Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio
T. Basiao entered into a contract 1 by which:

1. Basiao was "authorized to solicit within the Philippines applications for

insurance policies and annuities in accordance with the existing rules and
regulations" of the Company;

2. he would receive "compensation, in the form of commissions ... as provided

in the Schedule of Commissions" of the contract to "constitute a part of the
consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well
as all its circulars ... and those which may from time to time be promulgated by
it, ..." were made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the duties
of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:

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

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving,

directly or indirectly, rebates in any form, or from making any misrepresentation
or over-selling, and, in general, from doing or committing acts prohibited in the
Agent's Manual and in circulars of the Office of the Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any
previous notice to the Agent, for or on account of ... (explicitly specified
causes). ...

Either party may terminate this contract by giving to the other notice in writing
to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued or
 should the Agent fail to renew his existing Certificate of Authority upon its
expiration. The Agent shall not have any right to any commission on renewal
of premiums that may be paid after the termination of this agreement for any
cause whatsoever, except when the termination is due to disability or death in
line of service. As to commission corresponding to any balance of the first
year's premiums remaining unpaid at the termination of this agreement, the
Agent shall be entitled to it if the balance of the first year premium is paid, less
actual cost of collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of

commissions or other compensations shall be valid without the prior consent
in writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's
Contract — and to implement his end of it Basiao organized an agency or office to which he gave the
name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract
with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a
reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted
the latter to terminate also his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its
president. Without contesting the termination of the first contract, the complaint sought to recover
commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the
Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an
independent contractor and that the Company had no obligation to him for unpaid commissions under
the terms and conditions of his contract. 5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting
agreement had established an employer-employee relationship between him and the Company, and
this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision
directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium
remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in
favor of the respondent company ..." plus 10% attorney's fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission.
7
Hence, the present petition for certiorari and prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's
employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions
within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217
of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's
status was that of an independent contractor whose claim was thus cognizable, not by the Labor
Arbiter in a labor case, but by the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense
existed between it and Basiao, is drawn from the terms of the contract they had entered into, which,
either expressly or by necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment
quotas and compensated him on the basis of results obtained. He was not bound to observe any
schedule of working hours or report to any regular station; he could seek and work on his prospects
anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most
effective.

Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with
the Company, the respondents contend that they do not constitute the decisive determinant of the
nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the
status of an employee from that of an independent contractor is control, that is, whether or not the
party who engages the services of another has the power to control the latter's conduct in rendering
such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's
contract obliging him to "... observe and conform to all rules and regulations which the Company may
from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of
applicants for insurance, processed their applications and determined the amounts of insurance cover
to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of
the Company. 9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case
of Viana vs. Alejo Al-Lagadan10

... In determining the existence of employer-employee relationship, the

following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees' conduct — although the
latter is the most important element (35 Am. Jur. 445). ...

has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid
test of the character of a contract or agreement to render service. It should, however, be obvious that
not every form of control that the hiring party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an employee and an individual contractor is not to
vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom
to the party hired and eschews any intervention whatsoever in his performance of the engagement.

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. The
distinction acquires particular relevance in the case of an enterprise affected with public interest, as is
the business of insurance, and is on that account subject to regulation by the State with respect, not
only to the relations between insurer and insured but also to the internal affairs of the insurance
company. 12 Rules and regulations governing the conduct of the business are provided for in the
Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for
an insurance company to promulgate a set of rules to guide its commission agents in selling its policies
that they may not run afoul of the law and what it requires or prohibits. Of such a character are the
rules which prescribe the qualifications of persons who may be insured, subject insurance applications
to processing and approval by the Company, and also reserve to the Company the determination of
the premiums to be paid and the schedules of payment. None of these really invades the agent's
contractual prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee relationship between
him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be

independent contractors, instead of employees of the parties for whom they worked. In Mafinco
Trading Corporation vs. Ople, 13 the Court ruled that a person engaged to sell soft drinks for another,
using a truck supplied by the latter, but with the right to employ his own workers, sell according to his
own methods subject only to prearranged routes, observing no working hours fixed by the other party
and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a
peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an
employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on
all fours with the present one, this Court held that there was no employer-employee relationship
between a commission agent and an investment company, but that the former was an independent
contractor where said agent and others similarly placed were: (a) paid compensation in the form of
commissions based on percentages of their sales, any balance of commissions earned being payable
to their legal representatives in the event of death or registration; (b) required to put up performance
bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the
agreement with the company and termination of their services for certain causes; (d) not required to
report for work at any time, nor to devote their time exclusively to working for the company nor to
submit a record of their activities, and who, finally, shouldered their own selling and transportation
expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy
and sell rice and palay without compensation except a certain percentage of what he was able to buy
or sell, did work at his own pleasure without any supervision or control on the part of his principal and
relied on his own resources in the performance of his work, was a plain commission agent, an
independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him
to observe and conform to such rules and regulations as the latter might from time to time prescribe.
No showing has been made that any such rules or regulations were in fact promulgated, much less
that any rules existed or were issued which effectively controlled or restricted his choice of methods
— or the methods themselves — of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the express provision of the contract
leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting
insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the
Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what
is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship
with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the
petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions
should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of,
and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in
affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider
Basiao's claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and
that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No
pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 119930 March 12, 1998

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu City), LABOR ARBITER
NICASIO P. ANINON and PANTALEON DE LOS REYES, respondents.

BELLOSILLO, J.:

On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB-VII Case No.
03-0309-94 filed by private respondent Pantaleon de los Reyes against petitioner Insular Life
Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and nonpayment of salaries and back wages
after finding no employer-employee relationship between De los Reyes and petitioner INSULAR LIFE.
1
On appeal by private respondent, the order of dismissal was reversed by the National Labor Relations
Commission (NLRC) which ruled that respondent De los Reyes was an employee of petitioner.2
Petitioner's motion for reconsideration having been denied, the NLRC remanded the case to the Labor
Arbiter for hearing on the merits.

Seeking relief through this special civil action for certiorari with prayer for a restraining order and/or
preliminary injunction, petitioner now comes to us praying for annulment of the decision of respondent
NLRC dated 3 March 1995 and its Order dated 6 April 1995 denying the motion for reconsideration of
the decision. It faults NLRC for acting without jurisdiction and/or with grave abuse of discretion when,
contrary to established facts and pertinent law and jurisprudence, it reversed the decision of the Labor
Arbiter and held instead that the complaint was properly filed as an employer-employee relationship
existed between petitioner and private respondent.

