Republic of the Philippines free to decide for themselves whether to report for work or not on any cockfighting day.

SUPREME COURT In times when there are few cockfights in Gallera de Mandaue, petitioners go to other
Manila cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued
identification cards to indicate that they were free from the normal entrance fee and to
THIRD DIVISION differentiate them from the general public.6
G.R. No. 196426 August 15, 2011 In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to
be regular employees of respondents as they performed work that was necessary and
MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners,
indispensable to the usual trade or business of respondents for a number of years. The
vs.
Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered
COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER 19th DIVISION,
respondents to pay petitioners their backwages and separation pay.7
GALLERA DE MANDAUE / SPOUSES VICENTE and MARIA LUISA
LOOT, Respondents. Respondents’ counsel received the Labor Arbiter’s Decision on September 14, 2004.
And within the 10-day appeal period, he filed the respondents’ appeal with the NLRC on
DECISION
September 24, 2004, but without posting a cash or surety bond equivalent to the
VELASCO, JR., J.: monetary award granted by the Labor Arbiter.8

Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to It was only on October 11, 2004 that respondents filed an appeal bond dated October 6,
set aside the Decision1 and Resolution2 dated May 29, 2009 and February 23, 2010, 2004. Hence, in a Resolution9 dated August 25, 2005, the NLRC denied the appeal for
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA affirmed its non-perfection.
the October 18, 2006 Resolution3 of the National Labor Relations Commission (NLRC),
Subsequently, however, the NLRC, acting on respondents’ Motion for Reconsideration,
Fourth Division (now Seventh Division), in NLRC Case No. V-000673-2004.
reversed its Resolution on the postulate that their appeal was meritorious and the filing
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they of an appeal bond, albeit belated, is a substantial compliance with the rules. The NLRC
were hired by respondents-spouses Vicente and Maria Luisa Loot, the owners of held in its Resolution of October 18, 2006 that there was no employer-employee
Gallera de Mandaue (the cockpit), as the official masiador and sentenciador, relationship between petitioners and respondents, respondents having no part in the
respectively, of the cockpit sometime in 1993. selection and engagement of petitioners, and that no separate individual contract with
respondents was ever executed by petitioners.10
As the masiador, Semblante calls and takes the bets from the gamecock owners and
other bettors and orders the start of the cockfight. He also distributes the winnings after Following the denial by the NLRC of their Motion for Reconsideration, per Resolution
deducting the arriba, or the commission for the cockpit. Meanwhile, as the sentenciador, dated January 12, 2007, petitioners went to the CA on a petition for certiorari. In support
Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks’ of their petition, petitioners argued that the NLRC gravely abused its discretion in
physical condition and capabilities to continue the cockfight, and eventually declares the entertaining an appeal that was not perfected in the first place. On the other hand,
result of the cockfight.4 respondents argued that the NLRC did not commit grave abuse of discretion, since they
eventually posted their appeal bond and that their appeal was so meritorious warranting
For their services as masiador and sentenciador, Semblante receives PhP 2,000 per the relaxation of the rules in the interest of justice. 11
week or a total of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP
14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday every In its Decision dated May 29, 2009, the appellate court found for respondents, noting
week, excluding monthly derbies and cockfights held on special holidays. Their working that referees and bet-takers in a cockfight need to have the kind of expertise that is
days start at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the characteristic of the game to interpret messages conveyed by mere gestures. Hence,
morning depending on the needs of the cockpit. Petitioners had both been issued petitioners are akin to independent contractors who possess unique skills, expertise,
employees’ identification cards5 that they wear every time they report for duty. They and talent to distinguish them from ordinary employees. Further, respondents did not
alleged never having incurred any infraction and/or violation of the cockpit rules and supply petitioners with the tools and instrumentalities they needed to perform work.
regulations. Petitioners only needed their unique skills and talents to perform their job as masiador
and sentenciador.12 The CA held:
On November 14, 2003, however, petitioners were denied entry into the cockpit upon
the instructions of respondents, and were informed of the termination of their services In some circumstances, the NLRC is allowed to be liberal in the interpretation of the
effective that date. This prompted petitioners to file a complaint for illegal dismissal rules in deciding labor cases. In this case, the appeal bond was filed, although late.
against respondents. Moreover, an exceptional circumstance obtains in the case at bench which warrants a
relaxation of the bond requirement as a condition for perfecting the appeal. This case is
In answer, respondents denied that petitioners were their employees and alleged that highly meritorious that propels this Court not to strictly apply the rules and thus prevent
they were associates of respondents’ independent contractor, Tomas Vega. a grave injustice from being done.
Respondents claimed that petitioners have no regular working time or day and they are

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As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual completely, the rights and obligations of the parties. 17 This is one case where the
employer-employee exists between the petitioners and the private respondents exception to the general rule lies.
[constrain] the relaxation of the rules. In this regard, we find no grave abuse attributable
to the administrative body. While respondents had failed to post their bond within the 10-day period provided
above, it is evident, on the other hand, that petitioners are NOT employees of
xxxx respondents, since their relationship fails to pass muster the four-fold test of
employment We have repeatedly mentioned in countless decisions: (1) the selection
Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit owned by and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
Lucia Loot. Cockfighting, which is a part of our cultural heritage, has a peculiar set of and (4) the power to control the employee’s conduct, which is the most important
rules. It is a game based on the fighting ability of the game cocks in the cockpit. The element.18 1avvphi1
referees and bet-takers need to have that kind of expertise that is characteristic of the
cockfight gambling who can interpret the message conveyed even by mere gestures. As found by both the NLRC and the CA, respondents had no part in petitioners’
They ought to have the talent and skill to get the bets from numerous cockfighting selection and management;19 petitioners’ compensation was paid out of the arriba
aficionados and decide which cockerel to put in the arena. They are placed in that elite (which is a percentage deducted from the total bets), not by petitioners;20 and
spot where they can control the game and the crowd. They are not given salaries by petitioners performed their functions as masiador and sentenciador free from the
cockpit owners as their compensation is based on the "arriba". In fact, they can offer direction and control of respondents.21 In the conduct of their work, petitioners relied
their services everywhere because they are duly licensed by the GAB. They are free to mainly on their "expertise that is characteristic of the cockfight gambling," 22 and were
choose which cockpit arena to enter and offer their expertise. Private respondents never given by respondents any tool needed for the performance of their work. 23
cannot even control over the means and methods of the manner by which they perform
their work. In this light, they are akin to independent contractors who possess unique Respondents, not being petitioners’ employers, could never have dismissed, legally or
skills, expertise and talent to distinguish them from ordinary employees. illegally, petitioners, since respondents were without power or prerogative to do so in
the first place. The rule on the posting of an appeal bond cannot defeat the substantive
Furthermore, private respondents did not supply petitioners with the tools and rights of respondents to be free from an unwarranted burden of answering for an illegal
instrumentalities they needed to perform their work. Petitioners only needed their talent dismissal for which they were never responsible.1avvphi1
and skills to be a "masiador" and "sentenciador". As such, they had all the tools they
needed to perform their work. (Emphasis supplied.) Strict implementation of the rules on appeals must give way to the factual and legal
reality that is evident from the records of this case. 24 After all, the primary objective of
The CA refused to reconsider its Decision. Hence, petitioners came to this Court, our laws is to dispense justice and equity, not the contrary.
arguing in the main that the CA committed a reversible error in entertaining an appeal,
which was not perfected in the first place. WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and
February 23, 2010 Resolution of the CA, and the October 18, 2006 Resolution of the
Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases NLRC.
involving monetary awards from the Decision of the Labor Arbiter. 13 Article 223 of the
Labor Code provides: SO ORDERED.

Article 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:

xxxx

In case of a judgment involving a monetary award, an appeal by the employer may be

perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits of the case, has
relaxed this rule on, and excused the late posting of, the appeal bond when there are
strong and compelling reasons for the liberality,14 such as the prevention of miscarriage
of justice extant in the case15 or the special circumstances in the case combined with its
legal merits or the amount and the issue involved. 16 After all, technical rules cannot
prevent courts from exercising their duties to determine and settle, equitably and

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 Republic of the Philippines Very recently though and unfortunately, you have committed acts
SUPREME COURT inimical to the interest of the hospital, the details of which are
Manila contained in the hereto attached affidavit of witness.
SECOND DIVISION You are therefore given 24 hours to explain why no disciplinary
action should be taken against you.
G.R. No. 176484 November 25, 2008
Pending investigation of your case, you are hereby placed under
CALAMBA MEDICAL CENTER, INC., petitioner 30-days [sic] preventive suspension effective upon receipt
vs. hereof.7 (Emphasis, italics and underscoring supplied)
NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS
AND MERCEDITHA* LANZANAS, respondents. Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not
involved in the said incident, any work schedule after sending her husband Dr.
DECISION Lanzanas the memorandum,8 nor inform her the reason therefor, albeit she
CARPIO MORALES, J.: was later informed by the Human Resource Department (HRD) officer that that
was part of petitioner's cost-cutting measures.9
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged
the services of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) Responding to the memorandum, Dr. Lanzanas, by letter of March 9,
and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995, 1998,10 admitted that he spoke with Miscala over the phone but that their
respectively, as part of its team of resident physicians. Reporting at the hospital conversation was taken out of context by Dr. Trinidad.
twice-a-week on twenty-four-hour shifts, respondents were paid a monthly On March 14, 1998,11 the rank-and-file employees union of petitioner went on
"retainer" of P4,800.00 each.1 It appears that resident physicians were also strike due to unresolved grievances over terms and conditions of
given a percentage share out of fees charged for out-patient treatments, employment.12
operating room assistance and discharge billings, in addition to their fixed
monthly retainer.2 On March 20, 1998, Dr. Lanzanas filed a complaint for illegal
suspension13 before the National Labor Relations Commission (NLRC)-
The work schedules of the members of the team of resident physicians were Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a
fixed by petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And complaint for illegal dismissal.14
they were issued identification cards3 by petitioner and were enrolled in the
Social Security System (SSS).4 Income taxes were withheld from them.5 In the meantime, then Sec. Cresenciano Trajano of the Department of Labor
and Employment (DOLE) certified the labor dispute to the NLRC for
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician compulsory arbitration and issued on April 21, 1998 return-to-work Order to the
at the hospital, inadvertently overheard a telephone conversation of respondent striking union officers and employees of petitioner pending resolution of the
Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension labor dispute.15
telephone line. Apparently, Dr. Lanzanas and Miscala were discussing the low
"census" or admission of patients to the hospital.6 In a memorandum 16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998
order of the Secretary of Labor directing all union officers and members to
Dr. Desipeda whose attention was called to the above-said telephone return-to-work "on or April 23, 1998, except those employees that were already
conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998 terminated or are serving disciplinary actions." Dr. Desipeda thus ordered the
reading: officers and members of the union to "report for work as soon as possible" to
As a Licensed Resident Physician employed in Calamba Medical the hospital's personnel officer and administrator for "work scheduling,
Center since several years ago, the hospital management has assignments and/or re-assignments."
committed upon you utmost confidence in the performance of duties Petitioner later sent Dr. Lanzanas a notice of termination which he received on
pursuant thereto. This is the reason why you were awarded the April 25, 1998, indicating as grounds therefor his failure to report back to work
privilege to practice in the hospital and were entrusted hospital despite the DOLE order and his supposed role in the striking union, thus:
functions to serve the interest of both the hospital and our patients
using your capability for independent judgment. On April 23, 1998, you still did not report for work despite
memorandum issued by the CMC Medical Director implementing the

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 Labor Secretary's ORDER. The same is true on April 24, 1998 and each of the spouses of moral and exemplary damages to P100,000.00
April 25, 1998,--you still did not report for work [sic]. and P50,000.00, respectively and omitted the award of attorney's fees.
You are likewise aware that you were observed (re: signatories [sic] to In finding the existence of an employer-employee relationship between the
the Saligang Batas of BMCMC-UWP) to be unlawfully participating parties, the appellate court held:
as member in the rank-and-file union's concerted activities despite
knowledge that your position in the hospital is managerial in nature x x x. While it may be true that the respondents are given the discretion
(Nurses, Orderlies, and staff of the Emergency Room carry out your to decide on how to treat the petitioner's patients, the petitioner has not
orders using your independent judgment) which participation is denied nor explained why its Medical Director still has the direct
expressly prohibited by the New Labor Code and which prohibition was supervision and control over the respondents. The fact is the
sustained by the Med-Arbiter's ORDER dated February 24, 1998. petitioner's Medical Director still has to approve the schedule of
(Emphasis and italics in the original; underscoring partly in the original duties of the respondents. The respondents stressed that the
and partly supplied) petitioner's Medical Director also issues instructions or orders to the
respondents relating to the means and methods of performing
For these reasons as grounds for termination, you are hereby their duties, i.e. admission of patients, manner of characterizing
terminated for cause from employment effective today, April 25, cases, treatment of cases, etc., and may even overrule, review or
1998, without prejudice to further action for revocation of your license revise the decisions of the resident physicians. This was not
before the Philippine [sic] Regulations [sic] Commission.17 (Emphasis controverted by the petitioner. The foregoing factors taken together are
and underscoring supplied) sufficient to constitute the fourth element, i.e. control test, hence, the
existence of the employer-employee relationship. In denying that it had
Dr. Lanzanas thus amended his original complaint to include illegal control over the respondents, the petitioner alleged that the
dismissal.18 His and Dr. Merceditha's complaints were consolidated and respondents were free to put up their own clinics or to accept other
docketed as NLRC CASE NO. RAB-IV-3-9879-98-L. retainership agreement with the other hospitals. But, the petitioner
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed failed to substantiate the allegation with substantial evidence.
the spouses' complaints for want of jurisdiction upon a finding that there was (Emphasis and underscoring supplied)24
no employer-employee relationship between the parties, the fourth requisite or The appellate court thus declared that respondents were illegally dismissed.
the "control test" in the determination of an employment bond being absent.
x x x. The petitioner's ground for dismissing respondent Ronaldo
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Lanzanas was based on his alleged participation in union activities,
Arbiter's findings, disposing as follows: specifically in joining the strike and failing to observe the return-to-work
WHEREFORE, the assailed decision is set aside. The respondents are order issued by the Secretary of Labor. Yet, the petitioner did not
ordered to pay the complainants their full backwages; separation pay adduce any piece of evidence to show that respondent Ronaldo indeed
of one month salary for every year of service in lieu of reinstatement; participated in the strike. x x x.
moral damages of P500,000.00 each; exemplary damages In the case of respondent Merceditha Lanzanas, the petitioner's
of P250,000.00 each plus ten percent (10%) of the total award as explanation that "her marriage to complainant Ronaldo has given rise
attorney's fees. to the presumption that her sympat[hies] are likewise with her
SO ORDERED.21 husband" as a ground for her dismissal is unacceptable. Such is not
one of the grounds to justify the termination of her
Petitioner's motion for reconsideration having been denied, it brought the case employment.25 (Underscoring supplied)
to the Court of Appeals on certiorari.
The fallo of the appellate court's decision reads:
The appellate court, by June 30, 2004 Decision,22 initially granted petitioner's
petition and set aside the NLRC ruling. However, upon a subsequent motion WHEREFORE, the instant Motion for Reconsideration is GRANTED,
for reconsideration filed by respondents, it reinstated the NLRC decision in an and the Court's decision dated June 30, 2004, is SET ASIDE. In lieu
Amended Decision23 dated September 26, 2006 but tempered the award to thereof, a new judgment is entered, as follows:

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 WHEREFORE, the petition is DISMISSED. The assailed With respect to respondents' sharing in some hospital fees, this scheme does
decision dated May 3, 2002 and order dated September 24, not sever the employment tie between them and petitioner as this merely
2002 of the NLRC in NLRC NCR CA No. 019823-99 are mirrors additional form or another form of compensation or incentive similar to
AFFIRMED with the MODIFICATION that the moral and what commission-based employees receive as contemplated in Article 97 (f) of
exemplary damages are reduced to P100,000.00 each the Labor Code, thus:
and P50,000.00 each, respectively.
"Wage" paid to any employee shall mean the remuneration or earning,
SO ORDERED.26 (Emphasis and italics in the original; underscoring however designated, capable of being expressed in terms of
supplied) money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which
Preliminarily, the present petition calls for a determination of whether there is payable by an employer to an employee under a written or unwritten
exists an employer-employee relationship27 between petitioner and the contract of employment for work done or to be done, or for services
spouses-respondents. rendered or to be rendered and includes the fair and reasonable value,
Denying the existence of such relationship, petitioner argues that the appellate as determined by the Secretary of Labor, of board, lodging, or other
court, as well as the NLRC, overlooked its twice-a-week reporting arrangement facilities customarily furnished by the employer to the employee. x x x
with respondents who are free to practice their profession elsewhere the rest of (Emphasis and underscoring supplied),
the week. And it invites attention to the uncontroverted allegation that Respondents were in fact made subject to petitioner-hospital's Code of
respondents, aside from their monthly retainers, were entitled to one-half of all Ethics,32 the provisions of which cover administrative and disciplinary
suturing, admitting, consultation, medico-legal and operating room assistance measures on negligence of duties, personnel conduct and behavior, and
fees.28 These circumstances, it stresses, are clear badges of the absence of offenses against persons, property and the hospital's interest.
any employment relationship between them.
More importantly, petitioner itself provided incontrovertible proof of the
This Court is unimpressed. employment status of respondents, namely, the identification cards it issued
Under the "control test," an employment relationship exists between a them, the payslips33 and BIR W-2 (now 2316) Forms which reflect their status
physician and a hospital if the hospital controls both the means and the details as employees, and the classification as "salary" of their remuneration.
of the process by which the physician is to accomplish his task. 29 Moreover, it enrolled respondents in the SSS and Medicare (Philhealth)
program. It bears noting at this juncture that mandatory coverage under the
Where a person who works for another does so more or less at his own SSS Law34 is premised on the existence of an employer-employee
pleasure and is not subject to definite hours or conditions of work, and is relationship,35 except in cases of compulsory coverage of the self-employed. It
compensated according to the result of his efforts and not the amount thereof, would be preposterous for an employer to report certain persons as employees
the element of control is absent.30 and pay their SSS premiums as well as their wages if they are not its
employees.36
As priorly stated, private respondents maintained specific work-schedules, as
determined by petitioner through its medical director, which consisted of 24- And if respondents were not petitioner's employees, how does it account for its
hour shifts totaling forty-eight hours each week and which were strictly to be issuance of the earlier-quoted March 7, 1998 memorandum explicitly stating
observed under pain of administrative sanctions. that respondent is "employed" in it and of the subsequent termination letter
indicating respondent Lanzanas' employment status.
That petitioner exercised control over respondents gains light from the
undisputed fact that in the emergency room, the operating room, or any Finally, under Section 15, Rule X of Book III of the Implementing Rules of the
department or ward for that matter, respondents' work is monitored through its Labor Code, an employer-employee relationship exists between the resident
nursing supervisors, charge nurses and orderlies. Without the approval or physicians and the training hospitals, unless there is a training agreement
consent of petitioner or its medical director, no operations can be undertaken in between them, and the training program is duly accredited or approved by the
those areas. For control test to apply, it is not essential for the employer to appropriate government agency. In respondents' case, they were not
actually supervise the performance of duties of the employee, it being enough undergoing any specialization training. They were considered non-
that it has the right to wield the power.31 training general practitioners,37 assigned at the emergency rooms and ward
sections.

