko could align his operations with Manulife’s re-directed goal of being a "big league player." The method is to
expand coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-
and-method control as it relates, more than anything else, and is directly relevant, to Manulife’s objective of expanded
business operations through the use of a bigger sales force whose members are all on a principal-agent relationship. An
important point to note here is that Tongko was not supervising regular full-time employees of Manulife engaged in the
running of the insurance business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife
through the same agreement that he had with manulife, all the while sharing in these agents’ commissions through his
overrides.21

Lastly, in assailing the Agreement between him and Manulife, the petitioner cites Paguio v. National Labor Relations
Commission22 on the claim that the agreement that the parties signed did not conclusively indicate the legal relationship
between them.
The evidentiary situation in the present case, however, shows that despite the petitioner’s insistence that the Agreement
was no longer binding between him and Manulife, no evidence was ever adduced to show that their relationship changed
so that Manulife at some point controlled the means and method of the petitioner’s work. In fact, his evidence only further
supports the conclusion that he remained an independent insurance agent – a status he admits, subject only to the
qualification that he is at the same time an employee. Thus, we can only conclude that the Agreement governed his
relations with Manulife.

Additionally, it is not lost on us that Paguio is a ruling based on a different factual setting; it involves a publishing firm and
an account executive, whose repeated engagement was considered as an indication of employment. Our ruling in the
present case is specific to the insurance industry, where the law permits an insurance company to exercise control over
its agents within the limits prescribed by law, and to engage independent agents for several transactions and within an
unlimited period of time without the relationship amounting to employment. In light of these realities, the petitioner’s
arguments on his last argument must also fail.

The dissent also erroneously cites eight other cases — Social Security System v. Court of Appeals,23 Cosmopolitan
Funeral Homes, Inc. v. Maalat,24 Algon Engineering Construction Corporation v. National Labor Relations
Commission,25 Equitable Banking Corporation v. National Labor Relations Commission,26 Lazaro v. Social Security
Commission,27 Dealco Farms, Inc. v. National Labor Relations Commission, 28 South Davao Development Company, Inc.
v. Gamo,29 and Abante, Jr. v. Lamadrid Bearing & Parts Corporation.30 The dissent cited these cases to support its
allegation that labor laws and jurisprudence should be applied in cases, to the exclusion of other laws such as the Civil
Code or the Insurance Code, even when the latter are also applicable.

In Social Security System, Cosmopolitan Funeral Homes, Dealco Farms, and South Davao Development, the issue that
repeats itself is whether complainants were employees or independent contractors; the legal relationships involved are
both labor law concepts and make no reference to the Civil Code (or even the Insurance Code). The provisions cited in
the Dissent — Articles 1458-1637 of the Civil Code31 and Articles 1713-1720 of the Civil Code 32— do not even appear in
the decisions cited.

In Algon, the issue was whether the lease contract should dictate the legal relationship between the parties, when there
was proof of an employer-employee relationship. In the cited case, the lease provisions on termination were thus
considered irrelevant because of a substantial evidence of an employment relationship. The cited case lacks the
complexity of the present case; Civil Code provisions on lease do not prescribe that lessees exercise control over their
lessors in the way that the Insurance Code and the Civil provide that insurance companies and principals exercised
control over their agents.

The issue in Equitable, on the other hand, is whether a lawyer-client relationship or an employment relationship governs
the legal relation between parties. Again, this case is inapplicable as it does not illustrate the predominance of labor laws
and jurisprudence over other laws, in general, and the Insurance Code and Civil Code, in particular. It merely weighed the
evidence in favor of an employment relationship over that of a lawyer-client relationship. Similarly in Lazaro, the Court
found ample proof of control determinative of an employer-employee relationship.1âwphi1Both cases are not applicable to
the present case, which is attended by totally different factual considerations as the petitioner had not offered any
evidence of the company’s control in the means and manner of the performance of his work.

On the other hand, we find it strange that the dissent cites Abante as a precedent, since the Court, in this case, held that
an employee-employer relationship is notably absent in this case as the complainant was a sales agent. This case better
supports the majority’s position that a sales agent, who fails to show control in the concept of labor law, cannot be
considered an employee, even if the company exercised control in the concept of a sales agent. 33

It bears stressing that our ruling in this case is not about which law has primacy over the other, but that we should be able
to reconcile these laws. We are merely saying that where the law makes it mandatory for a company to exercise control
over its agents, the complainant in an illegal dismissal case cannot rely on these legally prescribed control devices as
indicators of an employer-employee relationship. As shown in our discussion, our consideration of the Insurance Code
and Civil Code provisions does not negate the application of labor laws and jurisprudence; ultimately, we dismissed the
petition because of its failure to comply with the control test.

WHEREFORE, premises considered, we hereby DENY the Motion for Reconsideration WITH FINALITY for lack of merit.
No further pleadings shall be entertained. Let entry of judgment proceed in due course.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice

I maintain my original vote, hence, I dissent

ANTONIO T. CARPIO
CONCHITA CARPIO MORALES
Associate Justice
Associate Justice

I dissent.
I join J.Velasco's dissent
(Please see dissenting opinion)
ANTONIO EDUARDO B. NACHURA
PRESBITERO J. VELASCO, JR.
Associate Justice
Associate Justice
 I join the dissent of Justice Velasco
DIOSDADO M. PERALTA
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Associate Justice

I join the dissent of Justice Velasco

MARIANO C. DEL CASTILLO
LUCAS P. BERSAMIN
Associate Justice
Associate Justice

No part
ROBERTO A. ABAD
MARTIN S. VILLARAMA, JR.
Associate Justice
Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

No part
MARIA LOURDES P. A. SERENO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution
had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice

Footnotes

1 Dated July 28, 2010.

2 The Dissent considered the referral of the motion for reconsideration to the En Banc as an "APPEAL" from the
Second Division to the En Banc (page 11 of the Dissent). Attention must be called to this matter for the use of the
word "APPEAL" might give the impression that there is an appeal remedy from the decision of a division to the
Court En Banc. The Court En Banc is not, as repeatedly held by the Supreme Court, an appellate court of any of
its divisions.

Petitioner asserts that:

"Aside from soliciting insurance for Manulife, petitioner was required to submit to the Company all
completed applications for insurance and to deliver policies, receive, collect and remit premiums to
respondent Manulife. Petitioner was required to use only sales materials and illustrations that were
approved by Manulife. He was even required to provide after-sales services, including the forwarding of
all written complaints to Manulife’s Head Office. Petitioner as also obliged to turn over to Manulife any
and all sums of money collected by him. He was further tasked to interview potential recruits both for his
direct unit and units under the Metro North Region of Manulife. However, the appointment of these
recruits is subject to the approval of Manulife. Likewise, he coordinated planning Key Result Areas for all
the subordinate managers and distribute to subordinate managers and agents Manulife memos, copies of
the Official Receipt, Daily Exception Reports, Overdue Notice Reports, Policy Contracts, Returned Check
Notices, and Agent’s Statement of Accounts and post on the bulletin board the Daily Production Report,
Back-ended Cases Report and Daily Collection Reports. To reiterate, petitioner was tasked to supervise
agents and managers assigned to his unit, the Metro North Region. It was Manulife who exercised the
power to assign and remove agents under his supervision."

DISSENTING OPINION

VELASCO, JR., J.:

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if Labor had
not first existed. Labor is superior to capital, and deserves much the higher consideration.

––Abraham Lincoln

Prefatory Statement

At the outset, it has to be made clear that the instant petition applies solely to petitioner Tongko with respect to his
relationship with Manulife as the latter’s Regional Manager of Metro North Region and not to ordinary underwriters of
different insurance companies claiming to be totaling 45,000 in the Philippines. In view of the facts and circumstances
peculiar only to Tongko’s case, the disposition in the instant petition is pro hac vice in line with the previous rulings of this
Court that the determination of an employer-employee relationship shall be on a case-to-case basis.1
There is, therefore, no reason to conclude that the November 7, 2008 Decision of this Court was meant to indiscriminately
classify all insurance agents as employees of their respective insurance companies. Nowhere in the Decision was such a
conclusion made or espoused. To reiterate, it was specifically stated in the Decision that Tongko, given his administrative
duties as a manager of Manulife, and not any other insurance agent in the Philippines, was an employee. As in every
case involving the determination of whether or not an employer-employee relationship obtains, it must be established in
each case that the alleged employer exercises control over the means and methods employed by the worker in achieving
a set objective. Only then can such relationship be said to exist.

In a Letter dated December 16, 2008, the Joint Foreign Chambers of the Philippines implored this Court to reverse its
November 7, 2008 Decision on the stated ground that it is "a case of judicial legislation that impairs the obligations of
commercial contracts and interferes with established business models and practices." The Chambers conclusion, sad to
state, was based on the erroneous premise that the Decision was a blanket declaration that all agents or underwriters are
considered employees of the insurance company.

The Philippine Life Insurance Association, Inc., through its then President Gregorio D. Mercado, also wrote a letter dated
January 12, 2009 reiterating the concerns of the Joint Foreign Chambers of the Philippines. In the letter, Mercado states:

Thus, with the recent Decision of the Honorable Supreme Court, generalizing the code of conduct as an indication of
control over the means and method of an employee, PLIA is alarmed that the floodgates would open to unscrupulous
claimants and leave PLIA’s member companies vulnerable to a multitude of law suits from agents who shall insist on
benefits that only employees enjoy. Such a scenario would certainly cripple PLIA’s member insurance companies, as their
time and resources would be devoted to fending off unscrupulous claims instead of focusing on improving themselves to
serve the interests of the public.

Mercado goes on to imply that the finality of the November 7, 2008 Decision would spell the end of the insurance industry.

The grim scenario depicted in Mercado’s letter and the unmistakable veiled threats implied therein are uncalled for.

The November 7, 2008 Decision, to reiterate, applies only to Tongko in light of the circumstances attendant in his case.
Certainly, his situation is unique from most other agents considering that he was promoted initially to Unit Manager, then
to Branch Manager and, eventually, Regional Manager. By this fact alone, the Decision cannot be applicable to all other
agents in the Philippines. Furthermore, the Decision was reached considering the totality of all relevant matters
underpinning and/or governing the professional relationship of Tongko and Manulife, not only the Code of Conduct, or
certain duties only. All the factors mentioned in the Decision contributed to the conclusion that at the time that Tongko was
dismissed, he was an employee of Manulife. And it will only be in the far off possibility that a completely identical case is
presented that the findings therein would apply.

Additionally, in line with the Court’s ruling in the November 7, 2008 Decision that Tongko became an employee after his
designation as a manager of Manulife, any backwages for illegal dismissal should only correspond to his income, bonuses
and other benefits that were appurtenant to his designation as a manager. Under Tongko’s Career Agent’s Agreement, he
was entitled to commissions, production bonus and persistency income. Thus, the basis for backwages would only be his
management overrides and other bonuses relative to his position as manager.

The Case

For the consideration of the Court is the Motion for Reconsideration dated July 28, 2010, filed by petitioner Gregorio V.
Tongko. Tongko seeks the reversal of our June 29, 2010 Resolution which dismissed the instant petition finding that
Tongko was not an employee of Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife). The Resolution reversed the
Court’s November 17, 2008 Decision.

The Facts

For clarity, the facts of the case are hereby reiterated:

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance business.
Renato A. Vergel De Dios (De Dios) was, during the period material, its President and Chief Executive Officer. Gregorio
V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent’s
Agreement2 (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed
or interpreted as creating an employer-employee relationship between the Company and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts issued by the Agent, money due or to become due to the
Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the
Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as
evidenced by an Official Receipt issued by the Company directly to the policyholder.

xxxx

14. TERMINATION
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by
giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall
be construed for any previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party
fifteen (15) days notice in writing. This Agreement shall similarly terminate forthwith upon the death of the Agent.

In cases of termination, including the Agent’s death, the Agent and/or his estate, executors or administrators, heirs,
assignees or successors-in-interest, as the case may be, shall remain liable to the Company for all the Agent’s obligations
and indebtedness due the Company arising from law or this Agreement.

In 1983, Tongko was named as a Unit Manager in Manulife’s Sales Agency Organization. In 1990, he became a Branch
Manager. He was thereafter promoted to Regional Manager. As the Court of Appeals (CA) found, Tongko’s gross
earnings from his work at Manulife as a Regional Manager, consisting of commissions, persistency income, and
management overrides, may be summarized as follows:

January to December 10, 2002 - P 865,096.07

2001 - 6,214,737.11

2000 - 8,003,180.38

1999 - 6,797,814.05

1998 - 4,805,166.34

1997 - 2,822,620.003

The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional sales
management level. Relative thereto, De Dios addressed a letter dated November 6, 2001 4 to Tongko regarding an
October 18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:

The first step to transforming Manulife into a big league player has been very clear - to increase the number of agents to
at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined
the organization. Since then, however, substantial changes have taken place in the organization, as these have been
influenced by developments both from within and without the company.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’ meeting
earlier last month when Kevin O’Connor, SVP - Agency, took to the floor to determine from our senior agency leaders
what more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where
evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today,
continues to remain one of the laggards in this area.