Petitioner reprises the stand it assumed below that it never had any employer-employee relationship
with private respondent, this being an express agreement between them in the agency contracts,
particularly reinforced by the stipulation therein that De los Reyes was allowed discretion to devise
ways and means to fulfill his obligations as agent and would be paid commission fees based on his
actual output. It further insists that the nature of this work status as described in the contracts had
already been squarely resolved by the Court in the earlier case of Insular Life Assurance Co., Ltd. v.
NLRC and Basiao 3 where the complainant therein, Melecio Basiao, was similarly situated as
respondent De los Reyes in that he was appointed first as an agent and then promoted as agency
manager, and the contracts under which he was appointed contained terms and conditions identical
to those of Delos Reyes. Petitioner concludes that since Basiao was declared by the Court to be an
independent contractor and not an employee of petitioner, there should be no reason why the status
of De los Reyes herein vis-a-vis petitioner should not be similarly determined.

We reject the submissions of petitioner and hold that respondent NLRC acted appropriately within the
bounds of the law. The records of the case are replete with telltale indicators of an existing employer-
employee relationship between the two parties despite written contractual disavowals.

These facts are undisputed: on 21 August 1992 petitioner entered into an agency contract with
respondent Pantaleon de los Reyes4 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.
The contract was prepared by petitioner in its entirety and De los Reyes merely signed his conformity
thereto. It contained the stipulation that no employer-employee relationship shall be created between
the parties and that the agent shall be free to exercise his own judgment as to time, place and means
of soliciting insurance. De los Reyes however was prohibited by petitioner from working for any other
life insurance company, and violation of this stipulation was sufficient ground for termination of the
contract. Aside from soliciting insurance for the petitioner, private respondent was required to submit
to the former all completed applications for insurance within ninety (90) consecutive days, deliver
policies, receive and collect initial premiums and balances of first year premiums, renewal premiums,
deposits on applications and payments on policy loans. Private respondent was also bound to turn
over to the company immediately any and all sums of money collected by him. In a written
communication by petitioner to respondent De los Reyes, the latter was urged to register with the
Social Security System as a self-employed individual as provided under PD No. 1636. 5

On 1 March 1993 petitioner and private respondent entered into another contract 6 where the latter
was appointed as Acting Unit Manager under its office — the Cebu DSO V (157). As such, 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. It was similarly
provided in the management contract that the relation of the acting unit manager and/or the agents of
his unit to the company shall be that of independent contractor. If the appointment was terminated for
any reason other than for cause, the acting unit manager would be reverted to agent status and
assigned to any unit. As in the previous agency contract, De los Reyes together with his unit force was
granted freedom to exercise judgment as to time, place and means of soliciting insurance. Aside from
being granted override commissions, the acting unit manager was given production bonus,
development allowance and a unit development financing scheme euphemistically termed "financial
assistance" consisting of payment to him of a free portion of P300.00 per month and a validate portion
of P1,200.00. While the latter amount was deemed as an advance against expected commissions, the
former was not and would be freely given to the unit manager by the company only upon fulfillment by
him of certain manpower and premium quota requirements. The agents and underwriters recruited
and trained by the acting unit manager would be attached to the unit but petitioner reserved the right
to determine if such assignment would be made or, for any reason, to reassign them elsewhere.

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.

Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction, citing the
absence of employer-employee relationship. It reasoned out that based on the criteria for determining
the existence of such relationship or the so-called "four-fold test," i.e., (a) selection and engagement
of employee, (b) payment of wages, (c) power of dismissal, and, (d) power of control, De los Reyes
was not an employee but an independent contractor.

On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case was dismissed
on the ground that the element of control was not sufficiently established since the rules and guidelines
set by petitioner in its agency agreement with respondent Delos Reyes were formulated only to
achieve the desired result without dictating the means or methods of attaining it.

Respondent NLRC however appreciated the evidence from a different perspective. It determined that
respondent De los Reyes was under the effective control of petitioner in the critical and most important
aspects of his work as Unit Manager. This conclusion was derived from the provisions in the contract
which appointed private respondent as Acting Unit Manager, to wit: (a) De los Reyes was to serve
exclusively the company, therefore, he was not an independent contractor; (b) he was required to
meet certain manpower and production quota; and, (c) petitioner controlled the assignment to and
removal of soliciting agents from his unit.

The NLRC also took into account other circumstances showing that petitioner exercised employer's
prerogatives over De los Reyes, e.g., (a) limiting the work of respondent De los Reyes to selling a life
insurance policy known as "Salary Deduction Insurance" only to members of the Philippine National
Police, public and private school teachers and other employees of private companies; (b) assigning
private respondent to a particular place and table where he worked whenever he was not in the field;
(c) paying private respondent during the period of twelve (12) months of his appointment as Acting
Unit Manager the amount of P1,500.00 as Unit Development Financing of which 20% formed his salary
and the rest, i.e., 80%, as advance of his expected commissions; and, (d) promising that upon
completion of certain requirements, he would be promoted to Unit Manager with the right of petitioner
to revert him to agent status when warranted.

Parenthetically, both petitioner and respondent NLRC treated the agency contract and the
management contract entered into between petitioner and De los Reyes as contracts of agency. We
however hold otherwise. Unquestionably there exist major distinctions between the two agreements.
While the first has the earmarks of an agency contract, the second is far removed from the concept of
agency in that provided therein are conditionalities that indicate an employer-employee relationship.
The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but
this holds true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter
has jurisdiction over the case..

It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly

repudiating it in the management contract and providing therein that the "employee" is an independent
contractor when the terms of the agreement clearly show otherwise. For, the employment status of a
person is defined and prescribed by law and not by what the parties say it should be. 7 In determining
the status of the management contract, the "four-fold test" on employment earlier mentioned has to
be applied.
Petitioner contends that De los Reyes was never required to go through the pre-employment
procedures and that the probationary employment status was reserved only to employees of petitioner.
On this score, it insists that the first requirement of selection and engagement of the employee was
not met.

A look at the provisions of the contract shows that private respondent was appointed as Acting Unit
Manager only upon recommendation of the District Manager. 8 This indicates that private respondent
was hired by petitioner because of the favorable endorsement of its duly authorized officer. But, this
approbation could only have been based on the performance of De los Reyes as agent under the
agency contract so that there can be no other conclusion arrived under this premise than the fact that
the agency or underwriter phase of the relationship of De los Reyes with petitioner was nothing more
than a trial or probationary period for his eventual appointment as Acting Unit Manager of petitioner.
Then, again, the very designation of the appointment of private respondent as "acting" unit manager
obviously implies a temporary employment status which may be made permanent only upon
compliance with company standards such as those enumerated under Sec. 6 of the management
contract. 9

On the matter of payment of wages, petitioner points out that respondent was compensated strictly on
commission basis, the amount of which was totally dependent on his total output. But, the manager's
contract, speaks differently. Thus—

4. Performance Requirements. — To maintain your appointment as Acting Unit

Manager you must meet the following manpower and production requirements:

Quarter Active Calendar Year

Production Agents Cumulative FYP
Production

1st 2 P 125,000
2nd 3 250,000
3rd 4 375,000
4th 5 500,000

5.4. Unit Development Financing (UDF). — As an Acting Unit Manager you

shall be given during the first 12 months of your appointment a financial
assistance which is composed of two parts:

5.4.1. Free Portion amounting to P300 per month, subject to

your meeting prescribed minimum performance requirement
on manpower and premium production. The free portion is not
payable by you.