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Turning now to the issue of dismissal, the Court upholds the appellate court's with such orders, prohibitions and/or injunctions as are issued by
conclusion that private respondents were illegally dismissed. the Secretary of Labor and Employment or the Commission,
under pain of immediate disciplinary action, including dismissal
Dr. Lanzanas was neither a managerial nor supervisory employee but part of or loss of employment status or payment by the locking-out
the rank-and-file. This is the import of the Secretary of Labor's Resolution of employer of backwages, damages and other affirmative relief,
May 22, 1998 in OS A-05-15-98 which reads: even criminal prosecution against either or both of them.
xxxx x x x x (Emphasis and underscoring supplied)
In the motion to dismiss it filed before the Med-Arbiter, the employer An assumption or certification order of the DOLE Secretary automatically
(CMC) alleged that 24 members of petitioner are supervisors, namely x results in a return-to-work of all striking workers, whether a corresponding
x x Rolando Lanzonas [sic] x x x. return-to-work order had been issued.39 The DOLE Secretary in fact issued a
A close scrutiny of the job descriptions of the alleged supervisors return-to-work Order, failing to comply with which is punishable by dismissal or
narrated by the employer only proves that except for the contention loss of employment status.40
that these employees allegedly supervise, they do not however Participation in a strike and intransigence to a return-to-work order must,
recommend any managerial action. At most, their job is however, be duly proved in order to justify immediate dismissal in a "national
merely routinary in nature and consequently, they cannot be interest" case. As the appellate court as well as the NLRC observed, however,
considered supervisory employees. there is nothing in the records that would bear out Dr. Lanzanas' actual
They are not therefore barred from membership in the union of participation in the strike. And the medical director's Memorandum 41 of April 22,
rank[-]and[-]file, which the petitioner [the union] is seeking to 1998 contains nothing more than a general directive to all union officers and
represent in the instant case.38 (Emphasis and underscoring supplied) members to return-to-work. Mere membership in a labor union does not ipso
facto mean participation in a strike.
xxxx
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or
Admittedly, Dr. Lanzanas was a union member in the hospital, which is before April 9, 1998, he was never given any work schedule42 was not refuted
considered indispensable to the national interest. In labor disputes adversely by petitioner. Petitioner in fact never released any findings of its supposed
affecting the continued operation of a hospital, Article 263(g) of the Labor Code investigation into Dr. Lanzanas' alleged "inimical acts."
provides:
Petitioner thus failed to observe the two requirements,before dismissal can be
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.– effected ─ notice and hearing ─ which constitute essential elements of the
statutory process; the first to apprise the employee of the particular acts or
xxxx omissions for which his dismissal is sought, and the second to inform the
employee of the employer's decision to dismiss him. 43 Non-observance of
(g) x x x x
these requirements runs afoul of the procedural mandate.44
x x x x. In labor disputes adversely affecting the continued
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998
operation of such hospitals, clinics or medical institutions, it shall
was the first and only time that he was apprised of the reason for his dismissal.
be the duty of the striking union or locking-out employer to provide and
He was not afforded, however, even the slightest opportunity to explain his
maintain an effective skeletal workforce of medical and other health
side. His was a "termination upon receipt" situation. While he was priorly made
personnel, whose movement and services shall be unhampered and
to explain on his telephone conversation with Miscala, 45 he was not with
unrestricted, as are necessary to insure the proper and adequate
respect to his supposed participation in the strike and failure to heed the return-
protection of the life and health of its patients, most especially
to-work order.
emergency cases, for the duration of the strike or lockout. In such
cases, the Secretary of Labor and Employment is mandated to As for the case of Dr. Merceditha, her dismissal was worse, it having been
immediately assume, within twenty-four hours from knowledge of the effected without any just or authorized cause and without observance of due
occurrence of such strike or lockout, jurisdiction over the same or process. In fact, petitioner never proferred any valid cause for her dismissal
certify to the Commission for compulsory arbitration. For this except its view that "her marriage to [Dr. Lanzanas] has given rise to the
purpose, the contending parties are strictly enjoined to comply presumption that her sympath[y] [is] with her husband; [and that when [Dr.

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Lanzanas] declared that he was going to boycott the scheduling of their respondent who was at the same time a stockholder of PAMAN[A]
workload by the medical doctor, he was presumed to be speaking for himself Hospital. The giving of the list was not a Board action.51 (Emphasis
[and] for his wife Merceditha."46 and underscoring supplied)
Petitioner's contention that Dr. Merceditha was a member of the union or was a The circulation of such list containing names of alleged union members
participant in the strike remained just that. Its termination of her employment on intended to prevent employment of workers for union activities similarly
the basis of her conjugal relationship is not analogous to constitutes unfair labor practice, thereby giving a right of action for damages by
the employees prejudiced.52
any of the causes enumerated in Article 282 47 of the Labor Code. Mere
suspicion or belief, no matter how strong, cannot substitute for factual findings A word on the appellate court's deletion of the award of attorney's fees. There
carefully established through orderly procedure.48 being no basis advanced in deleting it, as exemplary damages were correctly
awarded,53 the award of attorney's fees should be reinstated.
The Court even notes that after the proceedings at the NLRC, petitioner never
even mentioned Dr. Merceditha's case. There is thus no gainsaying that her WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871
dismissal was both substantively and procedurally infirm. is AFFIRMED with MODIFICATION in that the award by the National Labor
Relations Commission of 10% of the total judgment award as attorney's fees is
Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch reinstated. In all other aspects, the decision of the appellate court is affirmed.
out list"49 including therein the names of respondents. Consider the following
portions of Dr. Merceditha's Memorandum of Appeal: SO ORDERED.
3. Moreover, to top it all, respondents have circulated a so called
"Watch List" to other hospitals, one of which [was] procured from
Foothills Hospital in Sto. Tomas, Batangas [that] contains her name.
The object of the said list is precisely to harass Complainant and
malign her good name and reputation. This is not only unprofessional,
but runs smack of oppression as CMC is trying permanently deprived
[sic] Complainant of her livelihood by ensuring that she is barred from
practicing in other hospitals.
4. Other co-professionals and brothers in the profession are fully aware
of these "watch out" lists and as such, her reputation was not only
besmirched, but was damaged, and she suffered social humiliation as
it is of public knowledge that she was dismissed from work.
Complainant came from a reputable and respected family, her father
being a retired full Colonel in the Army, Col. Romeo A. Vente, and her
brothers and sisters are all professionals, her brothers, Arnold and
Romeo Jr., being engineers. The Complainant has a family protection
[sic] to protect. She likewise has a professional reputation to protect,
being a licensed physician. Both her personal and professional
reputation were damaged as a result of the unlawful acts of the
respondents.50
While petitioner does not deny the existence of such list, it pointed to the lack
of any board action on its part to initiate such listing and to circulate the same,
viz:
20. x x x. The alleged watchlist or "watch out list," as termed by
complainants, were merely lists obtained by one Dr. Ernesto Naval of
PAMANA Hospital. Said list was given by a stockholder of

7|Page
 Republic of the Philippines subject to subsequent confirmation of receipt of payment by the
SUPREME COURT Company as evidenced by an Official Receipt issued by the Company
Manila directly to the policyholder.
SECOND DIVISION xxxx
G.R. No. 167622 November 7, 2008 The Company may terminate this Agreement for any breach or
violation of any of the provisions hereof by the Agent by giving written
GREGORIO V. TONGKO, petitioner notice to the Agent within fifteen (15) days from the time of the
vs. discovery of the breach. No waiver, extinguishment, abandonment,
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and withdrawal or cancellation of the right to terminate this Agreement by
RENATO A. VERGEL DE DIOS, respondents. the Company shall be construed for any previous failure to exercise its
DECISION right under any provision of this Agreement.

VELASCO, JR., J.: Either of the parties hereto may likewise terminate his Agreement at
any time without cause, by giving to the other party fifteen (15) days
The Case notice in writing. x x x

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency
March 29, 2005 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. Organization. In 1990, he became a Branch Manager. As the CA found,
88253, entitled The Manufacturers Life Insurance Co. (Phils.), Inc. v. National Tongko's gross earnings from his work at Manulife, consisting of commissions,
Labor Relations Commission and Gregorio V. Tongko. The assailed decision persistency income, and management overrides, may be summarized as
set aside the Decision dated September 27, 2004 and Resolution dated follows:
December 16, 2004 rendered by the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 040220-04. January to December 10, 2002 - P 865,096.07
The Facts
2001 - 6,214,737.11
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic
corporation engaged in life insurance business. Renato A. Vergel De Dios was,
during the period material, its President and Chief Executive Officer. Gregorio 2000 - 8,003,180.38
V. Tongko started his professional relationship with Manulife on July 1, 1977 by
virtue of a Career Agent's Agreement2 (Agreement) he executed with Manulife.
1999 - 6,797,814.05
In the Agreement, it is provided that:
It is understood and agreed that the Agent is an independent 1998 - 4,805,166.34
contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship between 1997 - 2,822,620.003
the Company and the Agent.
xxxx The problem started sometime in 2001, when Manulife instituted manpower
development programs in the regional sales management level. Relative
a) The Agent shall canvass for applications for Life Insurance, thereto, De Dios addressed a letter dated November 6, 20014 to Tongko
Annuities, Group policies and other products offered by the Company, regarding an October 18, 2001 Metro North Sales Managers Meeting. In the
and collect, in exchange for provisional receipts issued by the Agent, letter, De Dios stated:
money due or to become due to the Company in respect of
applications or policies obtained by or through the Agent or from The first step to transforming Manulife into a big league player has
policyholders allotted by the Company to the Agent for servicing, been very clear - to increase the number of agents to at least 1,000
strong for a start. This may seem diametrically opposed to the way

8|Page
Manulife was run when you first joined the organization. Since then, same, an allegation that Malou herself denied at our meeting and in
however, substantial changes have taken place in the organization, as your very presence.
these have been influenced by developments both from within and
without the company. This only confirms, Greg, that those prior comments have no solid
basis at all. I now believe what I had thought all along, that these
xxxx allegations were simply meant to muddle the issues surrounding the
inability of your Region to meet its agency development objectives!
The issues around agent recruiting are central to the intended
objectives hence the need for a Senior Managers' meeting earlier last Issue # 3: "Sales Managers are doing what the company asks them to
month when Kevin O'Connor, SVP - Agency, took to the floor to do but, in the process, they earn less."
determine from our senior agency leaders what more could be done to
bolster manpower development. At earlier meetings, Kevin had xxxx
presented information where evidently, your Region was the lowest All the above notwithstanding, we had your own records checked and
performer (on a per Manager basis) in terms of recruiting in 2000 and, we found that you made a lot more money in the Year 2000 versus
as of today, continues to remain one of the laggards in this area. 1999. In addition, you also volunteered the information to Kevin when
While discussions, in general, were positive other than for certain you said that you probably will make more money in the Year 2001
comments from your end which were perceived to be uncalled for, it compared to Year 2000. Obviously, your above statement about
became clear that a one-on-one meeting with you was necessary to making "less money" did not refer to you but the way you argued this
ensure that you and management, were on the same plane. As point had us almost believing that you were spouting the gospel of
gleaned from some of your previous comments in prior meetings (both truth when you were not. x x x
in group and one-on-one), it was not clear that we were proceeding in xxxx
the same direction.
All of a sudden, Greg, I have become much more worried about your
Kevin held subsequent series of meetings with you as a result, one of ability to lead this group towards the new direction that we have been
which I joined briefly. In those subsequent meetings you reiterated discussing these past few weeks, i.e., Manulife's goal to become a
certain views, the validity of which we challenged and subsequently major agency-led distribution company in the Philippines. While as you
found as having no basis. claim, you have not stopped anyone from recruiting, I have never
With such views coming from you, I was a bit concerned that the rest heard you proactively push for greater agency recruiting. You have not
of the Metro North Managers may be a bit confused as to the been proactive all these years when it comes to agency growth.
directions the company was taking. For this reason, I sought a meeting xxxx
with everyone in your management team, including you, to clear the
air, so to speak. I cannot afford to see a major region fail to deliver on its developmental
goals next year and so, we are making the following changes in the
This note is intended to confirm the items that were discussed at the interim:
said Metro North Region's Sales Managers meeting held at the 7/F
Conference room last 18 October. 1. You will hire at your expense a competent assistant who
can unload you of much of the routine tasks which can be
xxxx easily delegated. This assistant should be so chosen as to
Issue # 2: "Some Managers are unhappy with their earnings and would complement your skills and help you in the areas where you
want to revert to the position of agents." feel "may not be your cup of tea".

This is an often repeated issue you have raised with me and with You have stated, if not implied, that your work as Regional
Kevin. For this reason, I placed the issue on the table before the rest of Manager may be too taxing for you and for your health. The
your Region's Sales Managers to verify its validity. As you must have above could solve this problem.
noted, no Sales Manager came forward on their own to confirm your xxxx
statement and it took you to name Malou Samson as a source of the

9|Page
 2. Effective immediately, Kevin and the rest of the Agency to its business. Manulife prescribed a Code of Conduct which would
Operations will deal with the North Star Branch (NSB) in govern in minute detail all aspects of the work to be undertaken by
autonomous fashion. x x x employees, including the sales process, the underwriting process,
signatures, handling of money, policyholder service, confidentiality,
I have decided to make this change so as to reduce your span legal and regulatory requirements and grounds for termination of
of control and allow you to concentrate more fully on employment. The letter of Mr. De Dios dated 06 November 2001 left no
overseeing the remaining groups under Metro North, your doubt as to who was in control. The subsequent termination letter
Central Unit and the rest of the Sales Managers in Metro dated 18 December 2001 again established in no uncertain terms the
North. I will hold you solely responsible for meeting the authority of the herein respondents to control the employees of
objectives of these remaining groups. Manulife. Plainly, the respondents wielded control not only as to the
xxxx ends to be achieved but the ways and means of attaining such ends. 6

The above changes can end at this point and they need not go any Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v.
further. This, however, is entirely dependent upon you. But you have to NLRC (4th Division)7 and Great Pacific Life Assurance Corporation v.
understand that meeting corporate objectives by everyone is primary NLRC,8 which Tongko claimed to be similar to the instant case.
and will not be compromised. We are meeting tough challenges next Tongko further claimed that his dismissal was without basis and that he was
year and I would want everybody on board. Any resistance or holding not afforded due process. He also cited the Manulife Code of Conduct by which
back by anyone will be dealt with accordingly. his actions were controlled by the company.
Subsequently, De Dios wrote Tongko another letter dated December 18, Manulife then filed a Position Paper with Motion to Dismiss dated February 27,
2001,5 terminating Tongko's services, thus: 2003,9 in which it alleged that Tongko is not its employee, and that it did not
It would appear, however, that despite the series of meetings and exercise "control" over him. Thus, Manulife claimed that the NLRC has no
communications, both one-on-one meetings between yourself and jurisdiction over the case.
SVP Kevin O'Connor, some of them with me, as well as group In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed
meetings with your Sales Managers, all these efforts have failed in the complaint for lack of an employer-employee relationship. Padolina found
helping you align your directions with Management's avowed agency that applying the four-fold test in determining the existence of an employer-
growth policy. employee relationship, none was found in the instant case. The dispositive
xxxx portion thereof states:

On account thereof, Management is exercising its prerogative under WHEREFORE, premises considered, judgment is hereby rendered
Section 14 of your Agents Contract as we are now issuing this notice DISMISSING the instant complaint for lack of jurisdiction, there being
of termination of your Agency Agreement with us effective fifteen days no employer-employee relationship between the parties.
from the date of this letter. SO ORDERED.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC Tongko appealed the arbiter's Decision to the NLRC which reversed the same
against Manulife for illegal dismissal. The case, docketed as NLRC NCR Case and rendered a Decision dated September 27, 2004 finding Tongko to have
No. 11-10330-02, was raffled to Labor Arbiter Marita V. Padolina. been illegally dismissed.
In the Complaint, Tongko, in a bid to establish an employer-employee The NLRC's First Division, while finding an employer-employee relationship
relationship, alleged that De Dios gave him specific directives on how to between Manulife and Tongko applying the four-fold test, held Manulife liable
manage his area of responsibility in the latter's letter dated November 6, 2001. for illegal dismissal. It further stated that Manulife exercised control over
He further claimed that Manulife exercised control over him as follows: Tongko as evidenced by the letter dated November 6, 2001 of De Dios and
Such control was certainly exercised by respondents over the herein wrote:
complainant. It was Manulife who hired, promoted and gave various The above-mentioned letter shows the extent to which respondents
assignments to him. It was the company who set objectives as regards controlled complainant's manner and means of doing his work and
productions, recruitment, training programs and all activities pertaining

10 | P a g e
 achieving the goals set by respondents. The letter shows how this conclusion while again applying the four-fold test. The CA found that
respondents concerned themselves with the manner complainant Manulife did not exercise control over Tongko that would render the latter an
managed the Metro North Region as Regional Sales Manager, to the employee of Manulife. The dispositive portion reads:
point that respondents even had a say on how complainant interacted
with other individuals in the Metro North Region. The letter is in fact WHEREFORE, premises considered, the present petition is hereby
replete with comments and criticisms on how complainant carried out GRANTED and the writ prayed for accordingly GRANTED. The
his functions as Regional Sales Manager. assailed Decision dated September 27, 2004 and Resolution dated
December 16, 2004 of the National Labor Relations Commission in
More importantly, the letter contains an abundance of directives or NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-
orders that are intended to directly affect complainant's authority and 04) are hereby ANNULLED and SET ASIDE. The Decision dated April
manner of carrying out his functions as Regional Sales Manager. 10 x x 15, 2004 of Labor Arbiter Marita V. Padolina is hereby REINSTATED.
x
Hence, Tongko filed this petition and presented the following issues:
Additionally, the First Division also ruled that:
A
Further evidence of [respondents'] control over complainant can be
found in the records of the case. [These] are the different codes of The Court of Appeals committed grave abuse of discretion in granting
conduct such as the Agent Code of Conduct, the Manulife Financial respondents' petition for certiorari.
Code of Conduct, and the Manulife Financial Code of Conduct B
Agreement, which serve as the foundations of the power of control
wielded by respondents over complainant that is further manifested in The Court of Appeals committed grave abuse of discretion in annulling
the different administrative and other tasks that he is required to and setting aside the Decision dated September 27, 2004 and
perform. These codes of conduct corroborate and reinforce the display Resolution dated December 16, 2004 in finding that there is no
of respondents' power of control in their 06 November 2001 Letter to employer-employee relationship between petitioner and respondent.
complainant.11
C
The fallo of the September 27, 2004 Decision reads:
The Court of Appeals committed grave abuse of discretion in annulling
WHEREFORE, premises considered, the appealed Decision is hereby and setting aside the Decision dated September 27, 2004 and
reversed and set aside. We find complainant to be a regular employee Resolution dated December 16, 2004 which found petitioner to have
of respondent Manulife and that he was illegally dismissed from been illegally dismissed and ordered his reinstatement with payment of
employment by respondents. backwages.13
In lieu of reinstatement, respondent Manulife is hereby ordered to pay Restated, the issues are: (1) Was there an employer-employee relationship
complainant separation pay as above set forth. Respondent Manulife is between Manulife and Tongko? and (2) If yes, was Manulife guilty of illegal
further ordered to pay complainant backwages from the time he was dismissal?
dismissed on 02 January 2002 up to the finality of this decision also as
indicated above. The Court's Ruling

xxxx This petition is meritorious.

All other claims are hereby dismissed for utter lack of merit. Tongko Was An Employee of Manulife

From this Decision, Manulife filed a motion for reconsideration which was The basic issue of whether or not the NLRC has jurisdiction over the case
denied by the NLRC First Division in a Resolution dated December 16, 2004. 12 resolves itself into the question of whether an employer-employee relationship
existed between Manulife and Tongko. If no employer-employee relationship
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. existed between the two parties, then jurisdiction over the case properly lies
88253. Thereafter, the CA issued the assailed Decision dated March 29, 2005, with the Regional Trial Court.
finding the absence of an employer-employee relationship between the parties
and deeming the NLRC with no jurisdiction over the case. The CA arrived at

11 | P a g e
In the determination of whether an employer-employee relationship exists I have decided to make this change so as to reduce your span of
between two parties, this Court applies the four-fold test to determine the control and allow you to concentrate more fully on overseeing the
existence of the elements of such relationship. In Pacific Consultants remaining groups under Metro North, your Central Unit and the rest of
International Asia, Inc. v. Schonfeld, the Court set out the elements of an the Sales Managers in Metro North. x x x
employer-employee relationship, thus:
3. Any resistance or holding back by anyone will be dealt with
Jurisprudence is firmly settled that whenever the existence of an accordingly.
employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; 4. I have been straightforward in this my letter and I know that we can
(b) the payment of wages; (c) the power of dismissal; and (d) the continue to work together… but it will have to be on my terms.
employer's power to control the employee's conduct. It is the so-called Anything else is unacceptable!
"control test" which constitutes the most important index of the The NLRC further ruled that the different codes of conduct that were applicable
existence of the employer-employee relationship that is, whether the to Tongko served as the foundations of the power of control wielded by
employer controls or has reserved the right to control the employee not Manulife over Tongko that is further manifested in the different administrative
only as to the result of the work to be done but also as to the means and other tasks that he was required to perform.
and methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the person The NLRC also found that Tongko was required to render exclusive service to
for whom the services are performed reserves the right to control not Manulife, further bolstering the existence of an employer-employee
only the end to be achieved but also the means to be used in reaching relationship.
such end.14
Finally, the NLRC ruled that Tongko was integrated into a management
The NLRC, for its part, applied the four-fold test and found the existence of all structure over which Manulife exercised control, including the actions of its
the elements and declared Tongko an employee of Manulife. The CA, on the officers. The NLRC held that such integration added to the fact that Tongko did
other hand, found that the element of control as an indicator of the existence of not have his own agency belied Manulife's claim that Tongko was an
an employer-employee relationship was lacking in this case. The NLRC and independent contractor.
the CA based their rulings on the same findings of fact but differed in their
interpretations. The CA, however, considered the finding of the existence of an employer-
employee relationship by the NLRC as far too sweeping having as its only
The NLRC arrived at its conclusion, first, on the basis of the letter dated basis the letter dated November 6, 2001 of De Dios. The CA did not concur
November 6, 2001 addressed by De Dios to Tongko. According to the NLRC, with the NLRC's ruling that the elements of control as pointed out by the NLRC
the letter contained "an abundance of directives or orders that are intended to are "sufficient indicia of control that negates independent contractorship and
directly affect complainant's authority and manner of carrying out his functions conclusively establish an employer-employee relationship between"15 Tongko
as Regional Sales Manager." It enumerated these "directives" or "orders" as and Manulife. The CA ruled that there is no employer-employee relationship
follows: between Tongko and Manulife.
1. You will hire at your expense a competent assistant who can unload An impasse appears to have been reached between the CA and the NLRC on
you of much of the routine tasks which can be easily delegated. x x x the sole issue of control over an employee's conduct. It bears clarifying that
such control not only applies to the work or goal to be done but also to the
xxxx means and methods to accomplish it.16 In Sonza v. ABS-CBN Broadcasting
This assistant should be hired immediately. Corporation, we explained that not all forms of control would establish an
employer-employee relationship, to wit:
2. Effective immediately, Kevin and the rest of the Agency Operations
will deal with the North Star Branch (NSB) in autonomous fashion x x Further, not every form of control that a party reserves to himself over
x. the conduct of the other party in relation to the services being rendered
may be accorded the effect of establishing an employer-employee
xxxx 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:

12 | P a g e
 Logically, the line should be drawn between rules that There is no conflict between our rulings in Insular and in Great Pacific Life
merely serve as guidelines towards the achievement of Assurance Corporation. We said in the latter case:
the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that [I]t cannot be gain said that Grepalife had control over private
control or fix the methodology and bind or restrict the respondents' performance as well as the result of their efforts. A
party hired to the use of such means. The first, which aim cursory reading of their respective functions as enumerated in
only to promote the result, create no employer-employee their contracts reveals that the company practically dictates the
relationship unlike the second, which address both the manner by which their jobs are to be carried out. For instance, the
result and the means used to achieve it.17 (Emphasis District Manager must properly account, record and document the
supplied.) company's funds spot-check and audit the work of the zone
supervisors, conserve the company's business in the district through
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that: ‘reinstatements', follow up the submission of weekly remittance reports
of the debit agents and zone supervisors, preserve company property
It is, therefore, usual and expected for an insurance company to in good condition, train understudies for the position of district
promulgate a set of rules to guide its commission agents in selling its manager, and maintain his quota of sales (the failure of which is a
policies that they may not run afoul of the law and what it requires or ground for termination). On the other hand, a zone supervisor must
prohibits. Of such a character are the rules which prescribe the direct and supervise the sales activities of the debit agents under him,
qualifications of persons who may be insured, subject insurance conserve company property through "reinstatements", undertake and
applications to processing and approval by the Company, and also discharge the functions of absentee debit agents, spot-check the
reserve to the Company the determination of the premiums to be paid records of debit agents, and insure proper documentation of sales and
and the schedules of payment. None of these really invades the collections by the debit agents.20 (Emphasis supplied.)
agent's contractual prerogative to adopt his own selling methods or to
sell insurance at his own time and convenience, hence cannot Based on the foregoing cases, if the specific rules and regulations that are
justifiably be said to establish an employer-employee relationship enforced against insurance agents or managers are such that would directly
between him and the company.18 affect the means and methods by which such agents or managers would
achieve the objectives set by the insurance company, they are employees of
Hence, we ruled in Insular that no employer-employee relationship existed the insurance company.
therein. However, such ruling was tempered with the qualification that had
there been evidence that the company promulgated rules or regulations that In the instant case, Manulife had the power of control over Tongko that would
effectively controlled or restricted an insurance agent's choice of methods or make him its employee. Several factors contribute to this conclusion.
the methods themselves in selling insurance, an employer-employee
relationship would have existed. In other words, the Court in Insular in no way In the Agreement dated July 1, 1977 executed between Tongko and Manulife,
definitively held that insurance agents are not employees of insurance it is provided that:
companies, but rather made the same a case-to-case basis. We held: The Agent hereby agrees to comply with all regulations and
The respondents limit themselves to pointing out that Basiao's contract requirements of the Company as herein provided as well as maintain a
with the Company bound him to observe and conform to such rules standard of knowledge and competency in the sale of the Company's
and regulations as the latter might from time to time prescribe. No products which satisfies those set by the Company and sufficiently
showing has been made that any such rules or regulations were meets the volume of new business required of Production Club
in fact promulgated, much less that any rules existed or were membership.21
issued which effectively controlled or restricted his choice of Under this provision, an agent of Manulife must comply with three (3)
methods or the methods themselves of selling insurance. Absent requirements: (1) compliance with the regulations and requirements of the
such showing, the Court will not speculate that any exceptions or company; (2) maintenance of a level of knowledge of the company's products
qualifications were imposed on the express provision of the that is satisfactory to the company; and (3) compliance with a quota of new
contract leaving Basiao "... free to exercise his own judgment as businesses.
to the time, place and means of soliciting insurance."19 (Emphasis
supplied.) Among the company regulations of Manulife are the different codes of conduct
such as the Agent Code of Conduct, Manulife Financial Code of Conduct, and

13 | P a g e
Manulife Financial Code of Conduct Agreement, which demonstrate the power d. Achieve agreed production objectives in terms of Net
of control exercised by the company over Tongko. The fact that Tongko was Annualized Commissions and Case Count and recruitment
obliged to obey and comply with the codes of conduct was not disowned by goals; and
respondents.
e. Sell the various products of Manulife to my personal clients.
Thus, with the company regulations and requirements alone, the fact that
Tongko was an employee of Manulife may already be established. Certainly, While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit
these requirements controlled the means and methods by which Tongko was dated April 28, 200324 that:
to achieve the company's goals. 3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks
More importantly, Manulife's evidence establishes the fact that Tongko was Unit, North Star Branch, Metro North Region;
tasked to perform administrative duties that establishes his employment with 4. As such UM, I render the following services:
Manulife.
a. To render or recommend prospective agents to be licensed,
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, trained and contracted to sell Manulife products and who will
2005, Manulife attached affidavits of its agents purportedly to support its claim be part of my Unit;
that Tongko, as a Regional Sales Manager, did not perform any administrative
functions. An examination of these affidavits would, however, prove the b. To coordinate activities of the agents under my Unit in their
opposite. daily, weekly and monthly selling activities, making sure that
their respective sales targets are met;
In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager
of Manulife, stated: c. To conduct periodic training sessions for my agents to
further enhance their sales skills.
4. On September 1, 1996, my services were engaged by Manulife as
an Agency Regional Sales Manager ("RSM") for Metro South Region d. To assist my agents with their sales activities by way of joint
pursuant to an Agency Contract. As such RSM, I have the following fieldwork, consultations and one-on- one evaluation and
functions: analysis of particular accounts.
1. Refer and recommend prospective agents to Manulife e. To provide opportunities to motivate my agents to succeed
like conducting promos to increase sales activities and
2. Coach agents to become productive encouraging them to be involved in company and industry
3. Regularly meet with, and coordinate activities of agents activities.
affiliated to my region. f. To provide opportunities for professional growth to my
While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit agents by encouraging them to be a member of the LUCAP
dated April 29, 200323 that: (Life Underwriters Association of the Philippines).

3. In January 1997, I was assigned as a Branch Manager ("BM") of A comparison of the above functions and those contained in the Agreement
Manulife for the Metro North Sector; with those cited in Great Pacific Life Assurance Corporation25 reveals a striking
similarity that would more than support a similar finding as in that case. Thus,
4. As such BM, I render the following services: there was an employer-employee relationship between the parties.
a. Refer and recommend prospective agents to Manulife; Additionally, it must be pointed out that the fact that Tongko was tasked with
recruiting a certain number of agents, in addition to his other administrative
b. Train and coordinate activities of other commission agents; functions, leads to no other conclusion that he was an employee of Manulife.
c. Coordinate activities of Agency Managers who, in turn, train In his letter dated November 6, 2001, De Dios harped on the direction of
and coordinate activites of other commission agents; Manulife of becoming a major agency-led distribution company whereby
greater agency recruitment is required of the managers, including Tongko. De

14 | P a g e
Dios made it clear that agent recruitment has become the primary means by without due process of law, nor shall any person be denied the equal
which Manulife intends to sell more policies. More importantly, it is Tongko's protection of the laws.
alleged failure to follow this principle of recruitment that led to the termination of
his employment with Manulife. With this, it is inescapable that Tongko was an Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in
employee of Manulife. explicit terms that the burden of proving the validity of the termination
of employment rests on the employer. Failure to discharge this
Tongko Was Illegally Dismissed evidential burden would necessarily mean that the dismissal was not
justified, and, therefore, illegal.27
In its Petition for Certiorari dated January 7, 200526 filed before the CA,
Manulife argued that even if Tongko is considered as its employee, his We again ruled in Times Transportation Co., Inc. v. National Labor Relations
employment was validly terminated on the ground of gross and habitual neglect Commission that:
of duties, inefficiency, as well as willful disobedience of the lawful orders of
Manulife. Manulife stated: The law mandates that the burden of proving the validity of the
termination of employment rests with the employer. Failure to
In the instant case, private respondent, despite the written reminder discharge this evidentiary burden would necessarily mean that the
from Mr. De Dios refused to shape up and altogether disregarded the dismissal was not justified, and, therefore, illegal. Unsubstantiated
latter's advice resulting in his laggard performance clearly indicative of suspicions, accusations and conclusions of employers do not provide
his willful disobedience of the lawful orders of his superior. x x x for legal justification for dismissing employees. In case of doubt, such
cases should be resolved in favor of labor, pursuant to the social
xxxx justice policy of our labor laws and Constitution. 28
As private respondent has patently failed to perform a very This burden of proof was clarified in Community Rural Bank of San Isidro
fundamental duty, and that is to yield obedience to all reasonable (N.E.), Inc. v. Paez to mean substantial evidence, to wit:
rules, orders and instructions of the Company, as well as gross failure
to reach at least minimum quota, the termination of his engagement The Labor Code provides that an employer may terminate the services
from Manulife is highly warranted and therefore, there is no illegal of an employee for just cause and this must be supported by
dismissal to speak of. substantial evidence. The settled rule in administrative and quasi-
judicial proceedings is that proof beyond reasonable doubt is not
It is readily evident from the above-quoted portions of Manulife's petition that it required in determining the legality of an employer's dismissal of an
failed to cite a single iota of evidence to support its claims. Manulife did not employee, and not even a preponderance of evidence is necessary as
even point out which order or rule that Tongko disobeyed. More importantly, substantial evidence is considered sufficient. Substantial evidence is
Manulife did not point out the specific acts that Tongko was guilty of that would more than a mere scintilla of evidence or relevant evidence as a
constitute gross and habitual neglect of duty or disobedience. Manulife merely reasonable mind might accept as adequate to support a conclusion,
cited Tongko's alleged "laggard performance," without substantiating such even if other minds, equally reasonable, might conceivably opine
claim, and equated the same to disobedience and neglect of duty. otherwise.29
We cannot, therefore, accept Manulife's position. Here, Manulife failed to overcome such burden of proof. It must be reiterated
In Quebec, Sr. v. National Labor Relations Commission, we ruled that: that Manulife even failed to identify the specific acts by which Tongko's
employment was terminated much less support the same with substantial
When there is no showing of a clear, valid and legal cause for the evidence. To repeat, mere conjectures cannot work to deprive employees of
termination of employment, the law considers the matter a case of their means of livelihood. Thus, it must be concluded that Tongko was illegally
illegal dismissal and the burden is on the employer to prove that the dismissed.
termination was for a valid or authorized cause. This burden of proof
appropriately lies on the shoulders of the employer and not on the Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons
employee because a worker's job has some of the characteristics of that Tongko not being its employee is not entitled to such notices. Since we
property rights and is therefore within the constitutional mantle of have ruled that Tongko is its employee, however, Manulife clearly failed to
protection. No person shall be deprived of life, liberty or property afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal
dismissal. In Quebec, Sr., we also stated:

15 | P a g e
 Furthermore, not only does our legal system dictate that the reasons PhP 518,144.76. For having been illegally dismissed, Tongko is entitled to
for dismissing a worker must be pertinently substantiated, it also reinstatement with full backwages under Art. 279 of the Labor Code. Due to the
mandates that the manner of dismissal must be properly done, strained relationship between Manulife and Tongko, reinstatement, however, is
otherwise, the termination itself is gravely defective and may be no longer advisable. Thus, Tongko will be entitled to backwages from January
declared unlawful.30 2, 2002 (date of dismissal) up to the finality of this decision. Moreover, Manulife
will pay Tongko separation pay of one (1) month salary for every year of
For breach of the due process requirements, Manulife is liable to Tongko in the service that is from 1977 to 2001 amounting to PhP 12,435,474.24, considering
amount of PhP 30,000 as indemnity in the form of nominal damages.31 that reinstatement is not feasible. Tongko shall also be entitled to an award of
Finally, Manulife raises the issue of the correctness of the computation of the attorney's fees in the amount of ten percent (10%) of the aggregate amount of
award to Tongko made by the NLRC by claiming that Songco v. National Labor the above awards.
Relations Commission32 is inapplicable to the instant case, considering that WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005
Songco was dismissed on the ground of retrenchment. Decision of the CA in CA-G.R. SP No. 88253 is REVERSED and SET ASIDE.
An examination of Songco reveals that it may be applied to the present case. The Decision dated September 27, 2004 of the NLRC is REINSTATED with
In that case, Jose Songco was a salesman of F.E. Zuellig (M), Inc. which the following modifications:
terminated the services of Songco on the ground of retrenchment due to Manulife shall pay Tongko the following:
financial losses. The issue raised to the Court, however, was whether
commissions are considered as part of wages in order to determine separation (1) Full backwages, inclusive of allowances and other benefits or their
pay. Thus, the fact that Songco was dismissed due to retrenchment does not monetary equivalent from January 2, 2002 up to the finality of this
hamper the application thereof to the instant case. What is pivotal is that we Decision;
ruled in Songco that commissions are part of wages for the determination of
separation pay. (2) Separation pay of one (1) month salary for every year of service
from 1977 up to 2001 amounting to PhP 12,435,474.24;
Article 279 of the Labor Code on security of tenure pertinently provides that:
(3) Nominal damages of PhP 30,000 as indemnity for violation of the
In cases of regular employment the employer shall not terminate the due process requirements; and
services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be (4) Attorney's fees equivalent to ten percent (10%) of the
entitled to reinstatement without loss of seniority rights and other aforementioned backwages and separation pay.
privileges and to his full backwages, inclusive of allowances, and to his Costs against respondent Manulife.
other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual SO ORDERED.
reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated
that an illegally dismissed employee shall be entitled to backwages and
separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to
two reliefs, namely: backwages and reinstatement. These are separate
and distinct from each other. However, separation pay is granted
where reinstatement is no longer feasible because of strained relations
between the employee and the employer. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the
computation of the NLRC that the monthly gross wage of Tongko in 2001 was

16 | P a g e
 Republic of the Philippines within fifteen (15) days from the time of the discovery of the breach. No waiver,
SUPREME COURT extinguishment, abandonment, withdrawal or cancellation of the right to
Manila terminate this Agreement by the Company shall be construed for any previous
failure to exercise its right under any provision of this Agreement.
EN BANC
Either of the parties hereto may likewise terminate his Agreement at any time
G.R. No. 167622 June 29, 2010 without cause, by giving to the other party fifteen (15) days notice in writing. 2
GREGORIO V. TONGKO, Petitioner, Tongko additionally agreed (1) to comply with all regulations and requirements
vs. of Manulife, and (2) to maintain a standard of knowledge and competency in
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and the sale of Manulife’s products, satisfactory to Manulife and sufficient to meet
RENATO A. VERGEL DE DIOS, Respondents. the volume of the new business, required by his Production Club membership. 3
RESOLUTION The second phase started in 1983 when Tongko was named Unit Manager in
BRION, J.: Manulife’s Sales Agency Organization. In 1990, he became a Branch Manager.
Six years later (or in 1996), Tongko became a Regional Sales Manager.4
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by
respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set Tongko’s gross earnings consisted of commissions, persistency income, and
aside our Decision of November 7, 2008. In the assailed decision, we found management overrides. Since the beginning, Tongko consistently declared
that an employer-employee relationship existed between Manulife and himself self-employed in his income tax returns. Thus, under oath, he declared
petitioner Gregorio Tongko and ordered Manulife to pay Tongko backwages his gross business income and deducted his business expenses to arrive at his
and separation pay for illegal dismissal. taxable business income. Manulife withheld the corresponding 10% tax on
Tongko’s earnings.5
The following facts have been stated in our Decision of November 7, 2008,
now under reconsideration, but are repeated, simply for purposes of clarity. In 2001, Manulife instituted manpower development programs at the regional
sales management level. Respondent Renato Vergel de Dios wrote Tongko a
The contractual relationship between Tongko and Manulife had two basic letter dated November 6, 2001 on concerns that were brought up during the
phases. The first or initial phase began on July 1, 1977, under a Career October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:
Agent’s Agreement (Agreement) that provided:
The first step to transforming Manulife into a big league player has been very
It is understood and agreed that the Agent is an independent contractor and clear – to increase the number of agents to at least 1,000 strong for a start.
nothing contained herein shall be construed or interpreted as creating an This may seem diametrically opposed to the way Manulife was run when you
employer-employee relationship between the Company and the Agent. first joined the organization. Since then, however, substantial changes have
taken place in the organization, as these have been influenced by
xxxx developments both from within and without the company.
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group xxxx
policies and other products offered by the Company, and collect, in exchange
for provisional receipts issued by the Agent, money due to or become due to The issues around agent recruiting are central to the intended objectives hence
the Company in respect of applications or policies obtained by or through the the need for a Senior Managers’ meeting earlier last month when Kevin
Agent or from policyholders allotted by the Company to the Agent for servicing, O’Connor, SVP-Agency, took to the floor to determine from our senior agency
subject to subsequent confirmation of receipt of payment by the Company as leaders what more could be done to bolster manpower development. At earlier
evidenced by an Official Receipt issued by the Company directly to the meetings, Kevin had presented information where evidently, your Region was
policyholder. the lowest performer (on a per Manager basis) in terms of recruiting in 2000
and, as of today, continues to remain one of the laggards in this area.
xxxx
While discussions, in general, were positive other than for certain comments
The Company may terminate this Agreement for any breach or violation of any from your end which were perceived to be uncalled for, it became clear that a
of the provisions hereof by the Agent by giving written notice to the Agent one-on-one meeting with you was necessary to ensure that you and

17 | P a g e
management, were on the same plane. As gleaned from some of your previous All of a sudden, Greg, I have become much more worried about your ability to
comments in prior meetings (both in group and one-on-one), it was not clear lead this group towards the new direction that we have been discussing these
that we were proceeding in the same direction. past few weeks, i.e., Manulife’s goal to become a major agency-led distribution
company in the Philippines. While as you claim, you have not stopped anyone
Kevin held subsequent series of meetings with you as a result, one of which I from recruiting, I have never heard you proactively push for greater agency
joined briefly. In those subsequent meetings you reiterated certain views, the recruiting. You have not been proactive all these years when it comes to
validity of which we challenged and subsequently found as having no basis. agency growth.
With such views coming from you, I was a bit concerned that the rest of the xxxx
Metro North Managers may be a bit confused as to the directions the company
was taking. For this reason, I sought a meeting with everyone in your I cannot afford to see a major region fail to deliver on its developmental goals
management team, including you, to clear the air, so to speak. next year and so, we are making the following changes in the interim:
This note is intended to confirm the items that were discussed at the said Metro 1. You will hire at your expense a competent assistant who can unload you of
North Region’s Sales Managers meeting held at the 7/F Conference room last much of the routine tasks which can be easily delegated. This assistant should
18 October. be so chosen as to complement your skills and help you in the areas where
you feel "may not be your cup of tea."
xxxx
You have stated, if not implied, that your work as Regional Manager may be
Issue # 2: "Some Managers are unhappy with their earnings and would want to too taxing for you and for your health. The above could solve this problem.
revert to the position of agents."
xxxx
This is an often repeated issue you have raised with me and with Kevin. For
this reason, I placed the issue on the table before the rest of your Region’s 2. Effective immediately, Kevin and the rest of the Agency Operations will deal
Sales Managers to verify its validity. As you must have noted, no Sales with the North Star Branch (NSB) in autonomous fashion. x x x
Manager came forward on their own to confirm your statement and it took you
to name Malou Samson as a source of the same, an allegation that Malou I have decided to make this change so as to reduce your span of control and
herself denied at our meeting and in your very presence. allow you to concentrate more fully on overseeing the remaining groups under
Metro North, your Central Unit and the rest of the Sales Managers in Metro
This only confirms, Greg, that those prior comments have no solid basis at all. I North. I will hold you solely responsible for meeting the objectives of these
now believe what I had thought all along, that these allegations were simply remaining groups.
meant to muddle the issues surrounding the inability of your Region to meet its
agency development objectives! xxxx

Issue # 3: "Sales Managers are doing what the company asks them to do but, The above changes can end at this point and they need not go any further.
in the process, they earn less." This, however, is entirely dependent upon you. But you have to understand
that meeting corporate objectives by everyone is primary and will not be
xxxx compromised. We are meeting tough challenges next year, and I would want
everybody on board. Any resistance or holding back by anyone will be dealt
All the above notwithstanding, we had your own records checked and we found with accordingly.6
that you made a lot more money in the Year 2000 versus 1999. In addition, you
also volunteered the information to Kevin when you said that you probably will Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001,
make more money in the Year 2001 compared to Year 2000. Obviously, your terminating Tongko’s services:
above statement about making "less money" did not refer to you but the way
you argued this point had us almost believing that you were spouting the It would appear, however, that despite the series of meetings and
gospel of truth when you were not. x x x communications, both one-on-one meetings between yourself and SVP Kevin
O’Connor, some of them with me, as well as group meetings with your Sales
xxxx Managers, all these efforts have failed in helping you align your directions with
Management’s avowed agency growth policy.

18 | P a g e
xxxx Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s
claim as he was not its employee as characterized in the four-fold test and our
On account thereof, Management is exercising its prerogative under Section 14 ruling in Carungcong v. National Labor Relations Commission.10
of your Agents Contract as we are now issuing this notice of termination of your
Agency Agreement with us effective fifteen days from the date of this letter. 7 The Conflicting Rulings of the Lower Tribunals
Tongko responded by filing an illegal dismissal complaint with the National The labor arbiter decreed that no employer-employee relationship existed
Labor Relations Commission (NLRC) Arbitration Branch. He essentially alleged between the parties. However, the NLRC reversed the labor arbiter’s decision
– despite the clear terms of the letter terminating his Agency Agreement – that on appeal; it found the existence of an employer-employee relationship and
he was Manulife’s employee before he was illegally dismissed. 8 concluded that Tongko had been illegally dismissed. In the petition for certiorari
with the Court of Appeals (CA), the appellate court found that the NLRC
Thus, the threshold issue is the existence of an employment relationship. A gravely abused its discretion in its ruling and reverted to the labor arbiter’s
finding that none exists renders the question of illegal dismissal moot; a finding decision that no employer-employee relationship existed between Tongko and
that an employment relationship exists, on the other hand, necessarily leads to Manulife.
the need to determine the validity of the termination of the relationship.
Our Decision of November 7, 2008
A. Tongko’s Case for Employment Relationship
In our Decision of November 7, 2008, we reversed the CA ruling and found that
Tongko asserted that as Unit Manager, he was paid an annual over-rider not an employment relationship existed between Tongko and Manulife. We
exceeding ₱50,000.00, regardless of production levels attained and exclusive concluded that Tongko is Manulife’s employee for the following reasons:
of commissions and bonuses. He also claimed that as Regional Sales
Manager, he was given a travel and entertainment allowance of ₱36,000.00 1. Our ruling in the first Insular11 case did not foreclose the possibility
per year in addition to his overriding commissions; he was tasked with of an insurance agent becoming an employee of an insurance
numerous administrative functions and supervisory authority over Manulife’s company; if evidence exists showing that the company promulgated
employees, aside from merely selling policies and recruiting agents for rules or regulations that effectively controlled or restricted an insurance
Manulife; and he recommended and recruited insurance agents subject to agent’s choice of methods or the methods themselves in selling
vetting and approval by Manulife. He further alleges that he was assigned a insurance, an employer-employee relationship would be present. The
definite place in the Manulife offices when he was not in the field – at the 3rd determination of the existence of an employer-employee relationship is
Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, thus on a case-to-case basis depending on the evidence on record.
Makati City – for which he never paid any rental. Manulife provided the office
equipment he used, including tables, chairs, computers and printers (and even 2. Manulife had the power of control over Tongko, sufficient to
office stationery), and paid for the electricity, water and telephone bills. As characterize him as an employee, as shown by the following indicators:
Regional Sales Manager, Tongko additionally asserts that he was required to 2.1 Tongko undertook to comply with Manulife’s rules,
follow at least three codes of conduct.9 regulations and other requirements, i.e., the different codes of
B. Manulife’s Case – Agency Relationship with Tongko conduct such as the Agent Code of Conduct, the Manulife
Financial Code of Conduct, and the Financial Code of Conduct
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement;
Agreement, Tongko was paid commissions of varying amounts, computed
based on the premium paid in full and actually received by Manulife on policies 2.2 The various affidavits of Manulife’s insurance agents and
obtained through an agent. As sales manager, Tongko was paid overriding managers, who occupied similar positions as Tongko, showed
sales commission derived from sales made by agents under his that they performed administrative duties that established
unit/structure/branch/region. Manulife also points out that it deducted and employment with Manulife;12 and
withheld a 10% tax from all commissions Tongko received; Tongko even 2.3 Tongko was tasked to recruit some agents in addition to
declared himself to be self-employed and consistently paid taxes as such—i.e., his other administrative functions. De Dios’ letter harped on the
he availed of tax deductions such as ordinary and necessary trade, business direction Manulife intended to take, viz., greater agency
and professional expenses to which a business is entitled. recruitment as the primary means to sell more policies;

19 | P a g e
 Tongko’s alleged failure to follow this directive led to the A. The Insurance and the Civil Codes; the Parties’ Intent and Established
termination of his employment with Manulife. Industry Practices
The Motion for Reconsideration We cannot consider the present case purely from a labor law perspective,
oblivious that the factual antecedents were set in the insurance industry so that
Manulife disagreed with our Decision and filed the present motion for the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly
reconsideration on the following GROUNDS: devoted to "Insurance Agents and Brokers" and specifically defines the agents
1. The November 7[, 2008] Decision violates Manulife’s right to due and brokers relationship with the insurance company and how they are
process by: (a) confining the review only to the issue of "control" and governed by the Code and regulated by the Insurance Commission.
utterly disregarding all the other issues that had been joined in this The Insurance Code, of course, does not wholly regulate the "agency" that it
case; (b) mischaracterizing the divergence of conclusions between the speaks of, as agency is a civil law matter governed by the Civil Code. Thus, at
CA and the NLRC decisions as confined only to that on "control"; (c) the very least, three sets of laws – namely, the Insurance Code, the Labor
grossly failing to consider the findings and conclusions of the CA on Code and the Civil Code – have to be considered in looking at the present
the majority of the material evidence, especially [Tongko’s] declaration case. Not to be forgotten, too, is the Agreement (partly reproduced on page 2
in his income tax returns that he was a "business person" or "self- of this Dissent and which no one disputes) that the parties adopted to govern
employed"; and (d) allowing [Tongko] to repudiate his sworn statement their relationship for purposes of selling the insurance the company offers. To
in a public document. forget these other laws is to take a myopic view of the present case and to add
2. The November 7[, 2008] Decision contravenes settled rules in to the uncertainties that now exist in considering the legal relationship between
contract law and agency, distorts not only the legal relationships of the insurance company and its "agents."
agencies to sell but also distributorship and franchising, and ignores The main issue of whether an agency or an employment relationship exists
the constitutional and policy context of contract law vis-à-vis labor law. depends on the incidents of the relationship. The Labor Code concept of
3. The November 7[, 2008] Decision ignores the findings of the CA on "control" has to be compared and distinguished with the "control" that must
the three elements of the four-fold test other than the "control" test, necessarily exist in a principal-agent relationship. The principal cannot but also
reverses well-settled doctrines of law on employer-employee have his or her say in directing the course of the principal-agent relationship,
relationships, and grossly misapplies the "control test," by selecting, especially in cases where the company-representative relationship in the
without basis, a few items of evidence to the exclusion of more insurance industry is an agency.
material evidence to support its conclusion that there is "control." a. The laws on insurance and agency
4. The November 7[, 2008] Decision is judicial legislation, beyond the The business of insurance is a highly regulated commercial activity in the
scope authorized by Articles 8 and 9 of the Civil Code, beyond the country, in terms particularly of who can be in the insurance business, who can
powers granted to this Court under Article VIII, Section 1 of the act for and in behalf of an insurer, and how these parties shall conduct
Constitution and contravenes through judicial legislation, the themselves in the insurance business. Section 186 of the Insurance Code
constitutional prohibition against impairment of contracts under Article provides that "No person, partnership, or association of persons shall transact
III, Section 10 of the Constitution. any insurance business in the Philippines except as agent of a person or
5. For all the above reasons, the November 7[, 2008] Decision made corporation authorized to do the business of insurance in the Philippines."
unsustainable and reversible errors, which should be corrected, in Sections 299 and 300 of the Insurance Code on Insurance Agents and
concluding that Respondent Manulife and Petitioner had an employer- Brokers, among other provisions, provide:
employee relationship, that Respondent Manulife illegally dismissed Section 299. No insurance company doing business in the Philippines, nor any
Petitioner, and for consequently ordering Respondent Manulife to pay agent thereof, shall pay any commission or other compensation to any person
Petitioner backwages, separation pay, nominal damages and for services in obtaining insurance, unless such person shall have first
attorney’s fees.13 procured from the Commissioner a license to act as an insurance agent of
THE COURT’S RULING such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services