While discussions, in general, were positive other than for certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management,
were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-
one), it was not clear that we were proceeding in the same direction.

Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings
you reiterated certain views, the validity of which we challenged and subsequently found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused
as to the directions the company was taking. For this reason, I sought a meeting with everyone in your management
team, including you, to clear the air, so to speak.

This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting
held at the 7/F Conference room last 18 October.

xxxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction
that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution
company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you
proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency
growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be
easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you
feel ‘may not be your cup of tea".
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The
above could solve this problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North.
I will hold you solely responsible for meeting the objectives of these remaining groups.

xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you.
But you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We
are meeting tough challenges next year and I would want everybody on board. Any resistance or holding back by anyone
will be dealt with accordingly.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, 5 terminating Tongko’s services, thus:

It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between
yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Management’s avowed agency growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now
issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the National Labor Relations Commission (NLRC)
against Manulife for illegal dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor
Arbiter Marita V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios gave him specific
directives on how to manage his area of responsibility in the latter’s letter dated November 6, 2001. He further claimed
that Manulife exercised control over him as follows:

Such control was certainly exercised by respondents over the herein complainant. It was Manulife who hired, promoted
and gave various assignments to him. It was the company who set objectives as regards productions, recruitment, training
programs and all activities pertaining to its business. Manulife prescribed a Code of Conduct which would govern in
minute detail all aspects of the work to be undertaken by employees, including the sales process, the underwriting
process, signatures, handling of money, policyholder service, confidentiality, legal and regulatory requirements and
grounds for termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to who was in
control. The subsequent termination letter dated 18 December 2001 again established in no uncertain terms the authority
of the herein respondents to control the employees of Manulife. Plainly, the respondents wielded control not only as to the
ends to be achieved but the ways and means of attaining such ends. 6

Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)7 and Great Pacific Life
Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.

Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He also cited the
Manulife Code of Conduct by which his actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003, 9 in which it alleged that Tongko is
not its employee, and that it did not exercise "control" over him. Thus, Manulife claimed that the NLRC has no jurisdiction
over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an employer-
employee relationship. Padolina found that applying the four-fold test in determining the existence of an employer-
employee relationship, none was found in the instant case. The dispositive portion thereof states:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of
jurisdiction, there being no employer-employee relationship between the parties.

SO ORDERED.

Tongko appealed the arbiter’s Decision to the NLRC which reversed the same and rendered a Decision dated September
27, 2004 finding Tongko to have been illegally dismissed.

The NLRC’s First Division, while finding an employer-employee relationship between Manulife and Tongko applying the
four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over Tongko as
evidenced by the letter dated November 6, 2001 of De Dios and wrote:

The above-mentioned letter shows the extent to which respondents controlled complainant’s manner and means of doing
his work and achieving the goals set by respondents. The letter shows how respondents concerned themselves with the
manner complainant managed the Metro North Region as Regional Sales Manager, to the point that respondents even
had a say on how complainant interacted with other individuals in the Metro North Region. The letter is in fact replete with
comments and criticisms on how complainant carried out his functions as Regional Sales Manager.

More importantly, the letter contains an abundance of directives or orders that are intended to directly affect complainant’s
authority and manner of carrying out his functions as Regional Sales Manager. 10

Additionally, the NLRC also ruled that:

Further evidence of [respondents’] control over complainant can be found in the records of the case. [These] are the
different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife
Financial Code of Conduct Agreement, which serve as the foundations of the power of control wielded by respondents
over complainant that is further manifested in the different administrative and other tasks that he is required to perform.
These codes of conduct corroborate and reinforce the display of respondents’ power of control in their 06 November 2001
Letter to complainant.11

The fallo of the September 27, 2004 NLRC Decision reads:

WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find complainant to be
a regular employee of respondent Manulife and that he was illegally dismissed from employment by respondents.

In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as above set forth.
Respondent Manulife is further ordered to pay complainant backwages from the time he was dismissed on 02 January
2002 up to the finality of this decision also as indicated above.

xxxx

All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in a
Resolution dated December 16, 2004.12

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued the assailed
Decision dated March 29, 2005, finding the absence of an employer-employee relationship between the parties and
deeming the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again applying the four-fold
test. The CA found that Manulife did not exercise control over Tongko that would render the latter an employee of
Manulife. The dispositive portion reads:

WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly
GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the National
Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are hereby
ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is hereby
REINSTATED.

Hence, Tongko filed a petition with this Court raising the following issues: (1) whether Tongko was an employee of
Manulife; and (2) whether Tongko was illegally dismissed.

In the November 17, 2010 Decision, this Court ruled that Tongko was an employee of Manulife and was illegally
dismissed. Applying the four-fold test, the Court found sufficient indicia of employment to conclude that Manulife and
Tongko had an employer-employee relationship. Thus, the Court further ruled that because there was no just or valid
cause for the termination of Tongko’s employment, he was therefore illegally dismissed.

Manulife appealed such Decision to the Court en banc which reversed the same in a June 29, 2010 Resolution. In the
Resolution, the Court used the intent of the parties as well as the established insurance industry practices to conclude that
the control required by the labor code to be present to establish an employer-employee relationship between Manulife and
Tongko was not present. It was further ruled that there was no other concrete evidence to establish that Tongko was an
employee of Manulife.

Thereafter, Tongko filed the instant motion for reconsideration of the Resolution.

The motion for reconsideration must be granted.

Labor laws, not the Insurance Code

or the Corporation Code, shall prevail in the instant case

Manufacturers Life Insurance Co. (Phils.), Inc. is part of a Canada-based multinational financial company claiming to be
the largest life insurance company in North America having 3,000 employees and 25,000 agents. 13 On the other hand,
Tongko is but a single Filipino agent/manager of Manulife. It is but just, it is but right, that the Court, interpret the
relationship between Tongko and Manulife as one of employment under labor laws and to uphold his constitutionally
protected rights as an employee, to security of tenure and an entitlement to monetary award should such right is infringed.
And this constitutionally-guaranteed right cannot be diminished, let alone undermined, by a mere contract, or however the
parties choose to call their true working relationship. 14 Neither, to stress, may the employer-employee relationship, if one
exists, be subverted by the manner and form of remuneration or earnings being paid or received, 15 i.e., fixed or on
commission basis, or the method of calculating the same.
The controversy in this case arose from the fact that, initially, Tongko executed a Career Agent’s Agreement whereby he
became an agent of Manulife. As such agent, Manulife did not control the means and methods for accomplishing his
assigned objective of canvassing life insurance applications. It is, therefore submitted that when he was exclusively an
agent of Manulife, he was not the latter’s employee.

The evidence, however, will reveal that he was later on promoted to the positions of unit, branch and regional manager.
The evidence will also show that he, similar to his colleagues, was assigned other duties and responsibilities aside from
those enumerated under the Agreement.

And there lies the crux of the problem. There is now an ambiguity as to the true relationship between Manulife and
Tongko. Moreover, it is now unclear as to what law, labor laws, corporation code, insurance code or civil code, should be
applied to the two parties.

Jurisprudence teaches that, given the doubt as to the applicable law in the instant case, labor law shall govern.

The Constitution acknowledges the reality that capital and labor often do not deal on equal grounds, requiring the state to
protect labor from abuse. To level the playing field, the framers of the Constitution incorporated two (2) provisions therein
to safeguard the employee’s right to security of tenure and enhance protection to employees’ rights and welfare:

ARTICLE II

DECLARATION OF PRINCIPLES
AND STATE POLICIES PRINCIPLES
STATE POLICIES

Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote
their welfare.

ARTICLE XIII

SOCIAL JUSTICE AND HUMAN RIGHTS LABOR

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law. (Emphasis supplied.)

In the Civil Code, it is provided in Articles 1700 and 1702 thereof that:

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

Article 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer. (Emphasis supplied.)

Verily, the mandate of this Court is to ensure that the provisions of the Constitution are carried out. The Court has the
responsibility to ensure that the rights of labor, as guaranteed by the Constitution, are actually enjoyed by the workers.
Thus, in several cases, the Court has repeatedly resolved doubts as to the relationship between parties as that of
employment, that which is most favorable to labor.

The Court, in a slew of cases, has consistently ruled that when there is doubt as to the law to be applied in a case with an
allegation of an employer-employee relationship, labor laws and jurisprudence shall apply. Consider:

1. In Social Security System v. Court of Appeals,16 the Court was faced with the conflicting claims of the workers and the
proprietor on the issue of whether an employer-employee relationship exists. Romeo Carreon and Quality Tobacco
Corporation (QTC) entered into an agreement whereby Carreon would allegedly purchase and sell QTC’s products.
Carreon claims that he was an employee of QTC while QTC claims that Carreon is an independent contractor. In the
agreement, Carreon was referred to as a vendee of QTC’s products. Their relationship would therefore be covered by the
Civil Code provisions on sales.17 However, in view of the complaint of Carreon praying for SSS benefits on the claim that
he is an employee of QTC, there arose the question as to which law should apply––the Civil Code or the Labor Code and
jurisprudence. The Court applied the jurisprudence in labor cases and used the four-fold test to determine the existence of
an employer-employee relationship. The Court stated:

The issue raised by the petitioner before this Court is the very same issue resolved by the Court of Appeals-that is,
whether or not Romeo Carreon is an employee or an independent contractor under the contract aforequoted. Corollary
thereto the question as to whether or not the Mafinco case is applicable to this case was raised by the parties.

The Court took cognizance of the fact that the question of whether or not an employer-employee relationship exists in a
certain situation continues to bedevil the courts. Some businessmen with the aid of lawyers have tried to avoid the
bringing about of an employer-employee relationship in some of their enterprises because that juridical relation spawns
obligations connected with workmen’s compensation, social security, medicare, minimum wage, termination pay and
unionism.
For this reason, in order to put the issue at rest, this Court has laid down in a formidable line of decisions the elements to
be generally considered in determining the existence of an employer-employee relationship, as follows: a) selection and
engagement of the employee; b) the payment of wages; c) the power of dismissal; and d) the employer’s power to control
the employee with respect to the means and method by-which the work is to be accomplished. The last which is the so-
called "control test" is the most important element (Brotherhood Labor Unity Movement of the Phils. vs. Zamora, 147
SCRA 49 [1987]; Dy Ke Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading
Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs. Court of Appeals, 37 SCRA 579 [1971]).

Applying the control test, that is, whether the employer controls or has reserved the right to control the employee not only
as to the result of the work to be done but also as to the means and method by which the same is to be accomplished, the
question of whether or not there is an employer-employee relationship for purposes of the Social Security Act has been
settled in this jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where
the element of control is absent; where a person who works for another does so more or less at his own pleasure and is
not subject to definite hours or conditions of work, and in turn is compensated according to the result of his effort, the
relationship of employer-employee does not exist. (SSS vs. Court of Appeals, 30 SCRA 210 [1969]). (Emphasis supplied.)

2. In Cosmopolitan Funeral Homes, Inc. v. Maalat,18 Cosmopolitan Funeral Homes, Inc. engaged the services of Noli
Maalat as a "supervisor" to handle the solicitation of mortuary arrangements, sales and collections. Maalat was dimissed
after having committed violations of the company’s policies. He filed a complaint for illegal dismissal and nonpayment of
commissions. Cosmopolitan argues that there is no employer-employee relationship between it and Maalat, the latter
being an independent contractor. The Court ruled that:

In determining whether a person who performs work for another is the latter's employee or an independent contractor, the
prevailing test is the "right of control" test. Under this test, an employer-employee relationship exists where the person for
whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and
means to be used in reaching that end.

The Court did not consider the provisions of the Civil Code on a Contract for a Piece of Work 19 in determining the
relationship between the parties. Instead, it used the labor law concept, the control test, to determine such relationship.

3. The Court in Algon Engineering Construction Corporation v. National Labor Relations Commission20 did not consider
the Civil Code provisions on lease when it ruled upon the existence of an employer-employee relationship. In that case,
from March 1, 1983 to May 10, 1985, Algon was in the process of completing the Lucena Talacogon Project in Del Monte,
Talacogon, Agusan del Sur. Jose Espinosa’s house is located near that project site. Thus, throughout that same period of
time, Espinosa allowed petitioner Algon to use his house and the grounds adjacent thereto as a parking and storage place
for the latter’s heavy equipment. However, Espinosa also claims in addition thereto that there existed an employment
contract between himself and petitioner Algon which, he insisted, hired him as a watchman to guard the heavy equipment
parked in other leased house spaces in Libtong, Talacogon, Agusan del Sur. The Court ruled therein that:

No particular evidence is required to prove the existence of an employer-employee relationship. All that is necessary is to
show that the employer is capable of exercising control over the employee. In labor disputes, it suffices that there be a
casual connection between the claim asserted and the employer-employee relations.