5.4.2. Validate Portion amounting to P1,200 per month, also

subject to meeting the same prescribed minimum performance
requirements on manpower and premium production. The
validated portion is an advance against expected
compensation during the UDF period and thereafter as may be
necessary.

The above provisions unquestionably demonstrate that the performance requirement imposed on De
los Reyes was applicable quarterly while his entitlement to the free portion (P300) and the validated
portion (P1,200) was monthly starting on the first month of the twelve (12) months of the appointment.
Thus, it has to be admitted that even before the end of the first quarter and prior to the so-called
quarterly performance evaluation, private respondent was already entitled to be paid both the free and
validated portions of the UDF every month because his production performance could not be
determined until after the lapse of the quarter involved. This indicates quite clearly that the unit
manager's quarterly performance had no bearing at all on his entitlement at least to the free portion of
the UDF which for all intents and purposes comprised the salary regularly paid to him by petitioner.
Thus it cannot be validly claimed that the financial assistance consisting of the free portion of the UDF
was purely dependent on the premium production of the agent. Be that as it may, it is worth considering
that the payment of compensation by way of commission does not militate against the conclusion that
private respondent was an employee of petitioner. Under Art. 97 of the Labor Code, "wage" shall mean
"however designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, price or commission basis . . . ." 10

As to the matter involving the power of dismissal and control by the employer, the latter of which is the
most important of the test, petitioner asserts that its termination of De los Reyes was but an exercise
of its inherent right as principal under the contracts and that the rules and guidelines it set forth in the
contract cannot, by any stretch of the imagination, be deemed as an exercise of control over the private
respondent as these were merely directives that fixed the desired result without dictating the means
or method to be employed in attaining it. The following factual findings of the NLRC 11 however
contradict such claims:

A perusal of the appointment of complainant as Acting Unit Manager reveals

that:

1. Complainant was to "exclusively" serve respondent company. Thus it is

provided: . . . 7..7 Other causes of Termination:
This appointment may likewise be terminated for any of the following causes:
. . . 7..7..2. Your entering the service of the government or another life
insurance company; 7..7..3. Your accepting a managerial or supervisory
position in any firm doing business in the Philippines without the written
consent of the Company; . . .

2. Complainant was required to meet certain manpower and production

quotas.

3. Respondent (herein petitioner) controlled the assignment and removal of

soliciting agents to and from complainant's unit, thus: . . . 7..2. Assignment of
Agents: Agents recruited and trained by you shall be attached to your unit
unless for reasons of Company policy, no such assignment should be made.
The Company retains the exclusive right to assign new soliciting agents to the
unit. It is agreed that the Company may remove or transfer any soliciting agents
appointed and assigned to the said unit. . . .

It would not be amiss to state that respondent's duty to collect the company's premiums using company
receipts under Sec. 7.4 of the management contract is further evidence of petitioner's control over
respondent, thus:

xxx xxx xxx

7.4. Acceptance and Remittance of Premiums. — . . . . the Company hereby

authorizes you to accept and to receive sums of money in payment of
premiums, loans, deposits on applications, with or without interest, due from
 policyholders and applicants for insurance, and the like, specially from
policyholders of business solicited and sold by the agents attached to your unit
provided however, that all such payments shall be duly receipted by you on
the corresponding Company's "Agents' Receipt" to be provided you for this
purpose and to be covered by such rules and accounting regulations the
Company may issue from time to time on the matter. Payments received by
you shall be turned over to the Company's designated District or Service Office
clerk or directly to the Home Office not later than the next working day from
receipt thereof . . . .

Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and Basiao12 to
the instant case under the doctrine of stare decisis, postulating that both cases involve parties similarly
situated and facts which are almost identical.

But we are not convinced that the cited case is on all fours with the case at bar. In Basiao, the agent
was appointed Agency Manager under an Agency Manager Contract. To implement his end of the
agreement, Melecio Basiao organized an agency office to which he gave the name M. Basiao and
Associates. The Agency Manager Contract practically contained the same terms and conditions as
the Agency Contract earlier entered into, and the Court observed that, "drawn from the terms of the
contract they had entered into, (which) either expressly or by necessary implication, Basiao (was)
made the master of his own time and selling methods, left to his own judgment the time, place and
means of soliciting insurance, set no accomplishment quotas and compensated him on the bases of
results obtained. He was not bound to observe any schedule of working hours or report to any regular
station; he could seek and work on his prospects anywhere and at anytime he chose to and was free
to adopt the selling methods he deemed most effective." Upon these premises, Basiao was considered
as agent — an independent contractor — of petitioner INSULAR LIFE.

Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not agency
manager. There is no evidence that to implement his obligations under the management contract, De
los Reyes had organized an office. Petitioner in fact has admitted that it provided De los Reyes a place
and a table at its office where he reported for and worked whenever he was not out in the field. Placed
under petitioner's Cebu District Service Office, the unit was given a name by petitioner — De los Reyes
and Associates — and assigned Code No. 11753 and Recruitment No. 109398. Under the
managership contract, De los Reyes was obliged to work exclusively for petitioner in life insurance
solicitation and was imposed premium production quotas. Of course, the acting unit manager could
not underwrite other lines of insurance because his Permanent Certificate of Authority was for life
insurance only and for no other. He was proscribed from accepting a managerial or supervisory
position in any other office including the government without the written consent of petitioner. De los
Reyes could only be promoted to permanent unit manager if he met certain requirements and his
promotion was recommended by the petitioner's District Manager and Regional Manager and
approved by its Division Manager. As Acting Unit Manager, De los Reyes performed functions beyond
mere solicitation of insurance business for petitioner. As found by the NLRC, he exercised
administrative functions which were necessary and beneficial to the business of INSULAR LIFE.

In Great Pacific Life Insurance Company v. NLRC 13 which is closer in application than Basiao to this
present controversy, we found that "the relationships of the Ruiz brothers and Grepalife were those of
employer-employee. First, their work at the time of their dismissal as zone supervisor and district
manager was 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 . . . . 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 . . . ." We need elaborate no further.
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.

WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the Decision of
the National Labor Relations Commission dated 3 March 1995 and its Order of 6 April 1996 sustaining
it are AFFIRMED. Let this case be REMANDED to the Labor Arbiter a quo who is directed to hear and
dispose of this case with deliberate dispatch in light of the views expressed herein.

SO ORDERED.