20 | P a g e
in obtaining insurance, any commission or other compensation from any Generally, the determinative element is the control exercised over the one
insurance company doing business in the Philippines or any agent thereof, rendering service. The employer controls the employee both in the results and
without first procuring a license so to act from the Commissioner x x x The in the means and manner of achieving this result. The principal in an agency
Commissioner shall satisfy himself as to the competence and trustworthiness relationship, on the other hand, also has the prerogative to exercise control
of the applicant and shall have the right to refuse to issue or renew and to over the agent in undertaking the assigned task based on the parameters
suspend or revoke any such license in his discretion.1avvphi1.net outlined in the pertinent laws.
Section 300. Any person who for compensation solicits or obtains insurance on Under the general law on agency as applied to insurance, an agency must be
behalf of any insurance company or transmits for a person other than himself express in light of the need for a license and for the designation by the
an application for a policy or contract of insurance to or from such company or insurance company. In the present case, the Agreement fully serves as grant
offers or assumes to act in the negotiating of such insurance shall be an of authority to Tongko as Manulife’s insurance agent.17 This agreement is
insurance agent within the intent of this section and shall thereby become liable supplemented by the company’s agency practices and usages, duly accepted
to all the duties, requirements, liabilities and penalties to which an insurance by the agent in carrying out the agency.18 By authority of the Insurance Code,
agent is subject. an insurance agency is for compensation,19 a matter the Civil Code Rules on
Agency presumes in the absence of proof to the contrary.20 Other than the
The application for an insurance agent’s license requires a written examination, compensation, the principal is bound to advance to, or to reimburse, the agent
and the applicant must be of good moral character and must not have been the agreed sums necessary for the execution of the agency.21 By implication at
convicted of a crime involving moral turpitude. 14 The insurance agent who least under Article 1994 of the Civil Code, the principal can appoint two or more
collects premiums from an insured person for remittance to the insurance agents to carry out the same assigned tasks,22 based necessarily on the
company does so in a fiduciary capacity, and an insurance company which specific instructions and directives given to them.
delivers an insurance policy or contract to an authorized agent is deemed to
have authorized the agent to receive payment on the company’s With particular relevance to the present case is the provision that "In the
behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any execution of the agency, the agent shall act in accordance with the instructions
amount other than that specified in the policy and this covers any rebate from of the principal."23 This provision is pertinent for purposes of the necessary
the premium or any special favor or advantage in the dividends or benefit control that the principal exercises over the agent in undertaking the assigned
accruing from the policy. task, and is an area where the instructions can intrude into the labor law
concept of control so that minute consideration of the facts is necessary. A
Thus, under the Insurance Code, the agent must, as a matter of qualification, related article is Article 1891 of the Civil Code which binds the agent to render
be licensed and must also act within the parameters of the authority granted an account of his transactions to the principal.
under the license and under the contract with the principal. Other than the need
for a license, the agent is limited in the way he offers and negotiates for the B. The Cited Case
sale of the company’s insurance products, in his collection activities, and in the
delivery of the insurance contract or policy. Rules regarding the desired results The Decision of November 7, 2008 refers to the first Insular and Grepalife
(e.g., the required volume to continue to qualify as a company agent, rules to cases to establish that the company rules and regulations that an agent has to
check on the parameters on the authority given to the agent, and rules to comply with are indicative of an employer-employee relationship.24 The
ensure that industry, legal and ethical rules are followed) are built-in elements Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita
of control specific to an insurance agency and should not and cannot be read Carpio Morales also cite Insular Life Assurance Co. v. National Labor Relations
as elements of control that attend an employment relationship governed by the Commission (second Insular case)25 to support the view that Tongko is
Labor Code. Manulife’s employee. On the other hand, Manulife cites the Carungcong case
and AFP Mutual Benefit Association, Inc. v. National Labor Relations
On the other hand, the Civil Code defines an agent as a "person [who] binds Commission (AFPMBAI case)26 to support its allegation that Tongko was not its
himself to render some service or to do something in representation or on employee.
behalf of another, with the consent or authority of the latter."16 While this is a
very broad definition that on its face may even encompass an employment A caveat has been given above with respect to the use of the rulings in the
relationship, the distinctions between agency and employment are sufficiently cited cases because none of them is on all fours with the present case; the
established by law and jurisprudence. uniqueness of the factual situation of the present case prevents it from being
directly and readily cast in the mold of the cited cases. These cited cases are

21 | P a g e
themselves different from one another; this difference underscores the need to very end; moreover, both parties never disputed its authenticity or the accuracy
read and quote them in the context of their own factual situations. of its terms.
The present case at first glance appears aligned with the facts in the By the Agreement’s express terms, Tongko served as an "insurance agent" for
Carungcong, the Grepalife, and the second Insular Life cases. A critical Manulife, not as an employee. To be sure, the Agreement’s legal
difference, however, exists as these cited cases dealt with the proper legal characterization of the nature of the relationship cannot be conclusive and
characterization of a subsequent management contract that superseded the binding on the courts; as the dissent clearly stated, the characterization of the
original agency contract between the insurance company and its agent. juridical relationship the Agreement embodied is a matter of law that is for the
Carungcong dealt with a subsequent Agreement making Carungcong a New courts to determine. At the same time, though, the characterization the parties
Business Manager that clearly superseded the Agreement designating gave to their relationship in the Agreement cannot simply be brushed aside
Carungcong as an agent empowered to solicit applications for insurance. The because it embodies their intent at the time they entered the Agreement, and
Grepalife case, on the other hand, dealt with the proper legal characterization they were governed by this understanding throughout their relationship. At the
of the appointment of the Ruiz brothers to positions higher than their original very least, the provision on the absence of employer-employee relationship
position as insurance agents. Thus, after analyzing the duties and functions of between the parties can be an aid in considering the Agreement and its
the Ruiz brothers, as these were enumerated in their contracts, we concluded implementation, and in appreciating the other evidence on record.
that the company practically dictated the manner by which the Ruiz brothers
were to carry out their jobs. Finally, the second Insular Life case dealt with the The parties’ legal characterization of their intent, although not conclusive, is
implications of de los Reyes’ appointment as acting unit manager which, like critical in this case because this intent is not illegal or outside the contemplation
the subsequent contracts in the Carungcong and the Grepalife cases, was of law, particularly of the Insurance and the Civil Codes. From this perspective,
clearly defined under a subsequent contract. In all these cited cases, a the provisions of the Insurance Code cannot be disregarded as this Code (as
determination of the presence of the Labor Code element of control was made heretofore already noted) expressly envisions a principal-agent relationship
on the basis of the stipulations of the subsequent contracts. between the insurance company and the insurance agent in the sale of
insurance to the public.1awph!1 For this reason, we can take judicial notice
In stark contrast with the Carungcong, the Grepalife, and the second Insular that as a matter of Insurance Code-based business practice, an agency
Life cases, the only contract or document extant and submitted as evidence in relationship prevails in the insurance industry for the purpose of selling
the present case is the Agreement – a pure agency agreement in the Civil insurance. The Agreement, by its express terms, is in accordance with the
Code context similar to the original contract in the first Insular Life case and the Insurance Code model when it provided for a principal-agent relationship, and
contract in the AFPMBAI case. And while Tongko was later on designated unit thus cannot lightly be set aside nor simply be considered as an agreement that
manager in 1983, Branch Manager in 1990, and Regional Sales Manager in does not reflect the parties’ true intent. This intent, incidentally, is reinforced by
1996, no formal contract regarding these undertakings appears in the records the system of compensation the Agreement provides, which likewise is in
of the case. Any such contract or agreement, had there been any, could have accordance with the production-based sales commissions the Insurance Code
at the very least provided the bases for properly ascertaining the juridical provides.
relationship established between the parties.
Significantly, evidence shows that Tongko’s role as an insurance agent never
These critical differences, particularly between the present case and the changed during his relationship with Manulife. If changes occurred at all, the
Grepalife and the second Insular Life cases, should therefore immediately drive changes did not appear to be in the nature of their core relationship. Tongko
us to be more prudent and cautious in applying the rulings in these cases. essentially remained an agent, but moved up in this role through Manulife’s
recognition that he could use other agents approved by Manulife, but operating
C. Analysis of the Evidence under his guidance and in whose commissions he had a share. For want of a
c.1. The Agreement better term, Tongko perhaps could be labeled as a "lead agent" who guided
under his wing other Manulife agents similarly tasked with the selling of
The primary evidence in the present case is the July 1, 1977 Agreement that Manulife insurance.
governed and defined the parties’ relations until the Agreement’s termination in
2001. This Agreement stood for more than two decades and, based on the Like Tongko, the evidence suggests that these other agents operated under
records of the case, was never modified or novated. It assumes primacy their own agency agreements. Thus, if Tongko’s compensation scheme
because it directly dealt with the nature of the parties’ relationship up to the changed at all during his relationship with Manulife, the change was solely for
purposes of crediting him with his share in the commissions the agents under
his wing generated. As an agent who was recruiting and guiding other

22 | P a g e
insurance agents, Tongko likewise moved up in terms of the reimbursement of dismissed or ignored. Interestingly, Justice Velasco’s dissenting opinion states
expenses he incurred in the course of his lead agency, a prerogative he that Tongko was forced to declare himself a business or self-employed person
enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received by Manulife’s persistent refusal to recognize him as its
greater reimbursements for his expenses and was even allowed to use employee.29 Regrettably, the dissent has shown no basis for this
Manulife facilities in his interactions with the agents, all of whom were, in the conclusion, an understandable omission since no evidence in fact exists
strict sense, Manulife agents approved and certified as such by Manulife with on this point in the records of the case. In fact, what the evidence shows is
the Insurance Commission. Tongko’s full conformity with, and action as, an independent agent until his
relationship with Manulife took a bad turn.
That Tongko assumed a leadership role but nevertheless wholly remained an
agent is the inevitable conclusion that results from the reading of the Another interesting point the dissent raised with respect to the Agreement is its
Agreement (the only agreement on record in this case) and his continuing role conclusion that the Agreement negated any employment relationship between
thereunder as sales agent, from the perspective of the Insurance and the Civil Tongko and Manulife so that the commissions he earned as a sales agent
Codes and in light of what Tongko himself attested to as his role as Regional should not be considered in the determination of the backwages and
Sales Manager. To be sure, this interpretation could have been contradicted if separation pay that should be given to him. This part of the dissent is correct
other agreements had been submitted as evidence of the relationship between although it went on to twist this conclusion by asserting that Tongko had dual
Manulife and Tongko on the latter’s expanded undertakings. In the absence of roles in his relationship with Manulife; he was an agent, not an employee, in so
any such evidence, however, this reading – based on the available evidence far as he sold insurance for Manulife, but was an employee in his capacity as a
and the applicable insurance and civil law provisions – must stand, subject only manager. Thus, the dissent concluded that Tongko’s backwages should only
to objective and evidentiary Labor Code tests on the existence of an employer- be with respect to his role as Manulife’s manager.
employee relationship.
The conclusion with respect to Tongko’s employment as a manager is, of
In applying such Labor Code tests, however, the enforcement of the course, unacceptable for the legal, factual and practical reasons discussed in
Agreement during the course of the parties’ relationship should be noted. From this Resolution. In brief, the factual reason is grounded on the lack of
1977 until the termination of the Agreement, Tongko’s occupation was to sell evidentiary support of the conclusion that Manulife exercised control over
Manulife’s insurance policies and products. Both parties acquiesced with the Tongko in the sense understood in the Labor Code. The legal reason, partly
terms and conditions of the Agreement. Tongko, for his part, accepted all the based on the lack of factual basis, is the erroneous legal conclusion that
benefits flowing from the Agreement, particularly the generous commissions. Manulife controlled Tongko and was thus its employee. The practical reason,
on the other hand, is the havoc that the dissent’s unwarranted conclusion
Evidence indicates that Tongko consistently clung to the view that he was an would cause the insurance industry that, by the law’s own design, operated
independent agent selling Manulife insurance products since he invariably along the lines of principal-agent relationship in the sale of insurance.
declared himself a business or self-employed person in his income tax
returns. This consistency with, and action made pursuant to the c.2. Other Evidence of Alleged Control
Agreement were pieces of evidence that were never mentioned nor
considered in our Decision of November 7, 2008. Had they been A glaring evidentiary gap for Tongko in this case is the lack of evidence on
considered, they could, at the very least, serve as Tongko’s admissions against record showing that Manulife ever exercised means-and-manner control, even
his interest. Strictly speaking, Tongko’s tax returns cannot but be legally to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. In
significant because he certified under oath the amount he earned as gross 1983, Tongko was appointed unit manager. Inexplicably, Tongko never
business income, claimed business deductions, leading to his net taxable bothered to present any evidence at all on what this designation meant. This
income. This should be evidence of the first order that cannot be brushed aside also holds true for Tongko’s appointment as branch manager in 1990, and as
by a mere denial. Even on a layman’s view that is devoid of legal Regional Sales Manager in 1996. The best evidence of control – the
considerations, the extent of his annual income alone renders his claimed agreement or directive relating to Tongko’s duties and responsibilities – was
employment status doubtful.27 never introduced as part of the records of the case. The reality is, prior to de
Dios’ letter, Manulife had practically left Tongko alone not only in doing the
Hand in hand with the concept of admission against interest in considering the business of selling insurance, but also in guiding the agents under his wing. As
tax returns, the concept of estoppel – a legal and equitable concept28 – discussed below, the alleged directives covered by de Dios’ letter, heretofore
necessarily must come into play. Tongko’s previous admissions in several quoted in full, were policy directions and targeted results that the company
years of tax returns as an independent agent, as against his belated claim that wanted Tongko and the other sales groups to realign with in their own selling
he was all along an employee, are too diametrically opposed to be simply

23 | P a g e
activities. This is the reality that the parties’ presented evidence consistently The dissent considers the imposition of administrative and managerial
tells us. functions on Tongko as indicative of labor law control; thus, Tongko as
manager, but not as insurance agent, became Manulife’s employee. It drew
What, to Tongko, serve as evidence of labor law control are the codes of this conclusion from what the other Manulife managers disclosed in their
conduct that Manulife imposes on its agents in the sale of insurance. The mere affidavits (i.e., their enumerated administrative and managerial functions) and
presentation of codes or of rules and regulations, however, is not per se after comparing these statements with the managers in Grepalife. The dissent
indicative of labor law control as the law and jurisprudence teach us. compared the control exercised by Manulife over its managers in the present
As already recited above, the Insurance Code imposes obligations on both the case with the control the managers in the Grepalife case exercised over their
insurance company and its agents in the performance of their respective employees by presenting the following matrix:31
obligations under the Code, particularly on licenses and their renewals, on the
representations to be made to potential customers, the collection of premiums, Duties of Manulife’s Manager Duties of Grepalife’s
on the delivery of insurance policies, on the matter of compensation, and on Managers/Supervisors
measures to ensure ethical business practice in the industry.
- to render or recommend - train understudies for the position
The general law on agency, on the other hand, expressly allows the principal
prospective agents to be of district manager
an element of control over the agent in a manner consistent with an agency
licensed, trained and contracted
relationship. In this sense, these control measures cannot be read as indicative
to sell Manulife products and
of labor law control. Foremost among these are the directives that the principal
who will be part of my Unit
may impose on the agent to achieve the assigned tasks, to the extent that they
do not involve the means and manner of undertaking these tasks. The law
likewise obligates the agent to render an account; in this sense, the principal - to coordinate activities of the - properly account, record and
may impose on the agent specific instructions on how an account shall be agents under [the managers’] document the company’s funds,
made, particularly on the matter of expenses and reimbursements. To these Unit in [the agents’] daily, spot-check and audit the work of
extents, control can be imposed through rules and regulations without intruding weekly and monthly selling the zone supervisors, x x x follow
into the labor law concept of control for purposes of employment. activities, making sure that their up the submission of weekly
respective sales targets are remittance reports of the debit
From jurisprudence, an important lesson that the first Insular Life case teaches met; agents and zone supervisors
us is that a commitment to abide by the rules and regulations of an insurance
company does not ipso facto make the insurance agent an employee. Neither - to conduct periodic training - direct and supervise the sales
do guidelines somehow restrictive of the insurance agent’s conduct necessarily sessions for [the] agents to activities of the debit agents under
indicate "control" as this term is defined in jurisprudence. Guidelines further enhance their sales skill; him, x x x undertake and discharge
indicative of labor law "control," as the first Insular Life case tells us, and the functions of absentee debit
should not merely relate to the mutually desirable result intended by the agents, spot-check the record of
- to assist [the] agents with their debit agents, and insure proper
contractual relationship; they must have the nature of dictating the means
sales activities by way of joint documentation of sales and
or methods to be employed in attaining the result, or of fixing the methodology
fieldwork, consultations and collections of debit agents.
and of binding or restricting the party hired to the use of these means. In fact,
one-on-one evaluation and
results-wise, the principal can impose production quotas and can determine
analysis of particular accounts
how many agents, with specific territories, ought to be employed to achieve the
company’s objectives. These are management policy decisions that the labor
Aside from these affidavits however, no other evidence exists regarding the
law element of control cannot reach. Our ruling in these respects in the first
effects of Tongko’s additional roles in Manulife’s sales operations on the
Insular Life case was practically reiterated in Carungcong. Thus, as will be
contractual relationship between them.
shown more fully below, Manulife’s codes of conduct, 30 all of which do not
intrude into the insurance agents’ means and manner of conducting their sales To the dissent, Tongko’s administrative functions as recruiter, trainer, or
and only control them as to the desired results and Insurance Code norms, supervisor of other sales agents constituted a substantive alteration of
cannot be used as basis for a finding that the labor law concept of control Manulife’s authority over Tongko and the performance of his end of the
existed between Manulife and Tongko. relationship with Manulife. We could not deny though that Tongko remained,