The elements of an employer-employee relationship are: (1) selection and engagement of the employee; (2) payment of
wages; (3) power of dismissal; and (4) employer’s own power to control employee’s conduct. Control of the employee’s
conduct is commonly regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. In the case at bar, there is no doubt that petitioner exercises control over Espinosa’s
conduct, as shown by the fact that, rather than address the loss of batteries as a breach of the purported contract of
lease, the memorandum instead emphasized the company rules and regulations and the fact that Espinosa was "on duty"
at the time of the said loss. Moreover, the petitioner’s act of transferring Espinosa to the day shift clearly shows its
treatment of Espinosa as an employee, and not as a landlord. Thus, an employer-employee relationship exists where the
person for whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such an end. (Emphasis supplied.)

4. Even when faced with the contention that the relationship between two parties was in the nature of a lawyer-client
relationship, the Court, in Equitable Banking Corporation v. National Labor Relations Commission, 21 still employed the
control test, a strictly labor law concept, to determine the existence of an employer-employee relationship. There, Ricardo
L. Sadac was engaged in 1981 as Equitable’s Vice-President for the legal department and as its General Counsel. In
1989, nine (9) lawyers of the legal department issued a letter-petition to the chairperson of the board of the bank accusing
private respondent of abusive conduct, inefficiency, mismanagement, ineffectiveness and indecisiveness. Later, the
lawyers threatened to resign en masse if Sadac was not relieved as the head of the legal department. After a formal
investigation of the charges, Sadac was advised that he would be substituted as the bank’s legal counsel. Sadac charged
the bank with illegal dismissal. The bank in turn denied the existence of an employer-employee relationship between it
and Sadac. The Court stated in its Decision that:

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal, and (4) the power to
control the employee's conduct, with the control test generally assuming primacy in the overall consideration. The power
of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential, in other
words, for the employer to actually supervise the performance of duties of the employee; it is enough that the former has
the right to wield the power. (Emphasis supplied.)

5. In Lazaro v. Social Security Commission,22 Rosalina M. Laudato was a sales supervisor of Royal Star Marketing, the
proprietor of which was Angelito L. Lazaro. Laudato claimed that the company failed to report her and remit her
contributions as an employee, to the Social Security System (SSS). Denying that Laudato was a sales supervisor of Royal
Star Marketing, Lazaro claimed that the former was only a sales agent earning on a commission basis. He added that
Laudato did not maintain definite hours of work and therefore could not be considered as an employee of Royal Star
Marketing. The Court, in determining the true relationship of the parties, did not apply the provisions of the Civil Code on
agency. Rather, the labor law concept of the control test was applied to determine the relationship of the parties. The
Court ruled therein that:

Lazaro’s arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico, the
Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite
the fact that the compensation that the agents on commission received was not paid by the company but by the investor
or the person insured. The relevant factor remains, as stated earlier, whether the "employer" controls or has reserved the
right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished.

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee. In
Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a "supervisor on commission basis" who did not observe normal hours of
work. This Court declared that there was an employer-employee relationship, noting that "[the] supervisor, although
compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is
measured by the number of sales he makes."

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales
supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus
was subject to the control of management as to how she implements its policies and its end results. x x x (Emphasis
supplied.)

6. While in Dealco Farms, Inc. v. National Labor Relations Commission (5 th Division),23 the Court declared the workers as
employees of Dealco farms and not independent contractors. There, Albert Caban and Chiquito Bastida were hired by
Dealco as escorts or "comboys" for the transit of live cattle from General Santos City to Manila in 1993. Sometime 1999,
Caban and Bastida were summarily replaced. Thus, they filed a case for illegal dismissal. Dealco claimed that Caban and
Bastida were in fact independent contractors hired by the buyers of the cattle who arranged for the transport thereof to
Manila. The Court again did not take into consideration provisions of the Civil Code on Contracts for a Piece of Work and
instead used the four-fold test to determine the true nature of the parties’ relationship. The Court ruled:

Regrettably, upon an evaluation of the merits of the petition, we do not find cause to disturb the findings of the Labor
Arbiter, affirmed by the NLRC, which are supported by substantial evidence.

The well-entrenched rule is that factual findings of administrative or quasi-judicial bodies, which are deemed to have
acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality,
and bind the Court when supported by substantial evidence. Section 5, Rule 133 defines substantial evidence as "that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion."

Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in labor cases. We
may take cognizance of and resolve factual issues only when the findings of fact and conclusions of law of the Labor
Arbiter are inconsistent with those of the NLRC and the CA.

In the case at bench, both the Labor Arbiter and the NLRC were one in their conclusion that respondents were not
independent contractors, but employees of petitioner. In determining the existence of an employer-employee relationship
between the parties, both the Labor Arbiter and the NLRC examined and weighed the circumstances against the four-fold
test which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4)
the power to control the employees’ conduct, or the so-called "control test." Of the four, the power of control is the most
important element. More importantly, the control test merely calls for the existence of the right to control, and not
necessarily the exercise thereof.

xxxx

We reject petitioner’s self-serving contention. Having failed to substantiate its allegation on the relationship between the
parties, we stick to the settled rule in controversies between a laborer and his master that doubts reasonably arising from
the evidence should be resolved in the former’s favor. The policy is reflected in no less than the Constitution, Labor Code
and Civil Code. (Emphasis supplied.)

7. Similarly, in South Davao Development Company, Inc. v. Gamo, 24 the Court refused to apply the provisions of the Civil
Code on Contract for a Piece of Work to a copra maker contractor and instead used the control test to determine the
worker’s relationship with the company. South Davao Development Company was the operator of a coconut and mango
farm in San Isidro, Davao Oriental and Inawayan/Baracatan, Davao del Sur. Sometime in August 1963, the company
hired respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, Gamo was appointed as a copra maker
contractor. Ernesto Belleza, Carlos Rojas, Maximo Malinao were all employees in petitioner’s coconut farm, while
respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were assigned to petitioner’s mango farm.
All of the abovenamed respondents (copra workers) were later transferred by petitioner to Gamo as the latter’s
copraceros. The Court ruled in that case that the workers must be considered as employees of the company as the latter
exercised control over the workers as evidenced by its power to transfer the copra workers as its employees to that of
Gamo:

In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from
their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner
corporation put Gamo in charge of the copra workers although under a different payment scheme. Thus, it is clear that an
employer-employee relationship has existed between petitioner corporation and respondents since the beginning and
such relationship did not cease despite their reassignments and the change of payment scheme. (Emphasis supplied.)

8. While in Abante v. Lamadrid Bearing & Parts Corp.,25 despite the allegation that the worker was a commission
salesman, the Court still used the four-fold test to determine the existence of an employer-employee relationship. The
worker, Empermaco B. Abante, Jr., was employed by respondent company Lamadrid Bearing and Parts Corporation
sometime in June 1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of
Mindanao. Sometime in 2001, Abante was informed by his customers that Lamadrid had issued a letter informing them
that Abante was no longer their salesman. Thereafter, Abante filed a case against Lamadrid for illegal dismissal.
Lamadrid, for its part, argued that Abante was not its employee but rather a freelance salesman on commission basis.
The Court ruled therein:

We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an employee of
respondent corporation. To ascertain the existence of an employer-employee relationship, jurisprudence has invariably
applied the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the
presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four,
the last one is the most important. The so-called "control test" is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for whom the services are performed reserves the right to control
not only the end achieved, but also the manner and means to be used in reaching that end. (Emphasis supplied.)

Verily, based on the above-mentioned sample of numerous cases, the Court has invariably applied labor laws and
doctrines, particularly the four-fold and control test, over Civil Code provisions, to determine the relationship of parties
where an employer-employee relationship is alleged, without regard to the industry or otherwise alleged relationship of the
parties. The Court cannot now deviate from established precedents. The four-fold test must be used to determine whether
Tongko was an employee of Manulife or not, and not the Insurance Code or Civil Code as claimed by Manulife.

Using the Four-Fold Test, Manulife exercised control over Tongko

As a matter of long and settled jurisprudence, the following are the elements, constituting the four-fold test, usually
considered in determining the existence of an employer-employee relationship: (a) the selection of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the power to control the employee’s conduct, with the "control test"
being the most crucial26 or generally assuming primacy in the overall consideration.27

In Meteoro v. Creative Creatures, Inc.,28 the Court stated that in the determination of the existence of an employer-
employee relationship, any competent and relevant evidence may be considered, to wit:

To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship, there is need to
examine evidentiary matters. The following elements constitute the reliable yardstick to determine such relationship: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee’s conduct. There is no hard and fast rule designed to establish the aforesaid
elements. Any competent and relevant evidence to prove the relationship may be admitted. Identification cards, cash
vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status. These pieces of evidence are readily available, as they are in the
possession of either the employee or the employer; and they may easily be looked into by the labor inspector (in the
course of inspection) when confronted with the question of the existence or absence of an employer-employee
relationship.

Some businessmen, however, try to avoid an employer-employee relationship from arising in their enterprises, because
that juridical relation spawns obligations connected with workmen’s compensation, social security, medicare, termination
pay, and unionism. Thus, in addition to the above-mentioned documents, other pieces of evidence are considered in
ascertaining the true nature of the parties’ relationship. This is especially true in determining the element of "control." The
most important index of an employer-employee relationship is the so-called "control test," that is, whether the employer
controls or has reserved the right to control the employee, not only as to the result of the work to be done, but also as to
the means and methods by which the same is to be accomplished. (Emphasis supplied.)

The NLRC, taking stock of the affidavits of petitioner’s fellow insurance managers therein detailing their duties, had
concluded that petitioner was an employee of Manulife. Indeed, the duties, responsibilities and undertakings of these
insurance managers are strikingly similar to those of Ernesto and Rodrigo Ruiz, as set forth in the Decision inGreat Pacific
Life Assurance Corporation v. NLRC.29 There, the Court decreed that the brothers Ruiz were employees of Grepalife. The
reasons behind the declaration need no belaboring. Suffice it to state that vis-à-vis the Ruizes in Grepalife, Manulife had
control of the means and methods employed by the petitioner in the performance of his work as a manager of Manulife.
Following the stare decisis rule, there seems to be no rhyme or reason to withhold from herein petitioner the benefits
accruing from an employer-employee relationship.

Thus, in the Court’s November 7, 2008 Decision, finding that Tongko was Manulife’s employee, it was ruled that:

More importantly, Manulife’s evidence establishes the fact that Tongko was tasked to perform administrative duties that
establishes his employment with Manulife.

In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached affidavits of its
agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not perform any administrative
functions. An examination of these affidavits would, however, prove the opposite.

In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of Manulife, stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager (RSM) for
Metro South Region pursuant to an Agency Contract. As such RSM, I have the following functions:

1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

 3. Regularly meet with, and coordinate activities of agents affiliated to my region.

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 2003 that:

3. In January 1997, I was assigned as a Branch Manager (BM) of Manulife for the Metro North Sector;

4. As such BM, I render the following services:

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of other commission
agents;

d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and
recruitment goals; and

e. Sell the various products of Manulife to my personal clients.

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 2003 that:

3. In 1977, I was assigned as a Unit Manager (UM) of North Peaks Unit, North Star Branch, Metro North Region;

4. As such UM, I render the following services:

a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products
and who will be part of my Unit;

b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities, making
sure that their respective sales targets are met;

c. To conduct periodic training sessions for my agents to further enhance their sales skills.

d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one
evaluation and analysis of particular accounts.

e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales activities
and encouraging them to be involved in company and industry activities.

f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the
LUCAP (Life Underwriters Association of the Philippines).

A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific Life
Assurance Corporation reveals a striking similarity that would more than support a similar finding as in that case. Thus,
there was an employer-employee relationship between the parties. (Emphasis supplied.)

In comparison, in Great Pacific Life Corporation v. NLRC (Grepalife), 30 the Court stated:

Furthermore, it cannot be gainsaid that Grepalife had control over private respondents’ performance as well as the result
of their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company
practically dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly
account, record and document the company’s funds spot-check and audit the work of the zone supervisors, conserve the
company’s business in the district through ‘reinstatements’, follow up the submission of weekly remittance reports of the
debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of
district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a
zone supervisor must direct and supervise the sales activities of the debit agents under him, conserve company property
through "reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of debit
agents, and insure proper documentation of sales and collections by the debit agents. (Emphasis supplied.)

A close scrutiny of the duties and responsibilities of the Manulife managers with those of the Ruizes would show a striking
similarity that cannot be denied. More so, taking the aggregate of the evidence presented in this case, a just and objective
mind cannot but conclude that, as in Grepalife, the Manulife managers are also employees of Manulife.

In Equitable Banking Corporation,31 the Court ruled:

The NLRC, in the instant case, based its finding that there existed an employer-employee relationship between petitioner
bank and private respondent on these factual settings:

"It was complainant’s understanding with respondent Morales that he would be appointed and assigned to the Legal
Department as vice President with the same salary, privileges and benefits granted by the respondent bank to its ranking
senior officers. He was not hired as lawyer on a retainership basis but as an officer of the bank.
"Thus, the complainant was given an appointment as Vice President, Legal Department, effective August 1, 1981, with a
monthly salary of P8,000.00, monthly allowance of P4,500.00, and the usual two months Christmas bonus based on basic
salary likewise enjoyed by the other officers of the bank.