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 ₱310,000 for the first year and
₱317,000 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 Arbiter5 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
₱317,000. 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 (₱500,000.00).

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 (₱150,000.00) 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.21 Whatever benefits SONZA enjoyed arose from contract and not
because of an employer-employee relationship.22

SONZA’s talent fees, amounting to ₱317,000 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.38 Even though ABS-CBN provided SONZA
with the place of work and the necessary equipment, SONZA was still an independent contractor since
ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for SONZA to display
his talent during the airing of the programs.39

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

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected
him to its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s control
"not only [over] his manner of work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents"41 of ABS-CBN. The Agreement does not 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 Constitution53 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.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 96520 June 28, 1996

RESTITUTO C. PALOMADO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, MARLING RICE MILL and/or MARIO TAN
TENG KUAN and ROLANDO TAN, respondents.

PANGANIBAN, J.:p

In this Decision, this Court reiterates some well-entrenched doctrines in labor cases, like (1) the appropriate remedy to challenge rulings of the
NLRC is a petition for certiorari under Rule 65, not a petition for review under Rule 45 or 43; (2) a motion for reconsideration is an essential
prerequisite to certiorari; (3) only questions relating to jurisdiction or grave abuse of discretion -- not ordinary errors of law -- are reviewable on
certiorari; (4) hence, findings of facts of the NLRC are generally accorded great respect, even finality; (5) the law grants the labor arbiter wide
latitude to determine the need for a formal hearing after the submission by the parties of their position papers; (6) labor tribunals need only
substantial evidence -- not beyond reasonable doubt -- as basis for their decisions; and (7) before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established.

Petitioner questions the correctness of the Resolution1 dated November 29, 1990 of respondent
National Labor Relations Commission2 in Case No. RAB-IV-4-2385-90, which affirmed in toto the
decision dated June 27, 1990 rendered by Labor Arbiter Numeriano D. Villena dismissing herein
petitioner's complaint for alleged illegal dismissal, underpayment of wages and various benefits.

Antecedent Facts

The labor arbiter made the following factual findings:

As viewed from the complaint filed on April 17, 1990, complainant Restituto
Palomado charges respondents Marling Rice Mill and/or Mario Tan Teng (sic)
Kuan and Rolando S. (sic) Tan for alleged illegal dismissal, underpayment of
wages, overtime pay, legal holiday pay, premium pay for holiday and rest day
and separation pay/retirement/resignation benefit.

After a careful appraisal of the verified position papers together with their
supporting proofs, documents and affidavits submitted by the parties, the
undersigned finds that the case could be decided judiciously without the
necessity of going through formal hearings, hence this Decision.

In support of his claims, complainant, in his verified position paper submitted

on June 7, 1990 gave the following averments: that on January 2, 1970, he
was hired by respondent Marline Rice Mill as a truck driver paid on a "per trip
basis" amounting to a monthly average of P3,000.00; that he allegedly worked
thereat continuously up to August 1987 when he was illegally dismissed by
respondent Rolando O. Tan, in his capacity as manager/operator of
respondent Marling Rice Mill. Complainant likewise averred that sometime in
1973, respondent Mario Tan Ten (sic) Kuan suffered from stroke and in view
thereof, his son, respondent Rolando O. Tan, managed and operated Marling
Rice Mill. It was further argued that sometime in August 1987, respondent
Rolando Tan talked to him (complainant) and told him that he (R. Tan) would
sell the Isuzu cargo truck which complainant used to drive in order to buy a
new truck with the assurance that he would be retained as the driver of the
new unit, however, when the Isuzu cargo truck was bought, respondent Tan
dismissed him without cause and hired a new driver by the name of Antonio
Pustrado. Complainant contended that because of his unjustified dismissal
from Marling Rice Mill, he suffered and continues to suffer loss of income in
the average amount of P3,000.00 a month starting September 1987.

With regards to his money claims, complainant argued that he had to take trips
which took 2-3 days to complete for which he was paid minimal amounts
depending on the load of his truck and that for said minimal amounts, he had
to work continuously for days and even nights; that there were occasions when
he had to drive even during holidays and his rest days as per order of the
respondents (,) hence, for these, he is entitled to overtime pay, legal holiday
pay and premium pay for holiday and rest day.

Complainant submitted as part of its (sic) documentary evidence a

"Certification of Premium Payments" issued by the Employee Accounts
Department of the Social Security System dated October 26, 1988 showing
the premium payments made by Marling Trading and Ricemill in his favor from
April 1972 to July 1979. As likewise indicated by the letters "NI" in the columns
corresponding to the months after July 1979, complainant's name was no
longer included in the quarterly collection list submitted by the respondents on
file with the Social Security System.

On the other hand, respondent Rolando S. (sic) Tan, in his verified position
paper submitted on May 28, 1990 alleged among others that he is the
proprietor of R.S. Ricemill located in Bo. Hibanga, Sariaya, Quezon, which
business he started in 1987 while respondent Mario Tan Ten (sic) Kuan was
the proprietor of "Marling Rice Mill", which ceased operations in 1987 following
the infirmity and poor health of Mr. Mario Tan Teng Kuan who died of cardiac
arrest on March 15, 1989.
 Respondent Rolando S. (sic) Tan strongly argued that he is not the owner
neither the manager of Marling Rice Mill although he was a former employee
of Mr. Mario Tan Teng Kuan and that complainant had never been an
employee of R.S. Ricemill which he owned and operated.

The labor arbiter found that there was no dispute as to the fact that respondent Mario Tan Teng Kuan
(as owner of Marling Rice Mill) employed petitioner herein as truck driver, the real controversy being
when the latter's services actually ended, particularly in view of the untimely death of respondent Mario
Tan Teng Kuan in 1989 and the Marling Rice Mill's cessation of operation in 1987. Absent other
concrete evidence of petitioner's length of service, the labor arbiter relied upon the "certification of
premium payments" prepared and issued by the SSS Employee Accounts Department, Premium
Verification Division II at the instance of petitioner himself, which certification showed that after June
1979, petitioner was no longer included among the employees listed in the quarterly collection list filed
with the Social Security System -- in other words, he ceased to be employed with respondent Marling
Rice Mill after June 1979. This was buttressed by the payrolls of Marling Rice Mill submitted to the
SSS for various periods after June 1979, as well as by the unrebutted sworn statement of one Dionisio
Belda, petitioner's co-worker and pahinante, who alleged that petitioner asked to go on vacation leave
in June 1979 and did not report back to work after that. The arbiter thus concluded that petitioner
ceased to be an employee of respondent Marling Rice Mill since July 1979, and therefore, inasmuch
as the complaint against his former employer Marling Rice Mill and/or Mario Tan Teng Kuan was filed
only on April 17, 1990, or beyond the reglementary period prescribed by law,3 the complaint was
already barred by prescription.