24 | P a g e
first and foremost, an insurance agent, and that his additional role as Branch employment relationship and the consequent omission of portions leading to
Manager did not lessen his main and dominant role as insurance agent; this the contrary conclusion. For example, the following portions of the affidavit of
role continued to dominate the relations between Tongko and Manulife even Regional Sales Manager John Chua, with counterparts in the other affidavits,
after Tongko assumed his leadership role among agents. This conclusion were not brought out in the Decision of November 7, 2008, while the other
cannot be denied because it proceeds from the undisputed fact that Tongko portions suggesting labor law control were highlighted. Specifically, the
and Manulife never altered their July 1, 1977 Agreement, a distinction the following portions of the affidavits were not brought out:32
present case has with the contractual changes made in the second Insular Life
case. Tongko’s results-based commissions, too, attest to the primacy he gave 1.a. I have no fixed wages or salary since my services are
to his role as insurance sales agent. compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;
The dissent apparently did not also properly analyze and appreciate the great
qualitative difference that exists between: 1.b. I have no fixed working hours and employ my own method in
soliticing insurance at a time and place I see fit;
 the Manulife managers’ role is to coordinate activities of the agents
under the managers’ Unit in the agents’ daily, weekly, and monthly 1.c. I have my own assistant and messenger who handle my daily work
selling activities, making sure that their respective sales targets are load;
met. 1.d. I use my own facilities, tools, materials and supplies in carrying out
 the District Manager’s duty in Grepalife is to properly account, record, my business of selling insurance;
and document the company's funds, spot-check and audit the work of xxxx
the zone supervisors, conserve the company's business in the district
through "reinstatements," follow up the submission of weekly 6. I have my own staff that handles the day to day operations of my
remittance reports of the debit agents and zone supervisors, preserve office;
company property in good condition, train understudies for the position
of district managers, and maintain his quota of sales (the failure of 7. My staff are my own employees and received salaries from me;
which is a ground for termination). xxxx
 the Zone Supervisor’s (also in Grepalife) has the duty to direct and 9. My commission and incentives are all reported to the Bureau of
supervise the sales activities of the debit agents under him, conserve Internal Revenue (BIR) as income by a self-employed individual or
company property through "reinstatements," undertake and discharge professional with a ten (10) percent creditable withholding tax. I also
the functions of absentee debit agents, spot-check the records of debit remit monthly for professionals.
agents, and insure proper documentation of sales and collections by
the debit agents. These statements, read with the above comparative analysis of the Manulife
and the Grepalife cases, would have readily yielded the conclusion that no
These job contents are worlds apart in terms of "control." In Grepalife, the employer-employee relationship existed between Manulife and Tongko.
details of how to do the job are specified and pre-determined; in the present
case, the operative words are the "sales target," the methodology being left Even de Dios’ letter is not determinative of control as it indicates the least
undefined except to the extent of being "coordinative." To be sure, a amount of intrusion into Tongko’s exercise of his role as manager in guiding
"coordinative" standard for a manager cannot be indicative of control; the the sales agents. Strictly viewed, de Dios’ directives are merely operational
standard only essentially describes what a Branch Manager is – the person in guidelines on how Tongko could align his operations with Manulife’s re-directed
the lead who orchestrates activities within the group. To "coordinate," and goal of being a "big league player." The method is to expand coverage through
thereby to lead and to orchestrate, is not so much a matter of control by the use of more agents. This requirement for the recruitment of more agents is
Manulife; it is simply a statement of a branch manager’s role in relation with his not a means-and-method control as it relates, more than anything else, and is
agents from the point of view of Manulife whose business Tongko’s sales directly relevant, to Manulife’s objective of expanded business operations
group carries. through the use of a bigger sales force whose members are all on a principal-
agent relationship. An important point to note here is that Tongko was not
A disturbing note, with respect to the presented affidavits and Tongko’s alleged supervising regular full-time employees of Manulife engaged in the running of
administrative functions, is the selective citation of the portions supportive of an the insurance business; Tongko was effectively guiding his corps of sales

25 | P a g e
agents, who are bound to Manulife through the same Agreement that he had  was he paid additional compensation as a so-called Area Sales
with Manulife, all the while sharing in these agents’ commissions through his Manager, apart from the commissions he received from the insurance
overrides. This is the lead agent concept mentioned above for want of a more sales he generated;
appropriate term, since the title of Branch Manager used by the parties is really
a misnomer given that what is involved is not a specific regular branch of the  what can be Manulife’s basis to terminate his status as lead agent;
company but a corps of non-employed agents, defined in terms of covered
territory, through which the company sells insurance. Still another point to  can Manulife terminate his role as lead agent separately from his
agency contract; and
consider is that Tongko was not even setting policies in the way a regular
company manager does; company aims and objectives were simply relayed to  to what extent does Manulife control the means and methods of
him with suggestions on how these objectives can be reached through the Tongko’s role as lead agent?
expansion of a non-employee sales force.
The answers to these questions may, to some extent, be deduced from the
Interestingly, a large part of de Dios’ letter focused on income, which Manulife evidence at hand, as partly discussed above. But strictly speaking, the
demonstrated, in Tongko’s case, to be unaffected by the new goal and questions cannot definitively and concretely be answered through the evidence
direction the company had set. Income in insurance agency, of course, is on record. The concrete evidence required to settle these questions is simply
dependent on results, not on the means and manner of selling – a matter for not there, since only the Agreement and the anecdotal affidavits have been
Tongko and his agents to determine and an area into which Manulife had not marked and submitted as evidence.
waded. Undeniably, de Dios’ letter contained a directive to secure a competent
assistant at Tongko’s own expense. While couched in terms of a directive, it Given this anemic state of the evidence, particularly on the requisite confluence
cannot strictly be understood as an intrusion into Tongko’s method of operating of the factors determinative of the existence of employer-employee
and supervising the group of agents within his delineated territory. More than relationship, the Court cannot conclusively find that the relationship exists in
anything else, the "directive" was a signal to Tongko that his results were the present case, even if such relationship only refers to Tongko’s additional
unsatisfactory, and was a suggestion on how Tongko’s perceived weakness in functions. While a rough deduction can be made, the answer will not be fully
delivering results could be remedied. It was a solution, with an eye on results, supported by the substantial evidence needed.
for a consistently underperforming group; its obvious intent was to save
Tongko from the result that he then failed to grasp – that he could lose even his Under this legal situation, the only conclusion that can be made is that the
own status as an agent, as he in fact eventually did. absence of evidence showing Manulife’s control over Tongko’s contractual
duties points to the absence of any employer-employee relationship between
The present case must be distinguished from the second Insular Life case that Tongko and Manulife. In the context of the established evidence, Tongko
showed the hallmarks of an employer-employee relationship in the remained an agent all along; although his subsequent duties made him a lead
management system established. These were: exclusivity of service, control of agent with leadership role, he was nevertheless only an agent whose basic
assignments and removal of agents under the private respondent’s unit, and contract yields no evidence of means-and-manner control.
furnishing of company facilities and materials as well as capital described as
Unit Development Fund. All these are obviously absent in the present case. If This conclusion renders unnecessary any further discussion of the question of
there is a commonality in these cases, it is in the collection of premiums which whether an agent may simultaneously assume conflicting dual personalities.
is a basic authority that can be delegated to agents under the Insurance Code. But to set the record straight, the concept of a single person having the dual
role of agent and employee while doing the same task is a novel one in our
As previously discussed, what simply happened in Tongko’s case was the jurisprudence, which must be viewed with caution especially when it is devoid
grant of an expanded sales agency role that recognized him as leader amongst of any jurisprudential support or precedent. The quoted portions in Justice
agents in an area that Manulife defined. Whether this consequently resulted Carpio-Morales’ dissent,33 borrowed from both the Grepalife and the second
in the establishment of an employment relationship can be answered by Insular Life cases, to support the duality approach of the Decision of November
concrete evidence that corresponds to the following questions: 7, 2008, are regrettably far removed from their context – i.e., the cases’ factual
situations, the issues they decided and the totality of the rulings in these cases
 as lead agent, what were Tongko’s specific functions and the terms of – and cannot yield the conclusions that the dissenting opinions drew.
his additional engagement;
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’
appointment as zone supervisor and district manager made them employees
of Grepalife. Indeed, because of the presence of the element of control in their

26 | P a g e
contract of engagements, they were considered Grepalife’s employees. This In light of these conclusions, the sufficiency of Tongko’s failure to comply with
did not mean, however, that they were simultaneously considered agents as the guidelines of de Dios’ letter, as a ground for termination of Tongko’s
well as employees of Grepalife; the Court’s ruling never implied that this agency, is a matter that the labor tribunals cannot rule upon in the absence of
situation existed insofar as the Ruiz brothers were concerned. The Court’s an employer-employee relationship. Jurisdiction over the matter belongs to the
statement – the Insurance Code may govern the licensing requirements and courts applying the laws of insurance, agency and contracts.
other particular duties of insurance agents, but it does not bar the application of
the Labor Code with regard to labor standards and labor relations – simply WHEREFORE, considering the foregoing discussion, we REVERSE our
means that when an insurance company has exercised control over its agents Decision of November 7, 2008, GRANT Manulife’s motion for reconsideration
so as to make them their employees, the relationship between the parties, and, accordingly, DISMISS Tongko’s petition. No costs.
which was otherwise one for agency governed by the Civil Code and the SO ORDERED.
Insurance Code, will now be governed by the Labor Code. The reason for this
is simple – the contract of agency has been transformed into an employer-
employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether
the labor bodies have jurisdiction over an illegal termination dispute involving
parties who had two contracts – first, an original contract (agency contract),
which was undoubtedly one for agency, and another subsequent contract that
in turn designated the agent acting unit manager (a management contract).
Both the Insular Life and the labor arbiter were one in the position that both
were agency contracts. The Court disagreed with this conclusion and held that
insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor arbiter for
further proceedings. We never said in this case though that the insurance
agent had effectively assumed dual personalities for the simple reason that the
agency contract has been effectively superseded by the management contract.
The management contract provided that 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.
The dissent pointed out, as an argument to support its employment relationship
conclusion, that any doubt in the existence of an employer-employee
relationship should be resolved in favor of the existence of the
relationship.34 This observation, apparently drawn from Article 4 of the Labor
Code, is misplaced, as Article 4 applies only when a doubt exists in the
"implementation and application" of the Labor Code and its implementing rules;
it does not apply where no doubt exists as in a situation where the claimant
clearly failed to substantiate his claim of employment relationship by the
quantum of evidence the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our
November 7, 2008 Decision, suffice it to state that, as discussed above, the
Decision was not supported by the evidence adduced and was not in
accordance with controlling jurisprudence. It should, therefore, be reconsidered
and abandoned, but not in the manner the dissent suggests as the dissenting
opinions are as factually and as legally erroneous as the Decision under
reconsideration.

27 | P a g e
 Republic of the Philippines On July 24, 1991, complainants thru counsel wrote the Regional Director of the
SUPREME COURT Department of Labor and Employment, Bacolod City for intercession particularly in the
matter of wages and other benefits mandated by law.
SECOND DIVISION
On September 24, 1991, a routine inspection was conducted by personnel of the
G.R. No. 151827. April 29, 2005 Bacolod District Office of the Department of Labor and Employment. Accordingly, a
report and recommendation was made, hence, the endorsement by the Regional
JOSEFINA BENARES, Petitioners,
Director of the instant case to the Regional Arbitration Branch, NLRC, Bacolod City for
vs.
proper hearing and disposition.
Jaime pancho, Rodolfo pancho, jr., joselito medalla, paquito magallanes, Alicia
magallanes, evelyn magallanes, violeta villacampa, maritess pancho, rogelio On October 15, 1991, complainants alleged to have been terminated without being paid
pancho and arnolfo pancho, Respondents. termination benefits by respondent in retaliation to what they have done in reporting to
the Department of Labor and Employment their working conditions viz-a-viz (sic) wages
DECISION
and other mandatory benefits.
Tinga, J.:
On July 14, 1992, notification and summons were served to the parties wherein
Assailed in this Petition for Review on Certiorari1 is the Decision2 of the Court of Appeals complainants were directed to file a formal complaint.
which affirmed the National Labor Relations Commission’s (NLRC) decision3 holding
On July 28, 1992, a formal complaint was filed for illegal dismissal with money claims.
that respondents were illegally dismissed and ordering petitioner to pay respondents
separation pay, backwages, 13th month pay, Cost of Living Allowance (COLA), From the records, summons and notices of hearing were served to the parties and
emergency relief allowance (ERA), salary differentials and attorney’s fees. The NLRC apparently no amicable settlement was arrived, hence, the parties were directed to file
reversed the Labor Arbiter’s finding that respondents failed to lay down the facts and their respective position papers.
circumstances surrounding their dismissal and to prove their entitlement to monetary
awards.4 On January 22, 1993, complainant submitted their position paper, while respondent filed
its position paper on June 21, 1993.
The antecedents, as narrated by the NLRC, follow.
On March 17, 1994, complainants filed their reply position paper and affidavit.
Complainants alleged to have started working as sugar farm workers on various dates, Correspondingly, a rejoinder was filed by respondent on May 16, 1994.
to wit:
On August 17, 1994, from the Minutes of the scheduled hearing, respondent failed to
1. Jaime Pancho November 15, 1964 appear, and that the Office will evaluate the records of the case whether to conduct a
formal trial on the merits or not, and that the corresponding order will be issued.
2. Rodolfo Pancho, Jr. February 1, 1975
On January 16, 1996, the Labor Arbiter issued an order to the effect that the case is
3. Joselito Medalla November 15, 1964
now deemed submitted for resolution.
4. Paquito Magallanes March 10, 1973
On April 30, 1998, the Labor Arbiter a quo issued the assailed decision dismissing the
5. Felomino Magallanes November 15, 1964 complaint for lack of merit.