"Then, as part of the ongoing organization of the Legal Department, the position of General Counsel of the bank was
created and extended to the complainant. In addition to his duties as Vice President of the bank, the complainant’s duties
and responsibilities were so defined as to prove that he was a bank officer working under the supervision of the President
and the Board of Directors of the respondent bank.

"In his more than eight years employment with the respondent bank, the complainant was given the usual payslips to
evidence his monthly gross compensation. The respondent bank, as employer, withheld taxes due to the Bureau of
Internal Revenue from the complainant’s salary as employee. Moreover, the bank enrolled the complainant as its
employee under the Social Security System and Medicare programs. The complainant contributed to the bank
Employees’ Provident Fund.

"When the respondent bank changed its payroll accounting system in September 1988 by appointing SGV & Co. to
handle it and Far East Bank & Trust Company to pay the salaries and other benefits of Equitable Banking Corporation
officers, the complainant was included as one of corporate officers. Specifically, that there were eleven Far East Bank and
Trust Company credit memos starting October 13, 1988 up to September 13, 1989 received by the complainant from
FBTC crediting his salary and Christmas bonus to his account with FBTC per instruction of the respondent bank.

"In as much as the complainant and the lawyers in the Legal Department were receiving salaries and other benefits as
other bank officers and employees, the attorney’s fees, documentary and notarial fees earned in the exercise of their
profession as in-house lawyers were not given to or even shared with them, instead all were credited to the income of the
bank. In 1987 and 1988, the complainant and his subordinate lawyers were able to generate by way of attorney’s fees,
documentary and notarial fees a total income of P973,028.00 for the bank(’s) benefit. In turn, the respondent bank
shouldered the professional tax and Integrated Bar of the Philippines dues of the complainant and his subordinate
lawyers. Further proofs that there existed employer-employee relationship between the respondent bank and the
complainant are the following, to wit:

"(1) Complainant’s monthly attendance, like those of other bank officers, was recorded by the Chief Security
Officer and reported to the Office of the President with copy of the report furnished to the bank Personnel and
HRD Department.

"(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts covering legal
services of lawyers to be retained by the respondent bank for its branches on periodical retainership basis.

"(3) Complainant participated as part of management in annual Management Planning Conferences which started
in 1986 on objective-setting and long-range planning in response to the requirement of the rapidly changing
environment.

"(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified senior officer of
the bank.

"(5) Respondent bank since 1982 continuously reported and included the complainant as one of its senior officers
in its statements of financial condition holding the position of Vice President. These bank statements have been
distributed and circularized to the public, including bank clients and government entities.

"(6) Complainant, like other bank officers, prepared his biographical data for submission to the Central Bank after
his assumption of duties in 1981. Thereafter, and pursuant to the regulations of the Central Bank, he has been
required to update annually his biographical data."

It would virtually be foolhardy to so challenge the NLRC as having committed grave abuse of discretion in coming up with
its above findings. Just to the contrary, NLRC appears to have been rather exhaustive in its examination of this particular
question (existence or absence of an employer-employee relationship between the parties). Substantial evidence, which
is the quantum of evidence required to establish a fact in cases before administrative and quasi-judicial bodies, connotes
merely that amount of relevant evidence which a reasonable mind might accept to be adequate in justifying a conclusion.
(Emphasis supplied.)

Here, by virtue of designating Tongko initially as a Unit Manager and later on as a Regional Manager, Manulife must be
deemed as having considered Tongko as an officer of the company. Furthermore, Tongko has been involved in Manulife’s
manpower development programs. Thus, just as in Equitable Banking Corporation, Tongko must be considered as an
employee of Manulife.

While in Aboitiz Haulers, Inc. v. Damapatoi,32 Dimapatoi and several other individuals worked as checkers in Mega
Warehouse, which Aboitiz Haulers, Inc. owned. Aboitiz claimed that the complaining workers are not its employees, but
rather, of Grigio Security Agency and General Services (Grigio), a manpower agency that supplies security guards,
checkers and stuffers. It allegedly entered into a Written Contract of Service with Grigio in 1994. The workers’ services
were terminated by Aboitiz on the pretext that its contract with Grigio had already expired. In this case, the Court found
that Aboitiz was the employer of the workers exercising control over them:

Petitioner’s allegation that Grigio retained control over the respondents by providing supervisors to monitor the
performance of the respondents cannot be given much weight. Instead of exercising their own discretion or referring the
matter to the officers of Grigio, Grigio’s supervisors were obligated to refer to petitioner’s supervisors any discrepancy in
the performance of the respondents with their specified duties. The Written Contract of Services provided that:

5.c. That the GRIGIO personnel, particularly the supervisors, shall perform the following:
The Supervisor for the warehouse operation shall monitor the performance and productivity of all the checkers, jacklifters,
stuffers/strippers, forklift operators, drivers, and helpers. He shall coordinate with AHI’s supervisors regarding the
operations at the Warehouse to ensure safety at the place of work.

He shall see to it that the cargoes are not overlanded, shortlanded, delivered at a wrong destination, or misdelivered to
consignee’s port of destination. Any discrepancy shall be reported immediately to AHI’s Logistic Manager, Mr. Andy
Valeroso.

The control exercised by petitioner’s supervisors over the performance of respondents was to such extent that petitioner’s
Warehouse Supervisor, Roger Borromeo, confidently gave an evaluation of the performance of respondent Monaorai
Dimapatoi, who likewise felt obliged to obtain such Certification from Borromeo.

Petitioner’s control over the respondents is evident. And it is this right to control the employee, not only as to the result of
the work to be done, but also as to the means and methods by which the same is to be accomplished, that constitutes the
most important index of the existence of the employer-employee relationship. (Emphasis supplied.)

With this case, it becomes apparent that supervision and monitoring is sufficient to establish control that is evidence of an
employer-employee relationship. Such control would, therefore, be even more evident in the instant case considering that
Tongko himself was tasked to supervise and monitor the activities of Manulife agents. Moreover, it may be gleaned from
the records of the case that Tongko reported to Manulife with regard the performance of his agents. It was not, as if,
Tongko was left alone to supervise, and perhaps, discipline such agents. Tongko must be deemed as an employee of
Manulife.

In fact, in Lazaro,33 the Court ruled that a Sales Supervisor was considered an employee as she "oversaw and supervised
the sales agents of the company":

Lazaro’s arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico, the
Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite
the fact that the compensation that the agents on commission received was not paid by the company but by the investor
or the person insured. The relevant factor remains, as stated earlier, whether the "employer" controls or has reserved the
right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished.

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee. In
Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a "supervisor on commission basis" who did not observe normal hours of
work. This Court declared that there was an employer-employee relationship, noting that "[the] supervisor, although
compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is
measured by the number of sales he makes."

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales
supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus
was subject to the control of management as to how she implements its policies and its end results. x x x

The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial evidence. The SSC
examined the cash vouchers issued by Royal Star to Laudato, calling cards of Royal Star denominating Laudato as a
"Sales Supervisor" of the company, and Certificates of Appreciation issued by Royal Star to Laudato in recognition of her
unselfish and loyal efforts in promoting the company. On the other hand, Lazaro has failed to present any convincing
contrary evidence, relying instead on his bare assertions. The Court of Appeals correctly ruled that petitioner has not
sufficiently shown that the SSC’s ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita Lazaro, General
Manager of Royal Star, directing that no commissions were to be given on all "main office" sales from walk-in customers
and enjoining salesmen and sales supervisors to observe this new policy. The Memorandum evinces the fact that,
contrary to Lazaro’s claim, Royal Star exercised control over its sales supervisors or agents such as Laudato as to the
means and methods through which these personnel performed their work. (Emphasis supplied.)

Tongko was held out as an officer of Manulife by Manulife itself, being tagged as its Manager. He was tasked to supervise
the insurance agents of Manulife. Clearly, the Lazaro case must apply to Tongko and he must be considered an employee
of Manulife.

Furthermore, the letter of De Dios itself also contained several indicia of control. To reiterate, it was stated in the letter
that:

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction
that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution
company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you
proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency
growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be
easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you
feel "may not be your cup of tea".

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The
above could solve this problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North.
I will hold you solely responsible for meeting the objectives of these remaining groups. (Emphasis supplied.)

The goal of Manulife was to become an agency-driven insurance company. If Tongko were indeed not an employee of
Manulife, the company would not set the means and methods to achieve such goal. As long as Tongko was able to recruit
the set number of agents, there would be no reason for Manulife to terminate his services as an independent contractor.
However, that is not the case here. It may be gleaned from the letter that De Dios is directing Tongko to clamor more
actively his peers and his agents to recruit other agents. It was not sufficient that Tongko, by himself, recruit agents. This
directive certainly shows that Manulife sought to prescribe the means and methods to achieve its goal.

De Dios further ordered Tongko to hire at his expense an assistant on whom he "can unload you of much of the routine
tasks which can be easily delegated." There is no other way to classify this order but as an intrusion into the means and
methods of achieving the company’s goals.

In the letter, Tongko was also informed that his area of responsibility was going to be reduced. In Megascope General
Services v. National Labor Relations Commission, 34 between February 15, 1977 and January 1, 1989, petitioner
contracted the services of several individuals as gardeners, helpers and maintenance workers. These workers were
deployed at the National Power Corporation in Bagac, Bataan. Except for Gener J. del Rosario whose employment ended
on April 30, 1989, the work of the other workers ceased on January 31, 1991. Consequently, private respondents filed a
complaint for illegal dismissal, underpayment of salaries, nonpayment of five-day service incentive leave credits and
holiday pay against petitioner with the NLRC. The Court ruled therein that the company exercised control over the workers
that would establish an employer-employee relationship when it reassigned the workers from one workplace to another:

Private respondents were selected and hired by petitioner which assigned them to the NPC housing village in Bagac and
in Km. 168, Morong, Bataan. They drew their salaries from petitioner which eventually dismissed them. Petitioner’s control
over private respondents was manifest in its power to assign and pull them out of clients at its own discretion. Power of
control refers merely to the existence of the power and not to the actual exercise thereof. It is not essential for the
employer to actually supervise the performance of duties of the employee. It is enough that the former has the right to
wield the power.

In South Davao Development Company, Inc.,35 the Court ruled that the workers must be considered as employees of the
company as the latter exercised control over the means and methods employed by the workers to achieve their objective,
as evidenced by its power to transfer the copra workers as its employees to that of Gamo:

In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from
their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner
corporation put Gamo in charge of the copra workers although under a different payment scheme. Thus, it is clear that an
employer-employee relationship has existed between petitioner corporation and respondents since the beginning and
such relationship did not cease despite their reassignments and the change of payment scheme.

Similarly, in the instant case, by limiting the area of responsibility of Tongko, this is akin to a transfer or reassignment, an
exercise of control by Manulife over Tongko that must necessarily determine the existence of an employer-employee
relationship.

On the same issue, Justice Carpio-Morales added in her Dissenting Opinion to the June 29, 2010 Resolution that:

More significantly, in the succeeding Insular Life case, the Court found the following indicators material in finding the
presence of control in cases involving insurance managers:

Exclusivity of service, control of assignments and removal of agents under private respondent’s unit, collection of
premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but
hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the
conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner. x x x

The ponencia concludes that "[a]ll these are obviously absent" in petitioner’s case. The facts show otherwise, however.
On top of the exclusive service rendered to respondent, which AFP Mutual Benefit Association, Inc. v. NLRC instructs to
be not controlling, other factors were present. Petitioner established no agency of his own as the Metro North Region to
which he was assigned remained intact even after his ties with respondent were severed. Respondent provided and
furnished company facilities, equipments and materials for petitioner at respondent’s Makati office. Respondent’s control
of assignments was evident from its act of removing the North Star Branch from petitioner’s scope of the Metro North
Region, on which a "memo to spell this matter out in greater detail" was advised to be issued shortly thereafter.
Respondent reserved to impose other improvements in the region after manifesting its intention to closely follow the
region. Respondent’s managers, like petitioner, could only refer and recommend to respondent prospective agents who
would be part of their respective units. In other words, respondent had the last say on the composition and structure of the
sales unit or region of petitioner. Respondent, in fact, even devised the deployment of an Agency Development Officer in
the region to "contribute towards the manpower development work x x x as part of our agency growth campaign."

Such an arrangement leads to no other conclusion than that respondent exercised the type of control of an employer,
thereby wiping away the perception that petitioner was only a "lead agent" as viewed by the ponencia. Even respondent
sees otherwise when it rebuked petitioner that "[y]ou (petitioner) may have excelled in the past as an agent but, to this
date, you still carry the mindset of a senior agent." Insofar as his management functions were concerned, petitioner was
no longer considered a senior agent.