As to petitioner's claims against respondent Rolando O. Tan, the labor arbiter found that the
documentary evidence presented by said respondent overwhelmingly negated petitioner's allegations
that he had been employed by Tan, who it turned out was himself but an employee of Marling Rice
Mill, and who subsequently became proprietor of his own business (R.S. Ricemill), which started
operations in 1986, and which was never impleaded by petitioner as party-respondent in the case
below. Thus, the arbiter ruled that there existed no employer-employee relationship between the
herein petitioner and respondent Rolando O. Tan, and dismissed the petitioner's claims for lack of
merit.

Dissatisfied, petitioner appealed the decision to public respondent NLRC, claiming grave abuse of
discretion by the arbiter and serious errors in his findings of fact. But the public respondent agreed
with the findings made by the arbiter and then concluded:

We have gone over the entire records of this case, and We find no evidentiary
support for complainant's (petitioner's) allegations against respondent Rolando
Tan. Thus, it is Our opinion that the Labor Arbiter neither abused his discretion
nor committed serious errors in his findings of facts. Hence, We affirm.4

Aggrieved, petitioner now pleads NLRC's abuse of discretion before this Court.

Issues Raised

Petitioner framed the "principal issue" this-wise:

Whether or not public respondent NLRC erred in finding that the Labor Arbiter
did not act with grave abuse of discretion amounting to lack of jurisdiction nor
commit serious errors in his findings both in questions of fact and of law.
 and then proceeded to attack the labor arbiter's rulling by alleging the following specific
"grounds" for the petition:

I. The labor arbiter acted with grave abuse of discretion amounting to lack of
jurisdiction in the conduct of the proceedings in this case.

II. The labor arbiter committed serious errors in his findings in questions of fact.

III. The labor arbiter committed serious errors in his findings in questions of
law.

The Court's Ruling

We find for the respondents, the instant petition being obviously and indubitably bereft of merit.

At the outset, it must be noted that this petition suffers from serious procedural defects which would
have warranted its outright dismissal. First of all, it was incorrectly brought "under the provisions of
Rule 43 of the Rules of Court" (rollo, p. 6). We have time and again ruled that the appropriate remedy
to challenge a resolution of the NLRC is a special civil action for certiorari under Rule 65 of the Rules
of Court, and not a petition for review under Rule 45,5 much less Rule 43. However, in order to afford
the parties substantial justice, the Court decided to treat the instant petition as a special civil action for
certiorari.

Additionally, the allegations in the petition clearly show that petitioner failed to file a motion for
reconsideration of the assailed Resolution before filing the instant petition. As correctly argued by
private respondent Rolando Tan, such failure constitutes a fatal infirmity even if the petition be treated
as a special civil action for certiorari. The unquestioned rule in this jurisdiction is that certiorari will lie
only if there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of
law against the acts of public respondent. In the instant case, the plain and adequate remedy expressly
provided by law 6 was a motion for reconsideration of the assailed decision, based on palpable or
patent errors, to be made under oath and filed within ten (10) calendar days from receipt of the
questioned decision. And for failure to avail of the correct remedy expressly provided by law, petitioner
has permitted the subject Resolution to become final and executory after the lapse of the ten day
period within which to file such motion for reconsideration. We have held in Pure Foods Corporation
vs. NLRC7 that:

(T)he filing of such a motion is intended to afford public respondent an

opportunity to correct any actual or fancied error attributed to it by way of a re-
examination of the legal and factual aspects of the case. Petitioner's inaction
or negligence under the circumstances is tantamount to a deprivation of the
right and opportunity of the respondent commission to cleanse itself of an error
unwittingly committed or to vindicate itself of an act unfairly imputed. An
improvident resort to certiorari cannot be used as a tool to circumvent the right
of public respondent to review and purge its decision of an oversight, if any.
Neither should this special civil action be resorted to as a shield from the
adverse consequences of petitioner's own negligence or error in the choice of
remedies. Having allowed the decision to become final and executory,
petitioner cannot by an overdue strategy question the correctness of the
decision of the respondent commission when a timely motion for
reconsideration was the legal remedy indicated.

Likewise, in the case of Zapata vs. NLRC,8 this Court held:

 Furthermore, fatal to this action is petitioner's failure to move for the
reconsideration of the assailed decision on the dubious pretext that it will be a
mere rehash of the arguments and issues previously raised in his position
paper, but which stratagem conveniently skirts as a consequence the
reglementary period therefor, especially if the same has already expired. The
implementing rules of respondent NLRC are unequivocal in requiring that a
motion for reconsideration of the order, resolution, or decision of respondent
commission should be seasonably filed as a precondition for pursuing any
further or subsequent remedy, otherwise the said order resolution, or decision
shall become final and executory after ten calendar days from receipt thereof
. Obviously, the rationale therefor is that the law intends to afford the NLRC an
opportunity to rectify such errors or mistakes it may have lapsed into before
resort to the courts of justice can be had. This merely adopts the rule that the
function of a motion for reconsideration is to point out to the court (or
commission) the error that it may have committed and to give it a chance to
correct itself. (footnote omitted; emphasis supplied.)

But even if the aforementioned procedural flaws were to be disregarded, the herein petition
nevertheless suffers from even more grievous substantive defects. A petition for certiorari under Rule
65 of the Rules of Court will lie only where a grave abuse of discretion or an act without or in excess
of jurisdiction on the part of the respondent commission is clearly shown. In Loadstar Shipping Co.,
Inc. vs. Gallo,9 we reiterated the basic policy that the original and exclusive jurisdiction of this Court to
review a decision or resolution of respondent NLRC does not include a correction of its evaluation of
the evidence but is confined to issues of jurisdiction or grave abuse of discretion. But the instant
petition is a mere rehash of petitioner's Memorandum of Appeal 10 dated July 13, 1990 filed with
respondent NLRC. Nowhere in the petition is it shown that the respondent commission committed
such patent, gross and prejudicial errors of law or fact, or a capricious disregard of settled law and
jurisprudence, as to amount to a grave abuse of discretion or lack of jurisdiction on its part. Absent
such showing, this Court ordinarily will not engage in a review of the facts found nor even of the law
as interpreted or applied by respondent, for the writ of certiorari is an extraordinary remedy, and
certiorari jurisdiction is not to be equated with appellate jurisdiction. 11 Moreover, it is a fundamental
rule that factual findings of quasi-judicial agencies like the public respondent NLRC if supported by
substantial evidence are generally accorded not only great respect but even finality, and are binding
upon this Court, unless petitioner is able to show that respondent Commission had arbitrarily
disregarded evidence before it or had misapprehended evidence to such an extent as to compel a
contrary conclusion if such evidence had been properly appreciated. 12 This is rooted in the fact that
this Court is not a trier of facts, as well as in the respect to be accorded the determinations made by
administrative bodies in general on matters falling within their respective fields of specialization or
expertise. 13