6. Alicia Magallanes January 15, 1964 On June 26, 1998, complainants not satisfied with the aforecited ruling interposed the
instant appeal anchored on the ground that:
7. Evelyn Magallanes January 1, 1974
THE HONORABLE LABOR ARBITER GRAVELY ABUSED ITS DISCRETION AND
8. Violeta Villacampa December 1, 1979 SERIOUSLY ERRED IN HOLDING THAT THE COMPLAINANTS FAILED TO
DISCUSS THE FACTS AND CIRCUMSTANCES SURROUNDING THEIR DISMISSAL,
9. Maritess Pancho December 15, 1985 HENCE, THERE IS NO DISMISSAL TO SPEAK OF AND THAT COMPLAINANTS
FAILED TO ALLEGE AND PROVE THAT THEIR CLAIMS ARE VALID, HENCE THE
10. Rogelio Pancho December 1, 1979 DISMISSAL OF THEIR COMPLAINT WOULD CAUSE GRAVE AND IRREPARABLE
11. Arnolfo Pancho February 1, 1975 DAMAGE TO HEREIN COMPLAINANTS.5

Respondent Hda. Maasin II is a sugar cane plantation located in Murcia, Negros The NLRC held that respondents attained the status of regular seasonal workers of
Occidental with an area of 12-24 has. planted, owned and managed by Josefina Hda. Maasin II having worked therein from 1964-1985. It found that petitioner failed to
Benares, individual co-respondent. discharge the burden of proving that the termination of respondents was for a just or

28 | P a g e
authorized cause. Hence, respondents were illegally dismissed and should be awarded As regards the contention that the NLRC erroneously awarded COLA and ERA,
their money claims. respondents cite Osias Academy v. DOLE,14 which provides that the NLRC can extend
monetary awards even if these are not prayed for if the monetary benefits are statutory
Petitioner’s motion for reconsideration6 dated May 12, 1999 was denied in the grants intended to alleviate the laborer’s plight like the COLA and ERA.
resolution7 dated October 29, 1999.
The main question raised by the present petition is whether respondents are regular
The Court of Appeals affirmed the NLRC’s ruling, with the modification that the employees of Hacienda Maasin and thus entitled to their monetary claims. Related to
backwages and other monetary benefits shall be computed from the time compensation this is the issue of whether respondents were illegally terminated.
was withheld in accordance with Article 279 of the Labor Code, as amended by
Republic Act No. 6715. This case presents a good opportunity to reiterate the Court’s rulings on the subject of
seasonal employment. The Labor Code defines regular and casual employment, viz:
In its Resolution8 dated November 28, 2001, the appellate court denied petitioner’s
motion for reconsideration for lack of merit. Art. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of the
Petitioner is now before this Court averring that the Court of Appeals erred in affirming parties, an employment shall be deemed to be regular where the employee has been
the decision of the NLRC. While petitioner concedes that the factual findings of the engaged to perform activities which are usually necessary or desirable in the usual
NLRC are generally binding on the appellate court, petitioner insists that the findings of business or trade of the employer, except where the employment has been fixed for a
the NLRC are vague and contradictory, thereby necessitating review. specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or service
According to petitioner, the fact that she was able to present sufficient proof to rebut the
to be performed is seasonal in nature and the employment is for the duration of the
claim of illegal dismissal should be considered in light of the NLRC’s admission that
season.
there are gray areas in the case which require clarification. Petitioner avers that the
NLRC should have at least remanded the case to the labor arbiter to thresh out these An employment shall be deemed to be casual if it is not covered by the preceding
gray areas. She further claims that the NLRC was overly zealous in awarding COLA paragraph: Provided, That, any employee who has rendered at least one year of
and ERA despite the fact that respondents did not even pray for these awards in their service, whether such service is continuous or broken, shall be considered a regular
complaint. She also questions the NLRC’s general statement to the effect that the employee with respect to the activity in which he is employed and his employment shall
payroll she submitted is not convincing asserting that she submitted 235 sets of payroll, continue while such activity exists.
not just one, and that the NLRC did not even bother to explain why it found the payroll
unconvincing. The law provides for three kinds of employees: (1) regular employees or those who
have been engaged to perform activities which are usually necessary or desirable in the
Respondents filed a Comment9 dated May 10, 2002 alleging that petitioner failed to usual business or trade of the employer; (2) project employees or those whose
submit certified true copies of the assailed decisions and resolutions, and that the employment has been fixed for a specific project or undertaking, the completion or
petition lacks proof of service and raises questions of fact. termination of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in nature and the
In her Reply to Comment10 dated September 17, 2002, petitioner points out that the
employment is for the duration of the season; and (3) casual employees or those who
Rules of Court do not require that all copies of the petition contain certified true copies
are neither regular nor project employees.15
of the questioned decisions and resolutions. Further, all copies of the petition filed with
the Court contain an affidavit of service. Respondents’ copy does not have an affidavit In Mercado v. NLRC,16 the Court ruled that seasonal workers do not become regular
of service because the sworn declaration can not be executed before service of the employees by the mere fact that they have rendered at least one year of service,
petition is actually made. Petitioner also maintains that the rule on review of findings of whether continuous or broken, because the proviso in the second paragraph of Article
fact by the Supreme Court admits of certain exceptions such as when the conclusions 280 demarcates as "casual" employees, all other employees who do not fall under the
arrived at are grounded entirely on speculation, surmises and conjectures as in this definition of the preceding paragraph. It deems as regular employees those "casual"
case. employees who have rendered at least one year of service regardless of the fact that
such service may be continuous or broken.
The petition was given due course and the parties were required to submit their
respective memoranda in the Resolution11 dated March 3, 2003. Petitioner filed The factual circumstances obtaining in the Mercado case, however, are peculiar. In that
a Manifestation and Compliance12 dated April 22, 2003 adopting the allegations in case, the workers were engaged to do a particular phase of agricultural work necessary
her Petition for Review on Certiorari and Reply to Comment as her memorandum. For for rice and/or sugarcane production, after which they would be free to render services
their part, respondents filed a Memoranda For Private Respondents13 dated May 7, to other farm workers who need their services.
2003 alleging that the Court of Appeals correctly relied upon the factual findings of the
NLRC after having found the same to be supported by substantial evidence. They insist In contrast, in the case of Hacienda Fatima v. National Federation of Sugarcane
that they are regular seasonal employees of the sugar plantation. As such, petitioner Workers-Food and General Trade,17 respondents performed the same tasks for
has the burden of proving that their dismissal was for a just or authorized cause. petitioners every season for several years. Thus, they were considered the latter’s

29 | P a g e
regular employees for their respective tasks. The fact that they do not work continuously the quantum of evidence required to support the findings of the NLRC is only substantial
for one whole year but only for the duration of the season does not detract from evidence or that amount of relevant evidence which a reasonable mind might accept as
considering them in regular employment since in a litany of cases this Court has already adequate to justify a conclusion.23
settled that seasonal workers who are called to work from time to time and are
temporarily laid off during off-season are not separated from service in that period, but The issue, therefore, of whether respondents were regular employees of petitioner has
merely considered on leave until re-employed.18 been adequately dealt with. The labor arbiter, the NLRC and the Court of Appeals have
similarly held that respondents were regular employees of petitioner. Since it is a settled
Citing jurisprudence, the Court, in Hacienda Fatima, condensed the rule that the primary rule that the factual findings of quasi-judicial agencies which have acquired expertise in
standard for determining regular employment is the reasonable connection between the the matters entrusted to their jurisdiction are accorded by this Court not only respect but
particular activity performed by the employee vis-à-vis the usual trade or business of the even finality,24 we shall no longer disturb this finding.
employer. This connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in its Petitioner next underscores the NLRC decision’s mention of the "payroll" she presented
entirety. If the employee has been performing the job for at least a year, even if the despite the fact that she allegedly presented 235 sets of payroll, not just one payroll.
performance is not continuous and merely intermittent, the law deems repeated and This circumstance does not in itself evince any grave abuse of discretion on the part of
continuing need for its performance as sufficient evidence of the necessity if not the NLRC as it could well have been just an innocuous typographical error.
indispensability of that activity to the business. Hence, the employment is considered
Verily, the NLRC’s decision, affirmed as it was by the Court of Appeals, appears to have
regular, but only with respect to such activity and while such activity exists.19
been arrived at after due consideration of the evidence presented by both parties.
In this case, petitioner argues that respondents were not her regular employees as they
We also find no reason to disturb the finding that respondents were illegally terminated.
were merely "pakiao" workers who did not work continuously in the sugar plantation.
When there is no showing of clear, valid and legal cause for the termination of
They performed such tasks as weeding, cutting and loading canes, planting cane
employment, the law considers the matter a case of illegal dismissal and the burden is
points, fertilizing, cleaning the drainage, etc. These functions allegedly do not require
on the employer to prove that the termination was for a just or authorized cause. 25 In
respondents’ daily presence in the sugarcane field as it is not everyday that one weeds,
this case, as found both by the NLRC and the Court of Appeals, petitioner failed to
cuts canes or applies fertilizer. In support of her allegations, petitioner submitted
prove any such cause for the dismissal of respondents.
"cultivo" and milling payrolls.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of
The probative value of petitioner’s evidence, however, has been passed upon by the
the Court of Appeals respectively dated June 29, 2001 and November 28, 2001 are
labor arbiter, the NLRC and the Court of Appeals. Although the labor arbiter dismissed
hereby AFFIRMED. Costs against petitioner.
respondents’ complaint because their "position paper is completely devoid of any
discussion about their alleged dismissal, much less of the probative facts thereof," 20 the SO ORDERED.
ground for the dismissal of the complaint implies a finding that respondents are regular
employees. Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
The NLRC was more unequivocal when it pronounced that respondents have acquired
the status of regular seasonal employees having worked for more than one year,
whether continuous or broken in petitioner’s hacienda.

According to petitioner, however, the NLRC’s conclusion is highly suspect considering

its own admission that there are "gray areas which requires (sic) clarification." She
alleges that despite these gray areas, the NLRC "chose not to remand the case to the
Labor Arbiter….as this would unduly prolong the agony of the complainants in
particular." 21

Petitioner perhaps wittingly omitted mention that the NLRC "opted to appreciate the
merits of the instant case based on available documents/pleadings." 22 That the NLRC
chose not to remand the case to the labor arbiter for clarificatory proceedings and
instead decided the case on the basis of the evidence then available to it is a judgment
call this Court shall not interfere with in the absence of any showing that the NLRC
abused its discretion in so doing.

The Court of Appeals, in fact, found no such grave abuse of discretion on the part of the
NLRC. Accordingly, it dismissed the petition for certiorari and affirmed with modification
the findings of the NLRC. It is well to note at this point that in quasi-judicial proceedings,

30 | P a g e
 Republic of the Philippines For five years, petitioner performed the duties of Acting Manager. As of
SUPREME COURT December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
FIRST DIVISION
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
G.R. No. 170087 August 31, 2006 Petitioner alleged that she was required to sign a prepared resolution for her
ANGELINA FRANCISCO, Petitioner, replacement but she was assured that she would still be connected with Kasei
vs. Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, all employees of Kasei Corporation and announced that nothing had changed
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE and that petitioner was still connected with Kasei Corporation as Technical
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents. Assistant to Seiji Kamura and in charge of all BIR matters. 9

DECISION Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month

beginning January up to September 2001 for a total reduction of P22,500.00 as
YNARES-SANTIAGO, J.: of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did
This petition for review on certiorari under Rule 45 of the Rules of Court seeks not receive her salary from the company. She made repeated follow-ups with
to annul and set aside the Decision and Resolution of the Court of Appeals the company cashier but she was advised that the company was not earning
dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP well. 10
No. 78515 dismissing the complaint for constructive dismissal filed by herein
petitioner Angelina Francisco. The appellate court reversed and set aside the On October 15, 2001, petitioner asked for her salary from Acedo and the rest
Decision of the National Labor Relations Commission (NLRC) dated April 15, of the officers but she was informed that she is no longer connected with the
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the company. 11
decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No.
30-10-0-489-01, finding that private respondents were liable for constructive Since she was no longer paid her salary, petitioner did not report for work and
dismissal. filed an action for constructive dismissal before the labor arbiter.

In 1995, petitioner was hired by Kasei Corporation during its incorporation Private respondents averred that petitioner is not an employee of Kasei
stage. She was designated as Accountant and Corporate Secretary and was Corporation. They alleged that petitioner was hired in 1995 as one of its
assigned to handle all the accounting needs of the company. She was also technical consultants on accounting matters and act concurrently as Corporate
designated as Liaison Officer to the City of Makati to secure business permits, Secretary. As technical consultant, petitioner performed her work at her own
construction permits and other licenses for the initial operation of the discretion without control and supervision of Kasei Corporation. Petitioner had
company. 5 no daily time record and she came to the office any time she wanted. The
company never interfered with her work except that from time to time, the
Although she was designated as Corporate Secretary, she was not entrusted management would ask her opinion on matters relating to her profession.
with the corporate documents; neither did she attend any board meeting nor Petitioner did not go through the usual procedure of selection of employees,
required to do so. She never prepared any legal document and never but her services were engaged through a Board Resolution designating her as
represented the company as its Corporate Secretary. However, on some technical consultant. The money received by petitioner from the corporation
occasions, she was prevailed upon to sign documentation for the company. 6 was her professional fee subject to the 10% expanded withholding tax on
professionals, and that she was not one of those reported to the BIR or SSS as
In 1996, petitioner was designated Acting Manager. The corporation also hired one of the company’s employees. 12
Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner
was assigned to handle recruitment of all employees and perform management Petitioner’s designation as technical consultant depended solely upon the will
administration functions; represent the company in all dealings with of management. As such, her consultancy may be terminated any time
government agencies, especially with the Bureau of Internal Revenue (BIR), considering that her services were only temporary in nature and dependent on
Social Security System (SSS) and in the city government of Makati; and to the needs of the corporation.
administer all other matters pertaining to the operation of Kasei Restaurant
which is owned and operated by Kasei Corporation. 7 To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly

31 | P a g e
received by the BIR showing that petitioner was not among the employees 1) Respondents are directed to pay complainant separation pay computed at
reported to the BIR, as well as a list of payees subject to expanded withholding one month per year of service in addition to full backwages from October 2001
tax which included petitioner. SSS records were also submitted showing that to July 31, 2002;
petitioner’s latest employer was Seiji Corporation. 13
2) The awards representing moral and exemplary damages and 10% share in
The Labor Arbiter found that petitioner was illegally dismissed, thus: profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;
WHEREFORE, premises considered, judgment is hereby rendered as follows: 3) The award of 10% attorney’s fees shall be based on salary differential award
only;
1. finding complainant an employee of respondent corporation;
4) The awards representing salary differentials, housing allowance, mid year
2. declaring complainant’s dismissal as illegal; bonus and 13th month pay are AFFIRMED.
3. ordering respondents to reinstate complainant to her former position without SO ORDERED. 15
loss of seniority rights and jointly and severally pay complainant her money
claims in accordance with the following computation: On appeal, the Court of Appeals reversed the NLRC decision, thus:
a. Backwages 10/2001 – 07/2002 275,000.00 WHEREFORE, the instant petition is hereby GRANTED. The decision of the
National Labor Relations Commissions dated April 15, 2003 is hereby
(27,500 x 10 mos.) REVERSED and SET ASIDE and a new one is hereby rendered dismissing the
b. Salary Differentials (01/2001 – 09/2001) 22,500.00 complaint filed by private respondent against Kasei Corporation, et al. for
constructive dismissal.
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
SO ORDERED. 16
d. Midyear Bonus 2001 27,500.00
The appellate court denied petitioner’s motion for reconsideration, hence, the
e. 13th Month Pay 27,500.00 present recourse.

f. 10% share in the profits of Kasei The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent
Corp. from 1996-2001 361,175.00 Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
g. Moral and exemplary damages 100,000.00
Considering the conflicting findings by the Labor Arbiter and the National Labor
h. 10% Attorney’s fees 87,076.50
Relations Commission on one hand, and the Court of Appeals on the other,
P957,742.50 there is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence. 17
If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would accrue up to We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been
actual payment of separation pay. no uniform test to determine the existence of an employer-employee relation.
Generally, courts have relied on the so-called right of control test where the
SO ORDERED. 14 person for whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching such end. In
On April 15, 2003, the NLRC affirmed with modification the Decision of the
addition to the standard of right-of-control, the existing economic conditions
Labor Arbiter, the dispositive portion of which reads:
prevailing between the parties, like the inclusion of the employee in the
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED payrolls, can help in determining the existence of an employer-employee
as follows: relationship.
However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such

32 | P a g e
a relationship where several positions have been held by the worker. There are Standards Act is dependency. 25 By analogy, the benchmark of economic
instances when, aside from the employer’s power to control the employee with reality in analyzing possible employment relationships for purposes of the
respect to the means and methods by which the work is to be accomplished, Labor Code ought to be the economic dependence of the worker on his
economic realities of the employment relations help provide a comprehensive employer.
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity. By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of
The better approach would therefore be to adopt a two-tiered test involving: (1) Seiji Kamura, the corporation’s Technical Consultant. She reported for work
the putative employer’s power to control the employee with respect to the regularly and served in various capacities as Accountant, Liaison Officer,
means and methods by which the work is to be accomplished; and (2) the Technical Consultant, Acting Manager and Corporate Secretary, with
underlying economic realities of the activity or relationship. substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for
This two-tiered test would provide us with a framework of analysis, which would the proper operation of the corporation such as securing business permits and
take into consideration the totality of circumstances surrounding the true nature other licenses over an indefinite period of engagement.
of the relationship between the parties. This is especially appropriate in this
case where there is no written agreement or terms of reference to base the Under the broader economic reality test, the petitioner can likewise be said to
relationship on; and due to the complexity of the relationship based on the be an employee of respondent corporation because she had served the
various positions and responsibilities given to the worker over the period of the company for six years before her dismissal, receiving check vouchers
latter’s employment. indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from
The control test initially found application in the case of Viaña v. Al-Lagadan August 1, 1999 to December 18, 2000. 26 When petitioner was designated
and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that General Manager, respondent corporation made a report to the SSS signed by
there is an employer-employee relationship when the person for whom the Irene Ballesteros. Petitioner’s membership in the SSS as manifested by a copy
services are performed reserves the right to control not only the end achieved of the SSS specimen signature card which was signed by the President of
but also the manner and means used to achieve that end. Kasei Corporation and the inclusion of her name in the on-line inquiry system
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing of the SSS evinces the existence of an employer-employee relationship
economic conditions prevailing between the parties, in addition to the standard between petitioner and respondent corporation. 27
of right-of-control like the inclusion of the employee in the payrolls, to give a It is therefore apparent that petitioner is economically dependent on
clearer picture in determining the existence of an employer-employee respondent corporation for her continued employment in the latter’s line of
relationship based on an analysis of the totality of economic circumstances of business.
the worker.
In Domasig v. National Labor Relations Commission, 28 we held that in a
Thus, the determination of the relationship between employer and employee business establishment, an identification card is provided not only as a security
depends upon the circumstances of the whole economic activity, 22 such as: (1) measure but mainly to identify the holder thereof as a bona fide employee of
the extent to which the services performed are an integral part of the the firm that issues it. Together with the cash vouchers covering petitioner’s
employer’s business; (2) the extent of the worker’s investment in equipment salaries for the months stated therein, these matters constitute substantial
and facilities; (3) the nature and degree of control exercised by the employer; evidence adequate to support a conclusion that petitioner was an employee of
(4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, private respondent.
judgment or foresight required for the success of the claimed independent
enterprise; (6) the permanency and duration of the relationship between the We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its
worker and the employer; and (7) the degree of dependency of the worker workers with the SSS is proof that the latter were the former’s employees. The
upon the employer for his continued employment in that line of business. 23 coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
business. 24 In the United States, the touchstone of economic reality in established that petitioner never acted as Corporate Secretary and that her
analyzing possible employment relationships for purposes of the Federal Labor designation as such was only for convenience. The actual nature of petitioner’s