Furthermore, while this Court has already ruled that Article 280 of the Labor Code may not be used to prove the existence
of an employer-employee relationship when the same is denied,36 the fact that the work of the alleged independent
contractor is usually necessary or desirable in the usual business or trade of the employer would establish a management
structure that would mean that Tongko was Manulife’s employee.

Such element of control, however, was only present in the administrative duties imposed upon Tongko when he was a
manager of Manulife. The Agreement, as well as other the evidence presented, does not show the control necessary to
establish an employer-employee relationship while Tongko was just an agent of Manulife. Hence, it is emphasized that it
was only upon the imposition of such administrative duties that Tongko was an employee of Manulife and only the
consequent change in his remunerations should be considered as his salary. This would consist of his persistency income
and management overrides only and not his commissions as an agent.

The majority would seem to suggest that the notion of "control" as understood in the Labor Code and as applied in labor
relations cases differs from the concept of "control" that governs the relationship between an insurance company and its
agents. In Grepalife and in the earlier Insular life Assurance Co. Ltd. v. NLRC (4th Division) (Insular Life),37 it was distinctly
noted that the Court did not posit the dichotomy presently parlayed by the majority. Consider the following excerpts
from Insular Life:

Exclusivity of service, control of assignments and removal of agents under private respondent’s unit, collection of
premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but
hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the
conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner.

Similarly, Justice Carpio-Morales, in the same Dissenting Opinion, wrote:

The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does
not bar the application of the Labor Code with regard to labor standards and labor relations.

It bears pointing out that Tongko cannot be considered as an independent contractor of Manulife. There is no evidence to
establish such a scenario. In Television and Production Exponents, Inc. v. Servaña, 38 the Court enumerates the
requirements for a worker to be considered an independent contractor:

Aside from possessing substantial capital or investment, a legitimate job contractor or subcontractor carries on a distinct
and independent business and undertakes to perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, and free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof. TAPE failed to establish that
respondent is an independent contractor. As found by the Court of Appeals:

We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is indeed an
independent contractor. None of the above conditions exist in the case at bar. Private respondents failed to show that
petitioner has substantial capital or investment to be qualified as an independent contractor. They likewise failed to
present a written contract which specifies the performance of a specified piece of work, the nature and extent of the work
and the term and duration of the relationship between herein petitioner and private respondent TAPE.

Here, the records are bereft of any evidence to establish that Tongko had substantial capital or investment to be qualified
as an independent contractor.

Tongko being allowed the privilege to canvas

insurance applications is not contrary to his employment status

The majority described petitioner as a lead insurance agent, at best, the change in his designation––from unit manager to
branch manager and then to regional sales manager––being merely reflective of the increase in the number of agents
under his guidance as well as the increase in the area of operation. Tongko, so the majority suggests, never rose to the
level of Manulife’s employee, as he did not even present copies of his managerial appointment to prove the fact that his
agency relationship changed in the sense that Manulife controlled the means and methods of his work. The majority
posits that even though the other managers of Manulife admitted to having duties and responsibilities other than those
contained in a Career Agents Agreement, Tongko could not have been anything other than an agent.

With due respect, I beg to disagree with this posture.

It may be stated, as a general proposition, that an insurance agent––who usually sells insurance at his convenience
following his own selling methods and who, for the most part, is governed by a set of rules 39 the company promulgates to
guide its commission agents in selling its policies that they may not run afoul of the law––is not an employee. But as
explained for reasons stated in my Dissent to the June 29, 2010 Resolution, Manulife, upon the petitioner’s appointment
as manager, exercised effective control not only over the results of his work, but also over the means and methods by
which it is to be accomplished. For sure, petitioner, while acting as Manulife’s unit or branch manager, was allowed to sell
insurance policies. And there is nothing absurd, let alone novel about an employee of an insurance company being given
the privilege to solicit insurance.

In two (2) cases, the Court has already ruled that an individual may be an employee of an insurance agency while
concurrently being allowed to sell insurance policies for the same company. In the Insular Life case, 40 Insular Assurance
Co., Ltd. (Insular) entered into an agency contract with Pantaleon de los Reyes authorizing the latter to solicit within the
Philippines applications for life insurance and annuities for which he would be paid compensation in the form of
commissions. Later, on March 1, 1993, the same parties entered into another contract where de los Reyes was appointed
as Acting Unit Manager. The duties and responsibilities of de los Reyes included the recruitment, training, organization
and development within his designated territory of a sufficient number of qualified, competent and trustworthy
underwriters, and to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new
business and in the furtherance of the agency’s assigned goals. We also stated that:

"Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the company’s conservation
program, i.e., preservation and maintenance of existing insurance policies, and to accept moneys duly receipted on
agent’s receipts provided the same were turned over to the company. As long as he was unit manager in an acting
capacity, De los Reyes was prohibited from working for other life insurance companies or with the government. He could
not also accept a managerial or supervisory position in any firm doing business in the Philippines without the written
consent of petitioner.

"Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18
November 1993 that his services were terminated effective 18 December 1993. On 7 March 1994 he filed a complaint
before the Labor Arbiter on the ground that he was illegally dismissed and that he was not paid his salaries and
separation pay." (Emphasis supplied.)

The fact that de los Reyes concurrently acted as an agent, selling insurance for Insular, and as an acting Unit Manager,
did not prevent the Court from ruling that de los Reyes was Insular’s employee.

Similarly, in the Grepalife case,41 the brothers Rodrigo and Ernesto Ruiz entered into agency agreements with Great
Pacific Life Assurance Corporation (Grepalife) for the former to sell the latter’s insurance policies. They started out as
trainee agents and later promoted to Zone Supervisor and District Manager, respectively. Describing the brother’s duties,
the Court ruled:

x x x Their work at the time of their dismissal as zone supervisor and district manager are necessary and desirable to the
usual business of the insurance company. They were entrusted with supervisory, sales and other functions to guard
Grepalife’s business interests and to bring in more clients to the company, and even with administrative functions to
ensure that all collections, reports and data are faithfully brought to the company.

Upon the foregoing factual setting, the Court ruled that the brothers Ruiz are employees of Grepalife, the latter exercising
control over the means and methods employed by them to reach their objective.

Clearly, the fact that an individual acts as an agent of an insurance company is irrelevant to the issue of whether the
individual is an employee of the company. The Court has already recognized the reality that an employee of an insurance
company may, at the same time, be an agent and allowed to act as such.

It may be, as asserted, that petitioner was unable to adduce in evidence copies of his management contracts specifying
his overall duties and responsibilities as manager. But then, a management contract, for purposes of determining the
relationship between the worker and the employer, is simply evidence to support a conclusion either way. Such document,
or the absence thereof, would not influence the conclusion on the issue of employment. The presence of a management
contract would merely simplify the issue as to the duties and responsibilities of the employee concerned as they would
then be clearly defined. Moreover, other evidence, like the letter of De Dios, may be considered to support the contention
that he was an employee of Manulife and prove his duties and responsibilities as such.

It may not be remiss to point out that Tongko was dismissed from his employment with Manulife for his failure to recruit
sufficient numbers of agents. As was explained in the November 7, 2008 Decision:

The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional sales
management level. Relative thereto, De Dios addressed a letter dated November 6, 2001 to Tongko regarding an October
18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:

The first step to transforming Manulife into a big league player has been very clear to increase the number of agents to at
least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the organization, as these have been
influenced by developments both from within and without the company.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, terminating Tongko’s services, thus:

It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between
yourself and SVP Kevin O’ Connor, some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Managements’ avowed agency growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now
issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.
And yet, the recruitment of agents is not among the duties and responsibilities that were designated to Tongko in the
Agreement. And while there may not have been another contract to supersede the Agreement that was presented as
evidence, the facts of the case bear out that Tongko was assigned various other duties and responsibilities that were not
included therein.

Manulife’s decision not to execute a management contract with petitioner was well within its prerogative. However, the
bare fact of Manulife and petitioner not having executed a management contract, if this were the case, did not reduce the
petitioner to a mere "lead agent." While there was perhaps no written management contract whence petitioner’s duties
and undertaking as unit/branch manager may easily be fleshed out prefatory to determining if an employer-employee
relationship with Manulife did exist, other evidence was adduced to show such duties and responsibilities. For one, in his
letter42 of November 6, 2001, respondent De Dios addressed petitioner as sales manager. And as I wrote in my Dissent to
the June 29, 2010 Resolution, it is difficult to imagine that Manulife did not issue promotional appointments to petitioner as
unit manager, branch manager, and eventually regional sales manager. Sound management practice simply requires an
appointment for any upward personnel movement, particularly when additional functions and the corresponding increase
in compensation are involved. Then, too, the adverted affidavits of the managers of Manulife as to the duties and
responsibilities of a unit manager, such as petitioner, point to the conclusion that these managers were employees of
Manulife, applying the "four-fold" test.

Any lingering doubt that petitioner was, by virtue of the management appointment, under Manulife’s employ should be laid
to rest by its virtual admission made in its Motion for Reconsideration dated December 3, 2008 that petitioner was
dismissed for a just and lawful cause: gross and habitual neglect of duties, inefficiency and willful disobedience of the
lawful orders of Manulife, to wit:

5.4. And yet, until the November 7 Decision, Respondents never thought for one moment that Petitioner was Manulife’s
employee. All the agreements executed with him, his flexible hours, his unsupervised choice of clients and method of
selling the products, his ability to take leave anytime, his separate business expenses, his own declarations in his tax
return, Respondent Manulife’s non-contribution of SSS premiums for him, his non-existence in the company plantilla,
Respondent Manulife’s withholding from him of creditable income tax, all consistently showed that Respondent Manulife’s
belief was singular in the existence of independent contractorship.

x x x x.

5.7. And yet, respondent Manulife did indeed substantially comply with the requirements for lawful dismissal of a regular
employee, assuming arguendo that petitioner is one. He was dismissed for a just and lawful cause – for gross
disobedience of the lawful orders of Respondent Manulife. Respondents presented an abundance of evidence
demonstrating how termination happened only after failure to meet company goals, after all remedial efforts to correct the
inefficiency of Petitioner failed and after Petitioner, as found by the CA, created dissension in Respondent Manulife when
he refused to accept the need for improvement in his area and continued to spread the bile of discontent and rebellion
that he had generated among the other agents.

Notably, in the termination letter of Manulife that was addressed to Tongko, no mention is made of any valid cause for the
termination of his services. No mention was made of any particular rule that Tongko violated leading to his separation.
Evidently, Tongko’s termination of employment was without cause. In an apparent about face, Manulife now claims that it
had a valid cause for the termination of Tongko’s services.

While the Court allows the presentation of inconsistent defenses, Manulife’s argumentation on this point would destroy its
position that Tongko is not its employee. Manulife is essentially pointing out the facts that would show that it abided by the
requirements of the Labor Code on the dismissal of an employee. Article 282, paragraphs (a) and (b), of the Labor Code
requires the presence of valid grounds for the legal dismissal of an employee:

Article 282. Termination by employer. – An employer may terminate an employment for any of the following just causes:

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

(b) Gross and habitual neglect by the employee of his duties;

Stated differently, such requirements are only required of employers with regard to their employees. Manulife had no
reason to comply with this provision of law if it did not consider Tongko as an employee. Therefore, the question is
begged as to why Manulife deemed it necessary to comply with such provision of law. There is an implied admission that
Tongko was Manulife’s employee.

The following excerpts appearing in my Dissent to the June 29, 2010 Resolution are self-explanatory:

At this juncture, the Court notes that Manulife has changed its stance on the issue of illegal dismissal. In its Position Paper
with Motion to Dismiss filed before the Labor Arbiter, in its Motion for Reconsideration (Re: Decision dated 27 September
2004) dated October 11, 2004 filed before the NLRC, and in its Comment dated August 5, 2006 filed before the Court,
Manulife had consistently assumed the posture that the dismissal of petitioner was a proper exercise of termination
proviso under the Career Agent’s Agreement. In this motion, however, Manulife, in a virtual acknowledgment of petitioner
being its employee, contends that the petitioner was "dismissed for a just and lawful cause – for gross and habitual
neglect of duties, inefficiency and willful disobedience of the lawful orders." Manulife adds that:

Respondents presented an abundance of evidence demonstrating how termination happened only after failure to meet
company goals, after all remedial efforts to correct the inefficiency of Petitioner failed and after Petitioner, as found by the
CA, created dissension in Respondent Manulife when he refused to accept the need for improvement in his area and
continued to spread the bile of discontent and rebellion that he had generated among the other agents.
In all, I submit that petitioner’s peculiar circumstances as unit manager, branch manager and ultimately regional sales
manager of Manulife, with the exclusivity feature of his engagement and his duties as such manager, indicate, at the very
least, a prima facie existence of an employer-employee relationship, following the control test. And given the bias of the
Constitution,43 Labor Code44 and Civil Code45 in favor of labor, any doubt as to the existence of such relationship
occasioned by the lack of evidence should be resolved in favor of petitioner and of employment. In this regard, I hark back
anew to what the Court emphatically said in Dealco Farms, Inc. v. National Labor Relations Commission:

Having failed to substantiate its allegations on the relationship between the parties, we stick to the settled rule in
controversies between a laborer and his master that doubts reasonably arising from the evidence should be resolved in
the former’s favor.46

As in Dealco Farms, the sympathies of the Court in this case should be easy and clear. The flip-flopping of the lower
tribunals and the change in the Court’s own stand lucidly show the ambiguity and doubt in the application of the labor laws
to the instant case. As such, the Court is duty-bound to resolve such doubts in favor of the employee, Tongko.