In any event, a careful perusal of the records of this case leads to the inescapable conclusion that
respondent NLRC acted correctly in affirming in toto the decision of the labor arbiter dismissing the
claims of petitioner. Clearly, the arbiter's decision is based on substantial evidence, and no infirmity or
circumstance can be found in its factual findings as would detract from the conclusiveness thereof.
Thus, there being nothing irregular, arbitrary, capricious or oppressive, amounting to lack of
jurisdiction, nor erroneous exercise of discretion, much less any grave abuse thereof, on the part of
public respondent, we therefore may not amend or revoke its factual findings. Any error which may be
attributed to respondent NLRC would at most be a mere error of judgment which cannot be a proper
subject of the special civil action for certiorari. 14

But if only to demonstrate the utter lack of basis for the instant petition and obliterate all doubts as to
the correctness of the respondent Commission's ruling, we shall delve into the alleged errors assigned
by the petitioner.
Firstly, petitioner complains that the labor arbiter "acted with grave abuse of discretion . . ." when on
May 17, 1990 he terminated the preliminary conference and directed the parties to file their respective
position papers without even requiring the private respondents to answer the claims of petitioner and
in spite of the fact that petitioner's counsel had moved for ten days to file a reply/comment to
respondent Tan's Letter-Answer (Petitioner's Memorandum, pp. 7-8; rollo, pp. 185-186). Petitioner
also insists that inasmuch as the parties held totally conflicting positions, the arbiter ought to have held
formal hearings.

These arguments are simply untenable. Petitioner should know that the basic purpose of the initial
conference/hearing is to explore the possibility of amicably settling the case upon a fair compromise
(Sec. 1, Rule VII, Revised Rules of the NLRC). Therefore, when the possibility of an amicable
settlement appears remote, either in whole or in part, it becomes imperative for the labor arbiter to
terminate the conference and require the parties to submit their respective verified position papers
pursuant to Sec. 2 of Rule VII. In the case below, the arbiter's exercise of his discretion, which carries
with it the presumption of regularity, was based only on the belief that it was futile to continue exploring
the possibility of a settlement. The arbiter ordered submission of position papers also because of the
"failure of complainant's representative to appear" (rollo, p. 41). This, however, did not preclude the
petitioner's filing of a reply/comment to respondent Tan's Letter-Answer if he had so desired. In any
event, we do not see how the failure of the arbiter to conduct a formal hearing could constitute "grave
abuse of discretion". Sec. 3, Rule VII grants an arbiter wide latitude to "determine whether there is a
need for a formal hearing or investigation . . . after the submission by the parties of their position
papers and supporting proofs." Additionally, the records show that petitioner signed the minutes of the
hearing of May 17, 1990, signifying his agreement to the arbiter's colatilla that "in case a formal hearing
is no longer necessary, this case shall be deemed submitted for decision." (Rollo, p. 41.)

Secondly, petitioner believes that had there been a formal hearing, the arbiter's allegedly mistaken
reliance on certain of the documentary evidence submitted by parties "would have been cured and
remedied by the parties", presumably through the presentation of controverting evidence. This
postulate is not in consonance with the need for speedy disposition of labor cases, for the parties may
then willfully withhold their evidence and disclose the same only during the formal hearing, thus
creating surprises which would merely complicate the issues and prolong the trial. There is a dire need
to lessen technicalities in the process of settling labor disputes; hence, Sec. 2 of Rule VII provides:

Sec. 2. Submission of position papers. -- During the initial conference/hearing,

or immediately thereafter, the Labor Arbiter shall require the parties to
simultaneously submit to him their respective verified position papers, which
shall cover only the issues raised in the complaint, accompanied by all
supporting documents then available to them and the affidavits of their
witnesses which shall take the place of their direct testimony. The parties shall
thereafter not be allowed to allege, or present evidence to prove, facts not
referred to and any cause or causes of action not included in their complaint
or position papers, affidavits and other documents. The parties shall furnish
each other with copies of the position papers, together with the supporting
affidavits and documents submitted by them.

Petitioner further alleges that the arbiter ignored all his documentary exhibits save one, which was
even used against him, "while laboriously enumerating one by one all the documentary exhibits of
respondent Rolando Tan without qualification whatsoever on the admissibility and credibility of the
same." The one piece of documentary evidence being referred to was the SSS's certification of
premium payments which, as earlier mentioned, indicated on its face that by July 1979 petitioner was
no longer an employee of Marling Rice Mill. Other documentary evidence presented by petitioner
consisted of various receipts for purchases of gasoline, which cannot be regarded as relevant to nor
in any way supportive of his allegation of having been employed from 1979 onwards, and so were
correctly disregarded.

Petitioner also questions respondent Commission's condonation of the labor arbiter's "serious errors"
in determining the non-existence of employer-employee relationship based on (i) the SSS certification
of premium payments, (ii) the payrolls of Marling Rice Mill submitted to the SSS, and (iii) the sworn
statement executed by Dionisio Belda.

The petitioner's proposition is tenuous if not flimsy. He himself procured and submitted to the arbiter
the SSS certification of premium payments to prove his employment from 1979 to his alleged date of
termination. Thus, he must have foreseen the consequences of such evidence, for the certification
"clearly showed that after June 1979, his name as an employee of respondent Marling Rice Mill was
no longer included in the submitted quarterly collection list on file with the Social Security System, or
in short, he ceased to be employed with the respondent Marling Rice Mill after June 1979." 15 As for
the payrolls of Marline Rice Mill pertaining to various parts of 1979, 1984, 1985 and 1986, we agree
with respondent Tan 16 that petitioner's accusation that Tan deliberately and unlawfully withheld the
payrolls for the intervening periods is unfounded, reckless and irresponsible. In the first place, he did
not prove the existence of such unpresented payrolls (said rice mill having ceased operation in 1987)
and secondly, he failed to prove that respondent Tan (who insists he was not the manager thereof)
was in possession or custody of such payrolls. If he indeed believe that by such withheld payrolls he
could have proven the existence of an employer-employee relationship in his favor, then he should
have exerted diligent efforts to secure the same through subpoena duces tecum. But he did not. In
any event, quasi-judicial agencies need only substantial evidence as basis for their decisions.
Petitioner submitted a "Sinumpaang Salaysay" dated July 26, 1990 of Mr. Dionisio Belda (which,
incidentally, was presented for the first time only before this Court) in order to counteract and offset
the effects of the sworn statement dated October 28, 1979 executed by the same Mr. Belda in which
he categorically stated that petitioner did not return to work after going on vacation leave in June 1979,
Nevertheless, it is obvious that the new sworn statement does not in the least detract from the weight
of the evidence showing that petitioner was not an employee of private respondent Rolando Tan and
that Rolando Tan was not the manager of Marling Rice Mill but merely an employee thereof. The
petitioner also failed to explain why, in the payrolls of Marling Rice Mill, a certain Guillermo Tan signed
as the manager thereof, if indeed it is true that Rolando Tan was the manager of said rice mill. The
"Bilihang Lampasan" between respondent Tan and Antonio Lindog for the sale of an Isuzu cargo truck
does not, contrary to petitioner's contention, prove that respondent Tan was in "absolute control" of
Marling Rice Mill. To begin with, the mentioned truck was not even shown to have been owned by the
rice mill, thus no presumption of absolute control by respondent Tan over the rice mill could have
arisen from that contract of sale.