Tongko was illegally dismissed

Having established that Tongko was indeed an employee of Manulife when he was a manager thereof, the next question
is whether the dismissal was illegal.

This must be answered in the affirmative.

In the NLRC and the CA, Manulife alleged that Tongko was validly dismissed for gross and habitual neglect of duties,
inefficiency, as well as willful disobedience of the lawful orders of Manulife. Evidently, such dismissal was due to Tongko’s
failure to recruit the required number of agents from his area of responsibility.

To reiterate, two (2) of the alleged grounds for the dismissal of Tongko fall under Art. 282, paragraphs (a) and (b) of the
Labor Code:

Article 282. Termination by employer. – An employer may terminate an employment for any of the following just causes:

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

(c) Gross and habitual neglect by the employee of his duties;

On the other hand, inefficiency as a ground for termination of employment is equated with gross and habitual neglect, as
the Court explained in St. Luke’s Medical Center, Incorporated v. Fadrigo: 47

Gross inefficiency is closely related to gross neglect, for both involve specific acts of omission on the part of the employee
resulting in damage to the employer or to his business. As a just cause for an employee’s dismissal, inefficiency or
neglect of duty must not only be gross but also habitual. Thus, a single or isolated act of negligence does not constitute a
just cause for the dismissal of the employee. (Emphasis supplied.)

In cases of termination of employment for just causes, the Court has repeatedly held that the burden rests on the
employer to justify such dismissal. Art. 277, paragraph (b) of the Labor Code states:

Article. 277. Miscellaneous provisions. – x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article
283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any
decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or
legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission.
The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. The
Secretary of the Department of Labor and Employment may suspend the effects of the termination pending
resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor
and Employment before whom such dispute is pending that the termination may cause a serious labor dispute or
is in implementation of a mass lay-off. (Emphasis supplied.)

Thus, the Court has ruled in Caltex (Philippines), Inc. v. Agad48 that:

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. When there is
no showing of a clear, valid, and legal cause for the termination of employment, the law considers the matter a case of
illegal dismissal and the burden is on the employer to prove that the termination was for a valid or authorized cause.

The quantum of proof which the employer must discharge is substantial evidence. An employee’s dismissal due to serious
misconduct and loss of trust and confidence must be supported by substantial evidence. Substantial evidence is that
amount of relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds,
equally reasonable, might conceivably opine otherwise.

While in Lima Land, Inc. v. Cuevas,49 the Court ruled:

Well-settled is the rule that the essence of due process is simply an opportunity to be heard or, as applied to
administrative proceedings, an opportunity to explain one’s side or an opportunity to seek a reconsideration of the action
or ruling complained of.

Moreover, in dismissing an employee, the employer has the burden of proving that the former worker has been served
two notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other
to inform him of his employer’s decision to dismiss him. The first notice must state that dismissal is sought for the act or
omission charged against the employee, otherwise, the notice cannot be considered sufficient compliance with the rules.

The first written notice to be served on the employees should contain the specific causes or grounds for termination
against them, and a directive that the employees are given the opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a
period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they
will raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, were violated and/or which among the grounds under Article 282 is being charged
against the employees.

Manulife has failed to overcome such burden. Willful disobedience, to justify termination from employment, must comply
with the following requirements, as enunciated in Areno v. SkyCable PCC-Baguio,50 to wit:

As a just cause for dismissal of an employee under Article 282 of the Labor Code, willful disobedience of the employer’s
lawful orders requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, i.e.,
characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made
known to the employee, and must pertain to the duties which he had been engaged to discharge.

Neglect of duty, to be a valid ground for termination of employment must also conform to the following requirements, as
stated in Benjamin v. Amellar Corporation:51

It bears stressing in dismissing an employee for gross and habitual neglect of duties, the negligence should not merely be
gross. It should also be habitual. There being nothing in the records to identify what specific duties Anabel violated and
whether the violations were gross and habitual, any discussion herein is an exercise in futility.

Here, Manulife has failed to identify the rule and the standards by which Tongko’s acts were considered unsatisfactory.
There were no set criteria for determining the sufficiency of Tongko’s recruitment efforts. Moreover, Tongko’s acts were
not proved to be willful or gross and habitual as defined by the above-cited jurisprudence. Absent proof establishing such
factors, Manulife cannot be considered to have discharged the burden required to prove that the just cause for termination
of employment was indeed present. In fact, at the time Tongko’s services were terminated, his area was not the last in
agent recruitment. As such, Tongko’s dismissal smacks of arbitrariness.

Informal communications violate the principle of sub judice

On a final note, the Court received and set for agenda four (4) letters in relation to the instant case: (1) Letter of Tongko
dated November 30, 2005;52 (2) the aforementioned letter of the Joint Foreign Chambers of the Philippines dated
December 16, 2008;53 (3) Letter of Gregorio Mercado, President of the Philippine Life Insurance Association, Inc. dated
January 12, 2009;54 and (4) Letter of Tongko dated March 25, 2009,55 propounding their positions on the case. At that
point in time, the case had not yet become final and executory, hence, sub judice. In Romero v. Estrada, 56 the Court
expounded on this principle, to wit:

The sub judice rule restricts comments and disclosures pertaining to judicial proceedings to avoid prejudging the issue,
influencing the court, or obstructing the administration of justice. A violation of the sub judice rule may render one liable for
indirect contempt under Sec. 3(d), Rule 71 of the Rules of Court. The rationale for the rule adverted to is set out in Nestle
Philippines v. Sanchez:

It is a traditional conviction of civilized society everywhere that courts and juries, in the decision of issues of fact and law
should be immune from every extraneous influence; that facts should be decided upon evidence produced in court; and
that the determination of such facts should be uninfluenced by bias, prejudice or sympathies.

The principle of sub judice is a two-way street. Inasmuch as the parties and other interested individuals should refrain
from trying to influence the courts, the court itself should also be on guard against such attempts. The Court should,
therefore, be wary from accepting and putting on record, papers and documents not officially filed with it. Such
submissions have the appearance of influencing the Court despite the latter’s determined objectivity and must be avoided.
To illustrate, the November 7, 2008 Decision of this Court was decided in favor of Tongko with only one (1) dissent.
However, in the July 29, 2010 Resolution, the original Decision was reversed in favor of Manulife by the Court en banc,
with only two (2) dissents. The above-mentioned letters were received by the Court after November 7, 2008 but before
July 29, 2010. While the letters themselves may not have actually swayed the members of the Court, the appearance of
impropriety should be avoided. To reiterate, when the parties submitted the aforementioned letters, the case had not yet
become final and executory, they had sufficient remedies under the Rules of Court for redress. There was no reason for
the parties to have submitted such letters and for this Court to have taken cognizance thereof and to set the same for
agenda.

To reiterate, the declaration that Tongko is an employee of Manulife, having performed administrative functions as its
manager, cannot be applied to insurance agents in general. Any finding of an employer-employee relationship shall
always be on a case-to-case basis. The instant case is no exception. Any fear that the grant of Tongko’s motion for
reconsideration shall render all insurance agents in the country as employees of insurance companies is badly misplaced.
WHEREFORE, I vote to grant Tongko’s Motion for Reconsideration dated July 28, 2010, to annul and set aside the June
29, 2010, and to reinstate the November 7, 2008 Decision with modification on the amount of backwages to which Tongko
shall be entitled. As thus modified and subject to the qualifications defined in the Dissenting Opinion to the June 29, 2010,
petitioner should be awarded backwages, to be computed as the monthly average of his management overrides, as well
as other bonuses and benefits, corresponding to the period he was serving Manulife as unit, branch and eventually
regional sales manager.

PRESBITERO J. VELASCO, JR.

Associate Justice

4.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169510 August 8, 2011
ATOK BIG WEDGE COMPANY, INC., Petitioner,
vs.
JESUS P. GISON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision 1 dated May 31, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution2 dated August 23, 2005 denying petitioner’s motion for
reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by
petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A.
Torres. As a consultant on retainer basis, respondent assisted petitioner's retained legal counsel with matters pertaining to
the prosecution of cases against illegal surface occupants within the area covered by the company's mineral claims.
Respondent was likewise tasked to perform liaison work with several government agencies, which he said was his
expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the
management to discuss matters needing his expertise as a consultant. As payment for his services, respondent received
a retainer fee of P3,000.00 a month,3 which was delivered to him either at his residence or in a local restaurant. The
parties executed a retainer agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social
Security System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by
respondent considering that he was only a retainer/consultant. On February 4, 2003, respondent filed a Complaint 4 with
the SSS against petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum 5advising
respondent that within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company since
his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint6 for illegal dismissal, unfair labor practice, underpayment of wages,
non-payment of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC),
Regional Arbitration Branch (RAB), Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R.
Asuncion, Jr. The case was docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co., Inc.,
or Atok for brevity, approached him and asked him if he can help the company’s problem involving the 700 million pesos
crop damage claims of the residents living at the minesite of Atok. He participated in a series of dialogues conducted with
the residents. Mr. Torres offered to pay him P3,000.00 per month plus representation expenses. It was also agreed upon
by him and Torres that his participation in resolving the problem was temporary and there will be no employer-employee
relationship between him and Atok. It was also agreed upon that his compensation, allowances and other expenses will
be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded the only
passage to and from the minesite. In the early morning of February 1, 1992, a dialogue was made by Atok and the crop
damage claimants. Unfortunately, Atok’s representatives, including him, were virtually held hostage by the irate claimants
who demanded on the spot payment of their claims. He was able to convince the claimants to release the company
representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade. While Atok was
prosecuting its case with the claimants, another case erupted involving its partner, Benguet Corporation. After Atok parted
ways with Benguet Corporation, some properties acquired by the partnership and some receivables by Benguet
Corporation was the problem. He was again entangled with documentation, conferences, meetings, planning, execution
and clerical works. After two years, the controversy was resolved and Atok received its share of the properties of the
partnership, which is about 5 million pesos worth of equipment and condonation of Atok’s accountabilities with Benguet
Corporation in the amount of P900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was relieved of the
burden of paying 700 million pesos. In between attending the problems of the crop damage issue, he was also assigned
to do liaison works with the SEC, Bureau of Mines, municipal government of Itogon, Benguet, the Courts and other
government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to take charge of
some liaison matters and public relations in Baguio and Benguet Province, and to report regularly to Atok’s office in
Manila to attend meetings and so he had to stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is already entitled to the
benefits due an employee under the law, but management ignored his requests. However, he continued to avail of his
representation expenses and reimbursement of company-related expenses. He also enjoyed the privilege of securing
interest free salary loans payable in one year through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation officer and legal assistant,
and to assist in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his registration
with the SSS. His request was again ignored and so he filed a complaint with the SSS. After filing his complaint with the
SSS, respondents terminated his services.7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito
rendered a Decision8 ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and
respondent, the Labor Arbiter dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution 9 affirming the decision of the Labor Arbiter.
Respondent filed a Motion for Reconsideration, but it was denied in the Resolution 10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the
decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition,
respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable
Public Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the
Complaint of Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse of
Discretion when it affirmed the said Decision.11

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the
decretal portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations Commission
dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge
Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent position without
loss of seniority rights and to pay him full backwages, inclusive of allowances and other benefits or their monetary
equivalent computed from the time these were withheld from him up to the time of his actual and effective reinstatement.
This case is ordered REMANDED to the Labor Arbiter for the proper computation of backwages, allowances and other
benefits due to petitioner. Costs against private respondent Atok Big Wedge Company Incorporated.

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may
have overlooked Article 280 of the Labor Code, 13 or the provision which distinguishes between two kinds of
employees, i.e., regular and casual employees. Applying the provision to the respondent's case, he is deemed a regular
employee of the petitioner after the lapse of one year from his employment. Considering also that respondent had been
performing services for the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular
employee.