Disregarding the peripheral matters, the key issue in this case is whether there exists an employer-
employee relationship between petitioner and private respondent Rolando Tan, who, petitioner claims,
exercised the power to select and engage the services of the Marling Rice Mill's employees; to dismiss
employees (in the same way petitioner was allegedly dismissed), and paid the wages and controlled
all work of the mill's employees. Petitioner likewise avers that he was terminated without "cause, just
or authorized, thereby making the same illegal". As discussed earlier, and as found by the labor arbiter
and affirmed by the public respondent NLRC, there never existed an employer-employee relationship
between petitioner and private respondent Rolando Tan. Thus the labor arbiter held (and public
respondent NLRC concurred):

With regards to complainant's claims against respondent. Rolando O. Tan, the

overwhelming documentary evidences presented by said respondent strongly
negated complainant's charges that he had been under the employ of Rolando
O. Tan who appeared to be the registered proprietor/owner of R.S. Rice Mill,
(an) entity which started to operate in 1986 as per Certificate of Registration
 issued by the Bureau of Domestic Trade dated April 11, 1986 and which was
never interpleaded (sic) by herein complainant as party-respondent in this
case. Respondent Rolando Tan, whom complainant alluded to as the
manager/operator of Marling Rice Mill after respondent. Mario Tan Ten (sic)
Kuan suffered (a) stroke some time in 1973 was nothing more than a mere
employee of Marling Rice Mill as shown by the payrolls submitted to the Social
Security System by respondent Marling Rice Mill. Complainant's allegation that
Rolando Tan managed, operated and transacted business for Marling Rice Mill
is of no moment and wanting in evidence since it is even clear from the said
payrolls that it was one Guillermo Tan who was the manager of Marling Rice
Mill. Complainant's documentary exhibits (Annexes "I", "I-1" to "I-16", inclusive,
and Annex "J") failed to serve their purpose as they are in themselves mere
scraps of paper, irrelevant and immaterial.

In view of all the foregoing, the undersigned finds that there existed no
employee-employer relationship between complainant and respondent
Rolando O. Tan. (Rollo, pp. 49-50.)

An indispensable precondition of illegal dismissal is the prior existence of an employer-employee

relationship; in this case, since it was established that there was no such relationship between
petitioner and private respondent Tan, therefore the allegation of illegal dismissal does not have any
leg to stand on. The claims for backwages, separation pay and other benefits must likewise fail.

WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED for lack of merit and the
Resolution of the public respondent NLRC dated November 29, 1990 is AFFIRMED in toto. No costs.

SO ORDERED.

BOOK THREE
CONDITIONS OF EMPLOYMENT

Title I
WORKING CONDITIONS AND REST PERIODS

Chapter I
HOURS OF WORK

Article 82. Coverage. The provisions of this Title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.

As used herein, "managerial employees" refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff.
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of work
in the field cannot be determined with reasonable certainty.

Article 83. Normal hours of work. The normal hours of work of any employee shall not exceed eight
(8) hours a day.

Health personnel in cities and municipalities with a population of at least one million (1,000,000) or in
hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular office hours
for eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except where the
exigencies of the service require that such personnel work for six (6) days or forty-eight (48) hours, in
which case, they shall be entitled to an additional compensation of at least thirty percent (30%) of their
regular wage for work on the sixth day. For purposes of this Article, "health personnel" shall include
resident physicians, nurses, nutritionists, dietitians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or
clinic personnel.

Article 84. Hours worked. Hours worked shall include (a) all time during which an employee is required
to be on duty or to be at a prescribed workplace; and (b) all time during which an employee is suffered
or permitted to work.

Rest periods of short duration during working hours shall be counted as hours worked.

Article 85. Meal periods. Subject to such regulations as the Secretary of Labor may prescribe, it shall
be the duty of every employer to give his employees not less than sixty (60) minutes time-off for their
regular meals.

Article 86. Night shift differential. Every employee shall be paid a night shift differential of not less
than ten percent (10%) of his regular wage for each hour of work performed between ten o’clock in
the evening and six o’clock in the morning.

Article 87. Overtime work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, an additional compensation equivalent to his regular wage
plus at least twenty-five percent (25%) thereof. Work performed beyond eight hours on a holiday or
rest day shall be paid an additional compensation equivalent to the rate of the first eight hours on a
holiday or rest day plus at least thirty percent (30%) thereof.

Article 88. Undertime not offset by overtime. Undertime work on any particular day shall not be offset
by overtime work on any other day. Permission given to the employee to go on leave on some other
day of the week shall not exempt the employer from paying the additional compensation required in
this Chapter.

Article 89. Emergency overtime work. Any employee may be required by the employer to perform
overtime work in any of the following cases:

When the country is at war or when any other national or local emergency has been declared by the
National Assembly or the Chief Executive;

When it is necessary to prevent loss of life or property or in case of imminent danger to public safety
due to an actual or impending emergency in the locality caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity;
When there is urgent work to be performed on machines, installations, or equipment, in order to avoid
serious loss or damage to the employer or some other cause of similar nature;

When the work is necessary to prevent loss or damage to perishable goods; and

Where the completion or continuation of the work started before the eighth hour is necessary to
prevent serious obstruction or prejudice to the business or operations of the employer.

Any employee required to render overtime work under this Article shall be paid the additional
compensation required in this Chapter.

Article 90. Computation of additional compensation. For purposes of computing overtime and other
additional remuneration as required by this Chapter, the "regular wage" of an employee shall include
the cash wage only, without deduction on account of facilities provided by the employer.

Chapter II
WEEKLY REST PERIODS

Article 91. Right to weekly rest day.

It shall be the duty of every employer, whether operating for profit or not, to provide each of his
employees a rest period of not less than twenty-four (24) consecutive hours after every six (6)
consecutive normal work days.

The employer shall determine and schedule the weekly rest day of his employees subject to collective
bargaining agreement and to such rules and regulations as the Secretary of Labor and Employment
may provide. However, the employer shall respect the preference of employees as to their weekly rest
day when such preference is based on religious grounds.

Article 92. When employer may require work on a rest day. The employer may require his employees
to work on any day:

In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon,
earthquake, epidemic or other disaster or calamity to prevent loss of life and property, or imminent
danger to public safety;

In cases of urgent work to be performed on the machinery, equipment, or installation, to avoid serious
loss which the employer would otherwise suffer;

In the event of abnormal pressure of work due to special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;

To prevent loss or damage to perishable goods;

Where the nature of the work requires continuous operations and the stoppage of work may result in
irreparable injury or loss to the employer; and

Under other circumstances analogous or similar to the foregoing as determined by the Secretary of
Labor and Employment.

Article 93. Compensation for rest day, Sunday or holiday work.

Where an employee is made or permitted to work on his scheduled rest day, he shall be paid an
additional compensation of at least thirty percent (30%) of his regular wage. An employee shall be
entitled to such additional compensation for work performed on Sunday only when it is his established
rest day.

When the nature of the work of the employee is such that he has no regular workdays and no regular
rest days can be scheduled, he shall be paid an additional compensation of at least thirty percent
(30%) of his regular wage for work performed on Sundays and holidays.

Work performed on any special holiday shall be paid an additional compensation of at least thirty
percent (30%) of the regular wage of the employee. Where such holiday work falls on the employee’s
scheduled rest day, he shall be entitled to an additional compensation of at least fifty per cent (50%)
of his regular wage.

Where the collective bargaining agreement or other applicable employment contract stipulates the
payment of a higher premium pay than that prescribed under this Article, the employer shall pay such
higher rate.

Chapter III
HOLIDAYS, SERVICE INCENTIVE LEAVES AND SERVICE CHARGES

Article 94. Right to holiday pay.

Every worker shall be paid his regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;

The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; and

As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth
of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-
fifth and thirtieth of December and the day designated by law for holding a general election.

Article 95. Right to service incentive leave.

Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.

This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
Secretary of Labor and Employment after considering the viability or financial condition of such
establishment.

The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any
court or administrative action.

Article 96. Service charges. All service charges collected by hotels, restaurants and similar
establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The share of the employees shall be equally distributed
among them. In case the service charge is abolished, the share of the covered employees shall be
considered integrated in their wages.

Title II
WAGES

Chapter I
PRELIMINARY MATTERS

Article 97. Definitions. As used in this Title:

"Person" means an individual, partnership, association, corporation, business trust, legal

representatives, or any organized group of persons.

"Employer" includes any person acting directly or indirectly in the interest of an employer in relation to
an employee and shall include the government and all its branches, subdivisions and instrumentalities,
all government-owned or controlled corporations and institutions, as well as non-profit private
institutions, or organizations.

"Employee" includes any individual employed by an employer.

"Agriculture" includes farming in all its branches and, among other things, includes cultivation and
tillage of soil, dairying, the production, cultivation, growing and harvesting of any agricultural and
horticultural commodities, the raising of livestock or poultry, and any practices performed by a farmer
on a farm as an incident to or in conjunction with such farming operations, but does not include the
manufacturing or processing of sugar, coconuts, abaca, tobacco, pineapples or other farm products.

"Employ" includes to suffer or permit to work.

"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor and Employment, of board, lodging, or other facilities customarily furnished by the
employer to the employee. "Fair and reasonable value" shall not include any profit to the employer, or
to any person affiliated with the employer.

Article 98. Application of Title. This Title shall not apply to farm tenancy or leasehold, domestic service
and persons working in their respective homes in needle work or in any cottage industry duly registered
in accordance with law.

Chapter II
MINIMUM WAGE RATES

Article 99. Regional minimum wages. The minimum wage rates for agricultural and non-agricultural
employees and workers in each and every region of the country shall be those prescribed by the
Regional Tripartite Wages and Productivity Boards. (As amended by Section 3, Republic Act No. 6727,
June 9, 1989).
Article 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed
at the time of promulgation of this Code.

Article 101. Payment by results.

The Secretary of Labor and Employment shall regulate the payment of wages by results, including
pakyao, piecework, and other non-time work, in order to ensure the payment of fair and reasonable
wage rates, preferably through time and motion studies or in consultation with representatives of
workers’ and employers’ organizations.

Chapter III
PAYMENT OF WAGES

Article 102. Forms of payment. No employer shall pay the wages of an employee by means of
promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even
when expressly requested by the employee.

Payment of wages by check or money order shall be allowed when such manner of payment is
customary on the date of effectivity of this Code, or is necessary because of special circumstances as
specified in appropriate regulations to be issued by the Secretary of Labor and Employment or as
stipulated in a collective bargaining agreement.

Article 103. Time of payment. Wages shall be paid at least once every two (2) weeks or twice a month
at intervals not exceeding sixteen (16) days. If on account of force majeure or circumstances beyond
the employer’s control, payment of wages on or within the time herein provided cannot be made, the
employer shall pay the wages immediately after such force majeure or circumstances have ceased.
No employer shall make payment with less frequency than once a month.

The payment of wages of employees engaged to perform a task which cannot be completed in two (2)
weeks shall be subject to the following conditions, in the absence of a collective bargaining agreement
or arbitration award:

That payments are made at intervals not exceeding sixteen (16) days, in proportion to the amount of
work completed;

That final settlement is made upon completion of the work.

Article 104. Place of payment. Payment of wages shall be made at or near the place of undertaking,
except as otherwise provided by such regulations as the Secretary of Labor and Employment may
prescribe under conditions to ensure greater protection of wages.

Article 105. Direct payment of wages. Wages shall be paid directly to the workers to whom they are
due, except:

In cases of force majeure rendering such payment impossible or under other special circumstances
to be determined by the Secretary of Labor and Employment in appropriate regulations, in which case,
the worker may be paid through another person under written authority given by the worker for the
purpose; or
Where the worker has died, in which case, the employer may pay the wages of the deceased worker
to the heirs of the latter without the necessity of intestate proceedings. The claimants, if they are all of
age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they are
his heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be
executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be presented to the
employer who shall make payment through the Secretary of Labor and Employment or his
representative. The representative of the Secretary of Labor and Employment shall act as referee in
dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the
employer of any further liability with respect to the amount paid.

Article 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code.

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

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

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

Article 107. Indirect employer. The provisions of the immediately preceding article shall likewise apply
to any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.

Article 108. Posting of bond. An employer or indirect employer may require the contractor or
subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond
will answer for the wages due the employees should the contractor or subcontractor, as the case may
be, fail to pay the same.

Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers.

Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an
employer’s business, his workers shall enjoy first preference as regards their wages and other
monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and other creditors may be paid.
(As amended by Section 1, Republic Act No. 6715, March 21, 1989)
Article 111. Attorney’s fees.

In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees
equivalent to ten percent of the amount of wages recovered.

It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings
for the recovery of wages, attorney’s fees which exceed ten percent of the amount of wages recovered.