The CA added that although there was an agreement between the parties that respondent's employment would only be
temporary, it clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform.
Moreover, although respondent may have waived his right to attain a regular status of employment when he agreed to
perform these tasks on a temporary employment status, still, it was the law that recognized and considered him a regular
employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR
CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE
LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT
RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE
COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT
RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED RESPONDENT'S
REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY
WAS SENSITIVE AND CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of
the Rules of Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part
of the NLRC in rendering the resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an
employer-employee relationship between the petitioner and the respondent. Petitioner contends that where the existence
of an employer-employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set
the distinction between a casual employee from a regular employee for purposes of determining the rights of an employee
to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears
stressing that there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St.
Martin Funeral Home v. NLRC,15 the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which
is filed before the CA, is the proper vehicle for judicial review of decisions of the NLRC. The petition should be initially filed
before the Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate forum for the
relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous factual findings should be left
to the CA as it is procedurally equipped for that purpose. From the decision of the Court of Appeals, an ordinary appeal
under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted to by the parties. Hence,
respondent's resort to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact
and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when
supported by substantial evidence.17 Being a question of fact, the determination whether such a relationship exists
between petitioner and respondent was well within the province of the Labor Arbiter and the NLRC. Being supported by
substantial evidence, such determination should have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
(4) the power to control the employee's conduct, or the so-called "control test."18 Of these four, the last one is the most
important.19 The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship
exists where the person for whom the services are performed reserves the right to control not only the end achieved, but
also the manner and means to be used in reaching that end.20

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among
other things, respondent was not required to report everyday during regular office hours of petitioner. Respondent's
monthly retainer fees were paid to him either at his residence or a local restaurant. More importantly, petitioner did not
prescribe the manner in which respondent would accomplish any of the tasks in which his expertise as a liaison officer
was needed; respondent was left alone and given the freedom to accomplish the tasks using his own means and method.
Respondent was assigned tasks to perform, but petitioner did not control the manner and methods by which respondent
performed these tasks. Verily, the absence of the element of control on the part of the petitioner engenders a conclusion
that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that petitioner
hired him in a limited capacity only and that there will be no employer-employee relationship between them. As averred in
respondent's Position Paper:21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the
amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the complainant
that his participation on this particular problem of Atok will be temporary since the problem was then contemplated to be
limited in nature, hence, there will be no employer-employee relationship between him and Atok. Complainant agreed on
this arrangement. It was also agreed that complainant's compensations, allowances, representation expenses and
reimbursement of company- related expenses will be processed and paid through disbursement vouchers; 22

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he
agreed to perform tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim
that he became a regular employee of the petitioner based on his contention that the "temporary" aspect of his job and its
"limited" nature could not have lasted for eleven years unless some time during that period, he became a regular
employee of the petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The
appellate court's premise that regular employees are those who perform activities which are desirable and necessary for
the business of the employer is not determinative in this case. In fact, any agreement may provide that one party shall
render services for and in behalf of another, no matter how necessary for the latter's business, even without being hired
as an employee.23 Hence, respondent's length of service and petitioner's repeated act of assigning respondent some
tasks to be performed did not result to respondent's entitlement to the rights and privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be
considered as a regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to buttress its
findings that respondent became a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the
Court has ruled that said provision is not the yardstick for determining the existence of an employment relationship
because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for
purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it
does not apply where the existence of an employment relationship is in dispute. 24 It is, therefore, erroneous on the part of
the Court of Appeals to rely on Article 280 in determining whether an employer-employee relationship exists between
respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent's services
by the petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full
backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals
in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30,
2004 of the National Labor Relations Commission are REINSTATED.

SO ORDERED.

5.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169757 November 23, 2011
CESAR C. LIRIO, doing business under the name and style of CELKOR AD SONICMIX, Petitioner,
vs.
WILMER D. GENOVIA, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899 dated August 4,
2005 and its Resolution dated September 21, 2005, denying petitioner’s motion for reconsideration.

The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of the Labor Arbiter
with modification, finding that respondent is an employee of petitioner, and that respondent was illegally dismissed and
entitled to the payment of backwages and separation pay in lieu of reinstatement.

The facts are as follows:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or Celkor Ad Sonicmix
Recording Studio for illegal dismissal, non-payment of commission and award of moral and exemplary damages.

In his Position Paper,1 respondent Genovia alleged, among others, that on August 15, 2001, he was hired as studio
manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to manage and
operate Celkor and to promote and sell the recording studio's services to music enthusiasts and other prospective clients.
He received a monthly salary of P7,000.00. They also agreed that he was entitled to an additional commission of P100.00
per hour as recording technician whenever a client uses the studio for recording, editing or any related work. He was
made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day
only, but most of the time, he still rendered eight hours of work or more. All the employees of petitioner, including
respondent, rendered overtime work almost everyday, but petitioner never kept a daily time record to avoid paying the
employees overtime pay.

Respondent stated that a few days after he started working as a studio manager, petitioner approached him and told him
about his project to produce an album for his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star
Records. Petitioner asked respondent to compose and arrange songs for Celine and promised that he (Lirio) would draft a
contract to assure respondent of his compensation for such services. As agreed upon, the additional services that
respondent would render included composing and arranging musical scores only, while the technical aspect in producing
the album, such as digital editing, mixing and sound engineering would be performed by respondent in his capacity as
studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his work on the album as
composer and arranger would only be done during his spare time, since his other work as studio manager was the
priority. Respondent then started working on the album.

Respondent alleged that before the end of September 2001, he reminded petitioner about his compensation as composer
and arranger of the album. Petitioner verbally assured him that he would be duly compensated. By mid-November 2001,
respondent finally finished the compositions and musical arrangements of the songs to be included in the album. Before
the month ended, the lead and back-up vocals in the ten (10) songs were finally recorded and completed. From
December 2001 to January 2002, respondent, in his capacity as studio manager, worked on digital editing, mixing and
sound engineering of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts and negotiate with
various radio stations, malls, publishers, record companies and manufacturers, record bars and other outlets in
preparation for the promotion of the said album. By early February 2002, the album was in its manufacturing stage.
ELECTROMAT, manufacturer of CDs and cassette tapes, was tapped to do the job. The carrier single of the album, which
respondent composed and arranged, was finally aired over the radio on February 22, 2002.

On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as composer and
arranger of the album. Petitioner told respondent that since he was practically a nobody and had proven nothing yet in the
music industry, respondent did not deserve a high compensation, and he should be thankful that he was given a job to
feed his family. Petitioner informed respondent that he was entitled only to 20% of the net profit, and not of the gross sales
of the album, and that the salaries he received and would continue to receive as studio manager of Celkor would be
deducted from the said 20% net profit share. Respondent objected and insisted that he be properly compensated. On
March 14, 2002, petitioner verbally terminated respondent’s services, and he was instructed not to report for work.

Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and no hearing was
conducted before he was terminated, in violation of his constitutional right to due process. Having worked for more than
six months, he was already a regular employee. Although he was a so called "studio manager," he had no managerial
powers, but was merely an ordinary employee.

Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he be paid separation
pay, backwages and overtime pay; and that he be awarded unpaid commission in the amount of P2,000.00 for services
rendered as a studio technician as well as moral and exemplary damages.

Respondent’s evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was certified correct by
petitioner,2 and Petty Cash Vouchers3 evidencing receipt of payroll payments by respondent from Celkor.

In defense, petitioner stated in his Position Paper 4 that respondent was not hired as studio manager, composer,
technician or as an employee in any other capacity of Celkor. Respondent could not have been hired as a studio
manager, since the recording studio has no personnel except petitioner. Petitioner further claimed that his daughter Celine
Mei Lirio, a former contract artist of ABS-CBN Star Records, failed to come up with an album as the latter aborted its
project to produce one. Thus, he decided to produce an album for his daughter and established a recording studio, which
he named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would compose the songs for
the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed to be an amateur
composer, an arranger with limited experience and musician without any formal musical training. According to petitioner,
respondent had no track record as a composer, and he was not known in the field of music. Nevertheless, after some
discussion, respondent verbally agreed with petitioner to co-produce the album based on the following terms and
conditions: (1) petitioner shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all
the songs; (3) respondent shall act as composer and arranger of all the lyrics and the music of the five songs he already
composed and the revival songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner was entitled to
60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net profit; and (6) respondent
shall be entitled to draw advances of P7,000.00 a month, which shall be deductible from his share of the net profits and
only until such time that the album has been produced.

According to petitioner, they arrived at the foregoing sharing of profits based on the mutual understanding that respondent
was just an amateur composer with no track record whatsoever in the music industry, had no definite source of income,
had limited experience as an arranger, had no knowledge of the use of sound mixers or digital arranger and that petitioner
would help and teach him how to use the studio equipment; that petitioner would shoulder all the expenses of production
and provide the studio and equipment as well as his knowledge in the use thereof; and Celine Mei Lirio would sing the
songs. They embarked on the production of the album on or about the third week of August 2002.

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one of an informal
partnership under Article 17675 of the New Civil Code, since they agreed to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves. Petitioner had no control over the time and
manner by which respondent composed or arranged the songs, except on the result thereof. Respondent reported to the
recording studio between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employer-employee
relationship existed between him and the respondent, and there was no illegal dismissal to speak of.

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision, 6 finding that an employer-employee
relationship existed between petitioner and respondent, and that respondent was illegally dismissed. The dispositive
portion of the decision reads:

WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO and/ or
CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as regular employee and, consequently,
ORDERING said respondents:
 1) To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of this decision and, in
lieu of reinstatement, to [pay] his separation pay of one (1) month pay per year of service reckoned from [the] date
of hire on August 15, 2001 until finality of this decision, which as of date amounts to full backwages total of
145,778.6 (basic P7,000.00 x 19.6 mos.=P133,000.00 + 1/12 thereof as 13th month pay of P11,083.33 +
SILP P7,000/32.62 days=P214.59/day x 5=P1,072.96 x 1.58 yrs.=P1,695.27); separation pay
of P22,750.00 (P7,000.00 x 3.25 yrs.);

2) To pay complainant's unpaid commission of P2,000.00;

3) To pay him moral and exemplary damages in the combined amount of P75,000.00.

Other monetary claims of complainant are dismissed for lack of merit. 7

The Labor Arbiter stated that petitioner’s denial of the employment relationship cannot overcome respondent’s positive
assertion and documentary evidence proving that petitioner hired respondent as his employee. 8

Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission (NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor Arbiter. The
dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is REVERSED
and, hence, SET ASIDE and a new one ENTERED dismissing the instant case for lack of merit. 9

The NLRC stated that respondent failed to prove his employment tale with substantial evidence. Although the NLRC
agreed that respondent was able to prove that he received gross pay less deduction and net pay, with the corresponding
Certification of Correctness by petitioner, covering the period from July 31, 2001 to March 15, 2002, the NLRC held that
respondent failed to proved with substantial evidence that he was selected and engaged by petitioner, that petitioner had
the power to dismiss him, and that they had the power to control him not only as to the result of his work, but also as to
the means and methods of accomplishing his work.

Respondent’s motion for reconsideration was denied by the NLRC in a Resolution 9 dated December 14, 2004.

Respondent filed a petition for certiorari before the Court of Appeals.

On August 4, 2005, the Court of Appeals rendered a decision 10 reversing and setting aside the resolution of the NLRC,
and reinstating the decision of the Labor Arbiter, with modification in regard to the award of commission and damages.
The Court of Appeals deleted the award of commission, and moral and exemplary damages as the same were not
substantiated. The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and December 14, 2004
are hereby REVERSED and SET ASIDE. Accordingly, the decision dated October 31, 2003 of the Labor Arbiter
is REINSTATED, with the modification that the awards of commission and damages are deleted.11(Emphasis supplied.)

Petitioner’s motion for reconsideration was denied for lack of merit by the Court of Appeals in its Resolution 12 dated
September 21, 2005.

Hence, petitioner Lirio filed this petition.

Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under Rule 65, which will
prosper only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on the part of
the NLRC.13 However, petitioner contends that the Court of Appeals decided the case not in accordance with law and
applicable rulings of this Court as petitioner could not find any portion in the Decision of the Court of Appeals ruling that
the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction. Petitioner submits that the Court of Appeals could not review an error of judgment by the NLRC raised before
it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner contends that it was
error on the part of the Court of Appeals to review the finding of facts of the NLRC on whether there exists an employer-
employee relationship between the parties.

Petitioner’s argument lacks merit.

It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for certiorari under
Rule 65 of the Rules of Court filed before the Court of Appeals in accordance with the decision of the Court in St. Martin
Funeral Home v. NLRC,14 which held:

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme
Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all
such petitions should henceforth be initially filed in the Court of Appeals in strict observance of the doctrine on the
hierarchy of courts as the appropriate forum for the relief desired. 15

The Court of Appeals stated in its decision that the issue it had to resolve was "whether or not the public respondent
[NLRC] committed grave abuse of discretion when it declared that no employer-employee relationship exists between the
petitioner and the private respondents, since the petitioner failed to prove such fact by substantial evidence." 16

Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil action for
certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. 17 By grave abuse of discretion is
meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be shown
that the discretion was exercised arbitrarily or despotically.18

The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or
resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is
material to or decisive of the controversy; and it cannot make this determination without looking into the evidence of the
parties.19 Necessarily, the appellate court can only evaluate the materiality or significance of the evidence, which is
alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on
record.20 Thus, contrary to the contention of petitioner, the Court of Appeals can review the finding of facts of the NLRC
and the evidence of the parties to determine whether the NLRC gravely abused its discretion in finding that no employer-
employee relationship existed between petitioner and respondent. 21

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN

SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE PETITIONER
AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF ESTABLISHED PROVISION OF LAWS
AND JURISPRUDENCE.

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN
HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE PETITIONER AND THE
PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN INDICIA OF
EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS.22

Between the documentary evidence presented by respondent and the mere allegation of petitioner without any proof by
way of any document evincing their alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter
that petitioner failed to substantiate his claim that he had a partnership with respondent, citing the Labor Arbiter’s finding,
thus:

In this case, complainant's evidence is substantial enough to prove the employment relationship that on August 14, 2001,
he was hired as 'Studio manager' by respondent Lirio to manage and operate the recording studio and to promote and sell
its services to music enthusiasts and clients, proven by his receipt for this purpose from said respondent a fixed monthly
compensation of P7,000.00, with commission of P100.00 per hour when serving as recording technician, shown by the
payroll from July 31, 2001-March 15, 2002. The said evidence points to complainant's hiring as employee so that the case
comes within the purview of our jurisdiction on labor disputes between an employer and an employee. x x x.

Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his assertion
thereto, in the face of complainant's evidence, constitute but a self-serving assertion, without probative value, a
mere invention to justify the illegal dismissal.

xxxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his refusal to
respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of the album which he composed
and arranged during his free time and, moreover, that salaries which he received would be deducted therefrom, which
obviously, soured the relations from the point of view of respondent Lirio. 23

Hence, based on the finding above and the doctrine that "if doubt exists between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter," 24 the Court of Appeals reversed the resolution
of the NLRC and reinstated the decision of the Labor Arbiter with modification. Even if the Court of Appeals was remiss in
not stating it in definite terms, it is implied that the Court of Appeals found that the NLRC gravely abused its discretion in
finding that no employer-employee relationship existed between petitioner and respondent based on the evidence on
record.

We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of Appeals is in
accordance with law, or whether or not the Court of Appeals erred in reversing and setting aside the decision of the
NLRC, and reinstating the decision of the Labor Arbiter with modification.

In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not ironclad. 25Where
the issue is shrouded by a conflict of factual perceptions by the lower court or the lower administrative body, in this case,
the NLRC, this Court is constrained to review the factual findings of the Court of Appeals. 26

Before a case for illegal dismissal can prosper, it must first be established that an employer-employee relationship existed
between petitioner and respondent.27

The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important element is the employer’s control of the employee’s conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.28

It is settled that no particular form of evidence is required to prove the existence of an employer-employee
relationship.29 Any competent and relevant evidence to prove the relationship may be admitted. 30
In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as
follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by
petitioner,31 which showed that respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month
and another P3,500.00 every 30th of the month) with the corresponding deductions due to absences incurred by
respondent; and (2) copies of petty cash vouchers,32 showing the amounts he received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid monthly wages
of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was verbally dismissed by petitioner,
and respondent, thereafter, filed an action for illegal dismissal against petitioner. The power of control refers merely to the
existence of the power.33 It is not essential for the employer to actually supervise the performance of duties of the
employee, as it is sufficient that the former has a right to wield the power. 34Nevertheless, petitioner stated in his Position
Paper that it was agreed that he would help and teach respondent how to use the studio equipment. In such case,
petitioner certainly had the power to check on the progress and work of respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of partnership.1âwphi1 Such
claim was not supported by any written agreement. The Court notes that in the payroll dated July 31, 2001 to March 15,
2002,35 there were deductions from the wages of respondent for his absence from work, which negates petitioner’s claim
that the wages paid were advances for respondent’s work in the partnership. In Nicario v. National Labor Relations
Commission,36 the Court held:

It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-honored rule that in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be
resolved in the former’s favor. The policy is to extend the doctrine to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection of
labor. This rule should be applied in the case at bar, especially since the evidence presented by the private respondent
company is not convincing. x x x37

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the parties showed
that an employer-employee relationship existed between petitioner and respondent.

In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful
cause and validly made.38 Article 277 (b) of the Labor Code39 puts the burden of proving that the dismissal of an employee
was for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit
the dismissal.40 For an employee’s dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee
must be afforded due process.41 Procedural due process requires the employer to furnish an employee with two written
notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which
his dismissal is sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to
be issued after the employee has been given reasonable opportunity to answer and to be heard on his
defense.42 Petitioner failed to comply with these legal requirements; hence, the Court of Appeals correctly affirmed the
Labor Arbiter’s finding that respondent was illegally dismissed, and entitled to the payment of backwages, and separation
pay in lieu of reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899, dated August 4,
2005, and its Resolution dated September 21, 2005, are AFFIRMED.

No costs.

SO ORDERED.

6.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 192558 February 15, 2012
BITOY JAVIER (DANILO P. JAVIER), Petitioner,
vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision 1 of the Court of
Appeals (CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP No. 109975, which reversed the May 28, 2009 Decision 3 of
the National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding
that petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to
pay backwages and separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard
benefits. He alleged that he was an employee of Fly Ace since September 2007, performing various tasks at the
respondent’s warehouse such as cleaning and arranging the canned items before their delivery to certain locations,
except in instances when he would be ordered to accompany the company’s delivery vehicles, as pahinante; that he
reported for work from Monday to Saturday from 7:00 o’clock in the morning to 5:00 o’clock in the afternoon; that during
his employment, he was not issued an identification card and payslips by the company; that on May 6, 2008, he reported
for work but he was no longer allowed to enter the company premises by the security guard upon the instruction of Ruben
Ong (Mr. Ong), his superior;5 that after several minutes of begging to the guard to allow him to enter, he saw Ong whom
he approached and asked why he was being barred from entering the premises; that Ong replied by saying, "Tanungin
mo anak mo;" 6 that he then went home and discussed the matter with his family; that he discovered that Ong had been
courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong
and convince him to spare her father from trouble but he refused to accede; that thereafter, Javier was terminated from
his employment without notice; and that he was neither given the opportunity to refute the cause/s of his dismissal from
work.

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

For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in
December 2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed rate
of P 300.00 per trip, which was later increased to P 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6
times only in a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not available. On April
30, 2008, Fly Ace no longer needed the services of Javier. Denying that he was their employee, Fly Ace insisted that
there was no illegal dismissal.8 Fly Ace submitted a copy of its agreement with Milmar Hauling Services and copies of
acknowledgment receipts evidencing payment to Javier for his contracted services bearing the words, "daily
manpower (pakyaw/piece rate pay)" and the latter’s signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the Respondent nor any document showing that he
received the benefits accorded to regular employees of the Respondents. His contention that Respondent failed to give
him said ID and payslips implies that indeed he was not a regular employee of Fly Ace considering that complainant was
a helper and that Respondent company has contracted a regular trucking for the delivery of its products.

Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there is a
regular hauler to deliver its products, we give credence to Respondents’ claim that complainant was contracted on
"pakiao" basis.

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

xxxx

Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are not liable
for salary differentials. 9

Ruling of the NLRC

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

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

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

1. Backwages -P 45,770.83

2. Separation pay, in lieu of reinstatement - 8,450.00

3. Unpaid 13th month pay (proportionate) - 5,633.33

 TOTAL -P 59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.11

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javier’s complaint as ordered by the LA. The CA exercised its authority to make its own factual
determination anent the issue of the existence of an employer-employee relationship between the parties. According to
the CA:

xxx

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

xxx

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

The CA likewise added that Javier’s failure to present salary vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further, it found that Javier’s
work was not necessary and desirable to the business or trade of the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver, that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged by Javier did not pass the "control test."

He contracted work outside the company premises; he was not required to observe definite hours of work; he was not
required to report daily; and he was free to accept other work elsewhere as there was no exclusivity of his contracted
service to the company, the same being co-terminous with the trip only.13 Since no substantial evidence was presented to
establish an employer-employee relationship, the case for illegal dismissal could not prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS
NOT A REGULAR EMPLOYEE OF FLY ACE.

II.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.14

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

The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a worker on a per trip basis is
not significant because "this is merely a method of computing compensation and not a basis for determining the existence
of employer-employee relationship." Javier likewise invokes the rule that, "in controversies between a laborer and his
master, x x x doubts reasonably arising from the evidence should be resolved in the former’s favour. The policy is
reflected is no less than the Constitution, Labor Code and Civil Code."18

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latter’s failure to observe
substantive and procedural due process. Since his dismissal was not based on any of the causes recognized by law, and
was implemented without notice, Javier is entitled to separation pay and backwages.

In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-employee relationship. Having
a service contract with Milmar Hauling Services for the purpose of transporting and delivering company products to
customers, Fly Ace contracted Javier as an extra helper or pahinante on a mere "per trip basis." Javier, who was actually
a loiterer in the area, only accompanied and assisted the company driver when Milmar could not deliver or when the
exigency of extra deliveries arises for roughly five to six times a month. Before making a delivery, Fly Ace would turn over
to the driver and Javier the delivery vehicle with its loaded company products. With the vehicle and products in their
custody, the driver and Javier "would leave the company premises using their own means, method, best judgment and
discretion on how to deliver, time to deliver, where and [when] to start, and manner of delivering the products." 20

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

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

Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, "which are
unfortunately not supported by proof, documentary or otherwise."23 Javier simply assumed that he was an employee of Fly
Ace, absent any competent or relevant evidence to support it. "He performed his contracted work outside the premises of
the respondent; he was not even required to report to work at regular hours; he was not made to register his time in and
time out every time he was contracted to work; he was not subjected to any disciplinary sanction imposed to other
employees for company violations; he was not issued a company I.D.; he was not accorded the same benefits given to
other employees; he was not registered with the Social Security System (SSS) as petitioner’s employee; and, he was free
to leave, accept and engage in other means of livelihood as there is no exclusivity of his contracted services with the
petitioner, his services being co-terminus with the trip only. All these lead to the conclusion that petitioner is not an
employee of the respondents."24

Moreover, Fly Ace claims that it had "no right to control the result, means, manner and methods by which Javier would
perform his work or by which the same is to be accomplished."25 In other words, Javier and the company driver were
given a free hand as to how they would perform their contracted services and neither were they subjected to definite
hours or condition of work.

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

The Court affirms the assailed CA decision.

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

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

Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the party on whom the burden to prove lies was able to hurdle
the same. "No particular form of evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2009.html - fnt31 Hence, while no particular form of
evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the
substantiality of the evidence depends on its quantitative as well as its qualitative aspects."30Although substantial
evidence is not a function of quantity but rather of quality, the x x x circumstances of the instant case demand that
something more should have been proffered. Had there been other proofs of employment, such as x x x inclusion in
petitioner’s payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee
relationship."31

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the
requisite quantum of evidence.32 "Whoever claims entitlement to the benefits provided by law should establish his or her
right thereto x x x."33 Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.

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

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

In this case, Javier was not able to persuade the Court that the above elements exist in his case.1avvphi1 He could not
submit competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an
employee, or that Fly Ace could dictate what his conduct should be while at work. In other words, Javier’s allegations did
not establish that his relationship with Fly Ace had the attributes of an employer-employee relationship on the basis of the
above-mentioned four-fold test. Worse, Javier was not able to refute Fly Ace’s assertion that it had an agreement with a
hauling company to undertake the delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Ace’s
denial of his services’ exclusivity to the company. In short, all that Javier laid down were bare allegations without
corroborative proof.

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

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

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

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

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.

SO ORDERED.

Article 2, Section 18

The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.

Article 13, Section 3

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster
industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.

Article 13, Section 4

The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers,
who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural
lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining
retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for
voluntary land-sharing.

Article 13, Section 5

The State shall recognize the right of farmers, farmworkers, and landowners, as well as cooperatives, and other
independent farmers’ organizations to participate in the planning, organization, and management of the program, and
shall provide support to agriculture through appropriate technology and research, and adequate financial, production,
marketing, and other support services.

Article 13, Section 6

The State shall apply the principles of agrarian reform or stewardship, whenever applicable in accordance with law, in the
disposition or utilization of other natural resources, including lands of the public domain under lease or concession
suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the rights of indigenous communities
to their ancestral lands.

The State may resettle landless farmers and farmworkers in its own agricultural estates which shall be distributed to them
in the manner provided by law.

Article 13, Section 9

The State shall, by law, and for the common good, undertake, in cooperation with the public sector, a continuing program
of urban land reform and housing which will make available at affordable cost decent housing and basic services to
underprivileged and homeless citizens in urban centers and resettlements areas. It shall also promote adequate
employment opportunities to such citizens. In the implementation of such program the State shall respect the rights of
small property owners.

Article 3, Section 8

The right of the people, including those employed in the public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be abridged.

Article 9B, Section 2

(1) The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters.

(2) Appointments in the civil service shall be made only according to merit and fitness to be determined, as far as
practicable, and, except to positions which are policy-determining, primarily confidential, or highly technical, by
competitive examination.

(3) No officer or employee of the civil service shall be removed or suspended except for cause provided by law.

(4) No officer or employee in the civil service shall engage, directly or indirectly, in any electioneering or partisan political
campaign.

(5) The right to self-organization shall not be denied to government employees.

(6) Temporary employees of the Government shall be given such protection as may be provided by law.