33 | P a g e
job was as Kamura’s direct assistant with the duty of acting as Liaison Officer creates an adverse working environment rendering it impossible for such
in representing the company to secure construction permits, license to operate employee to continue working for her employer. Hence, her severance from the
and other requirements imposed by government agencies. Petitioner was company was not of her own making and therefore amounted to an illegal
never entrusted with corporate documents of the company, nor required to termination of employment.
attend the meeting of the corporation. She was never privy to the preparation
of any document for the corporation, although once in a while she was required In affording full protection to labor, this Court must ensure equal work
to sign prepared documentation for the company. 30 opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees and
The second affidavit of Kamura dated March 7, 2002 which repudiated the employers, we are mindful of the fact that the policy of the law is to apply the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself Labor Code to a greater number of employees. This would enable employees
from the records of the case. 31 Regardless of this fact, we are convinced that to avail of the benefits accorded to them by law, in line with the constitutional
the allegations in the first affidavit are sufficient to establish that petitioner is an mandate giving maximum aid and protection to labor, promoting their welfare
employee of Kasei Corporation. and reaffirming it as a primary social economic force in furtherance of social
justice and national development.
Granting arguendo, that the second affidavit validly repudiated the first one,
courts do not generally look with favor on any retraction or recanted testimony, WHEREFORE, the petition is GRANTED. The Decision and Resolution of the
for it could have been secured by considerations other than to tell the truth and Court of Appeals dated October 29, 2004 and October 7, 2005, respectively, in
would make solemn trials a mockery and place the investigation of the truth at CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the
the mercy of unscrupulous witnesses. 32 A recantation does not necessarily National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
cancel an earlier declaration, but like any other testimony the same is subject No. 032766-02, is REINSTATED. The case is REMANDED to the Labor
to the test of credibility and should be received with caution. 33 Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages
from the time she was illegally terminated until the date of finality of this
Based on the foregoing, there can be no other conclusion that petitioner is an decision, and separation pay representing one-half month pay for every year of
employee of respondent Kasei Corporation. She was selected and engaged by service, where a fraction of at least six months shall be considered as one
the company for compensation, and is economically dependent upon whole year.
respondent for her continued employment in that line of business. Her main job
function involved accounting and tax services rendered to respondent SO ORDERED.
corporation on a regular basis over an indefinite period of engagement.
Respondent corporation hired and engaged petitioner for compensation, with
the power to dismiss her for cause. More importantly, respondent corporation
had the power to control petitioner with the means and methods by which the
work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary
by P2,500 a month from January to September 2001. This amounts to an
illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and
confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to constructive
dismissal. Constructive dismissal is an involuntary resignation resulting in
cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v.
Florendo-Flores, 36 we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation arises which

34 | P a g e
 Republic of the Philippines week, the Kasunduan would cease to have legal effect and Bustamante would
SUPREME COURT have to return the vehicle to Villamaria Motors.

FIRST DIVISION Under the Kasunduan, Bustamante was prohibited from driving the vehicle
without prior authority from Villamaria Motors. Thus, Bustamante was
G.R. No. 165881 April 19, 2006 authorized to operate the vehicle to transport passengers only and not for other
purposes. He was also required to display an identification card in front of the
OSCAR VILLAMARIA, JR. Petitioner, windshield of the vehicle; in case of failure to do so, any fine that may be
imposed by government authorities would be charged against his account.
vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents Bustamante further obliged himself to pay for the cost of replacing any parts of
the vehicle that would be lost or damaged due to his negligence. In case the
vehicle sustained serious damage, Bustamante was obliged to notify Villamaria
DECISION Motors before commencing repairs. Bustamante was not allowed to wear
slippers, short pants or undershirts while driving. He was required to be polite
CALLEJO, SR., J.: and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more days and was
Before us is a Petition for Review on Certiorari under Rule 65 of the Revised required to attend any meetings which may be called from time to time. Aside
Rules of Court assailing the Decision1 and Resolution2 of the Court of Appeals from the boundary-hulog, Bustamante was also obliged to pay for the annual
(CA) in CA-G.R. SP No. 78720 which set aside the Resolution3 of the National registration fees of the vehicle and the premium for the vehicle’s
Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn comprehensive insurance. Bustamante promised to strictly comply with the
affirmed the Decision4 of the Labor Arbiter dismissing the complaint filed by rules and regulations imposed by Villamaria for the upkeep and maintenance of
respondent Jerry V. Bustamante. the jeepney.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole Bustamante continued driving the jeepney under the supervision and control of
proprietorship engaged in assembling passenger jeepneys with a public utility Villamaria. As agreed upon, he made daily remittances of P550.00 in payment
franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria of the purchase price of the vehicle. Bustamante failed to pay for the annual
stopped assembling jeepneys and retained only nine, four of which he registration fees of the vehicle, but Villamaria allowed him to continue driving
operated by employing drivers on a "boundary basis." One of those drivers was the jeepney.
respondent Bustamante who drove the jeepney with Plate No. PVU-660.
Bustamante remitted P450.00 a day to Villamaria as boundary and kept the In 1999, Bustamante and other drivers who also had the same arrangement
residue of his daily earnings as compensation for driving the vehicle. In August with Villamaria Motors failed to pay their respective boundary-hulog. This
1997, Villamaria verbally agreed to sell the jeepney to Bustamante under the prompted Villamaria to serve a "Paalala,"6 reminding them that under the
"boundary-hulog scheme," where Bustamante would remit to Villarama Kasunduan, failure to pay the daily boundary-hulog for one week, would mean
P550.00 a day for a period of four years; Bustamante would then become the their respective jeepneys would be returned to him without any complaints. He
owner of the vehicle and continue to drive the same under Villamaria’s warned the drivers that the Kasunduan would henceforth be strictly enforced
franchise. It was also agreed that Bustamante would make a downpayment of and urged them to comply with their obligation to avoid litigation.
P10,000.00.
On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and
On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng barred the latter from driving the vehicle.
Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog"5 over the
passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal
and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay against Villamaria and his wife Teresita. In his Position Paper,8 Bustamante
the boundary-hulog for three days, Villamaria Motors would hold on to the alleged that he was employed by Villamaria in July 1996 under the boundary
vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day; system, where he was required to remit P450.00 a day. After one year of
in case Bustamante failed to remit the daily boundary-hulog for a period of one continuously working for them, the spouses Villamaria presented the

35 | P a g e
Kasunduan for his signature, with the assurance that he (Bustamante) would that Bustamante eventually failed to remit the requisite boundary-hulog of
own the jeepney by March 2001 after paying P550.00 in daily installments and P550.00 a day, which prompted them to issue the Paalaala. Instead of
that he would thereafter continue driving the vehicle along the same route complying with his obligations, Bustamante stopped making his remittances
under the same franchise. He further narrated that in July 2000, he informed despite his daily trips and even brought the jeepney to the province without
the Villamaria spouses that the surplus engine of the jeepney needed to be permission. Worse, the jeepney figured in an accident and its license plate was
replaced, and was assured that it would be done. However, he was later confiscated; Bustamante even abandoned the vehicle in a gasoline station in
arrested and his driver’s license was confiscated because apparently, the Sucat, Parañaque City for two weeks. When the security guard at the gasoline
replacement engine that was installed was taken from a stolen vehicle. Due to station requested that the vehicle be retrieved and Teresita Villamaria asked
negotiations with the apprehending authorities, the jeepney was not Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the
impounded. The Villamaria spouses took the jeepney from him on July 24, vehicle was finally retrieved, the tires were worn, the alternator was gone, and
2000, and he was no longer allowed to drive the vehicle since then unless he the battery was no longer working.
paid them P70,000.00.
Citing the cases of Cathedral School of Technology v. NLRC 11 and Canlubang
Bustamante prayed that judgment be rendered in his favor, thus: Security Agency Corporation v. NLRC,12 the spouses Villamaria argued that
Bustamante was not illegally dismissed since the Kasunduan executed on
WHEREFORE, in the light of the foregoing, it is most respectfully prayed that August 7, 1997 transformed the employer-employee relationship into that of
judgment be rendered ordering the respondents, jointly and severally, the vendor-vendee. Hence, the spouses concluded, there was no legal basis to
following: hold them liable for illegal dismissal. They prayed that the case be dismissed
for lack of jurisdiction and patent lack of merit.
1. Reinstate complainant to his former position without loss of seniority
rights and execute a Deed of Sale in favor of the complainant relative In his Reply,13 Bustamante claimed that Villamaria exercised control and
to the PUJ with Plate No. PVU-660; supervision over the conduct of his employment. He maintained that the rulings
of the Court in National Labor Union v. Dinglasan,14 Magboo v. Bernardo,15 and
2. Ordering the respondents to pay backwages in the amount of Citizen's League of Free Workers v. Abbas16 are germane to the issue as they
define the nature of the owner/operator-driver relationship under the boundary
P400.00 a day and other benefits computed from July 24, 2000 up to
system. He further reiterated that it was the Villamaria spouses who presented
the time of his actual reinstatement;
the Kasunduan to him and that he conformed thereto only upon their
representation that he would own the vehicle after four years. Moreover, it
3. Ordering respondents to return the amount of P10,000.00 and appeared that the Paalala was duly received by him, as he, together with other
P180,000.00 for the expenses incurred by the complainant in the repair drivers, was made to affix his signature on a blank piece of paper purporting to
and maintenance of the subject jeep; be an "attendance sheet."

4. Ordering the respondents to refund the amount of One Hundred On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of the
(P100.00) Pesos per day counted from August 7, 1997 up to June spouses Villamaria and ordered the complaint dismissed on the following
2000 or a total of P91,200.00; ratiocination:

5. To pay moral and exemplary damages of not less than P200,000.00; Respondents presented the contract of Boundary-Hulog, as well as the
PAALALA, to prove their claim that complainant violated the terms of their
6. Attorney’s fee[s] of not less than 10% of the monetary award. contract and afterwards abandoned the vehicle assigned to him. As against the
foregoing, [the] complaint’s (sic) mere allegations to the contrary cannot
Other just and equitable reliefs under the premises are also being prayed for. 9 prevail.

In their Position Paper,10 the spouses Villamaria admitted the existence of the Not having been illegally dismissed, complainant is not entitled to damages
Kasunduan, but alleged that Bustamante failed to pay the P10,000.00 and attorney's fees.18
downpayment and the vehicle’s annual registration fees. They further alleged

36 | P a g e
Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan For his part, Villamaria averred that Bustamante failed to adduce proof of their
did not extinguish the employer-employee relationship between him and employer-employee relationship. He further pointed out that the Dinglasan
Villamaria. While he did not receive fixed wages, he kept only the excess of the case pertains to the boundary system and not the boundary-hulog system,
boundary-hulog which he was required to remit daily to Villamaria under the hence inapplicable in the instant case. He argued that upon the execution of
agreement. Bustamante maintained that he remained an employee because he the Kasunduan, the juridical tie between him and Bustamante was transformed
was engaged to perform activities which were necessary or desirable to into a vendor-vendee relationship. Noting that he was engaged in the
Villamaria’s trade or business. manufacture and sale of jeepneys and not in the business of transporting
passengers for consideration, Villamaria contended that the daily fees which
The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus: Bustmante paid were actually periodic installments for the the vehicle and were
not the same fees as understood in the boundary system. He added that the
boundary-hulog plan was basically a scheme to help the driver-buyer earn
WHEREFORE, premises considered, complainant's appeal is hereby
money and eventually pay for the unit in full, and for the owner to profit not
DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly on
from the daily earnings of the driver-buyer but from the purchase price of the
a jurisdictional issue, there being none over the subject matter of the
controversy.21 unit sold. Villamaria further asserted that the apparently restrictive conditions in
the Kasunduan did not mean that the means and method of driver-buyer’s
conduct was controlled, but were mere ways to preserve the vehicle for the
The NLRC ruled that under the Kasunduan, the juridical relationship between benefit of both parties: Villamaria would be able to collect the agreed purchase
Bustamante and Villamaria was that of vendor and vendee, hence, the Labor price, while Bustamante would be assured that the vehicle would still be in
Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for good running condition even after four years. Moreover, the right of vendor to
Reconsideration, which the NLRC resolved to deny on May 30, 2003. 22 impose certain conditions on the buyer should be respected until full ownership
of the property is vested on the latter. Villamaria insisted that the parallel
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging circumstances obtaining in Singer Sewing Machine Company v. Drilon 24 has
that the NLRC erred analogous application to the instant issue.

I In its Decision25 dated August 30, 2004, the CA reversed and set aside the
NLRC decision. The fallo of the decision reads:
IN DISMISSING PETITIONER’S APPEAL "FOR REASON NOT STATED IN
THE LABOR ARBITER’S DECISION, BUT MAINLY ON JURISDICTIONAL UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions
ISSUE;" of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE,
and judgment entered in favor of petitioner:
II
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN Jerry Bustamante separation pay computed from the time of his
IT DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED employment up to the time of termination based on the prevailing
BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS minimum wage at the time of termination; and,
DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE
OF OUR LABOR LAWS.23 2. Condemning private respondent Oscar Villamaria, Jr. to pay
petitioner Jerry Bustamante back wages computed from the time of his
Bustamante insisted that despite the Kasunduan, the relationship between him dismissal up to March 2001 based on the prevailing minimum wage at
and Villamaria continued to be that of employer-employee and as such, the the time of his dismissal.
Labor Arbiter had jurisdiction over his complaint. He further alleged that it is
common knowledge that operators of passenger jeepneys (including taxis) pay Without Costs.
their drivers not on a regular monthly basis but on commission or boundary
basis, or even the boundary-hulog system. Bustamante asserted that he was SO ORDERED.26
dismissed from employment without any lawful or just cause and without due
notice.

37 | P a g e
The appellate court ruled that the Labor Arbiter had jurisdiction over to reserve his title on the jeepney until after the purchase price thereof had
Bustamante’s complaint. Under the Kasunduan, the relationship between him been paid in full.
and Villamaria was dual: that of vendor-vendee and employer-employee. The
CA ratiocinated that Villamaria’s exercise of control over Bustamante’s conduct In his Comment on the petition, respondent avers that the appropriate remedy
in operating the jeepney is inconsistent with the former’s claim that he was not of petitioner was an appeal via a petition for review on certiorari under Rule 45
engaged in the transportation business. There was no evidence that petitioner of the Rules of Court and not a special civil action of certiorari under Rule 65.
was allowed to let some other person drive the jeepney. He argues that petitioner failed to establish that the CA committed grave abuse
of its discretion amounting to excess or lack of jurisdiction in its decision, as the
The CA further held that, while the power to dismiss was not mentioned in the said ruling is in accord with law and the evidence on record.
Kasunduan, it did not mean that Villamaria could not exercise it. It explained
that the existence of an employment relationship did not depend on how the Respondent further asserts that the Kasunduan presented to him by petitioner
worker was paid but on the presence or absence of control over the means and which provides for a boundary-hulog scheme was a devious circumvention of
method of the employee’s work. In this case, Villamaria’s directives (to drive the Labor Code of the Philippines. Respondent insists that his juridical
carefully, wear an identification card, don decent attire, park the vehicle in his relationship with petitioner is that of employer-employee because he was
garage, and to inform him about provincial trips, etc.) was a means to control engaged to perform activities which were necessary or desirable in the usual
the way in which Bustamante was to go about his work. In view of Villamaria’s business of petitioner, his employer.
supervision and control as employer, the fact that the "boundary" represented
installment payments of the purchase price on the jeepney did not remove the
In his Reply, petitioner avers that the Rules of Procedure should be liberally
parties’ employer-employee relationship. construed in his favor; hence, it behooves the Court to resolve the merits of his
petition.
While the appellate court recognized that a week’s default in paying the
boundary-hulog constituted an additional cause for terminating Bustamante’s
We agree with respondent’s contention that the remedy of petitioner from the
employment, it held that the latter was illegally dismissed. According to the CA,
CA decision was to file a petition for review on certiorari under Rule 45 of the
assuming that Bustamante failed to make the required payments as claimed by Rules of Court and not the independent action of certiorari under Rule 65.
Villamaria, the latter nevertheless failed to take steps to recover the unit and
Petitioner had 15 days from receipt of the CA resolution denying his motion for
waited for Bustamante to abandon it. It also pointed out that Villamaria neither
the reconsideration within which to file the petition under Rule 45. 28 But instead
submitted any police report to support his claim that the vehicle figured in a
of doing so, he filed a petition for certiorari under Rule 65 on November 22,
mishap nor presented the affidavit of the gas station guard to substantiate the
2004, which did not, however, suspend the running of the 15-day reglementary
claim that Bustamante abandoned the unit. period; consequently, the CA decision became final and executory upon the
lapse of the reglementary period for appeal. Thus, on this procedural lapse, the
Villamaria received a copy of the decision on September 8, 2004, and filed, on instant petition stands to be dismissed.29
September 17, 2004, a motion for reconsideration thereof. The CA denied the
motion in a Resolution27 dated November 2, 2004, and Villamaria received a
It must be stressed that the recourse to a special civil action under Rule 65 of
copy thereof on November 8, 2004. the Rules of Court is proscribed by the remedy of appeal under Rule 45. As the
Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of
Villamaria, now petitioner, seeks relief from this Court via petition for review on Appeals:30
certiorari under Rule 65 of the Rules of Court, alleging that the CA committed
grave abuse of its discretion amounting to excess or lack of jurisdiction in
We agree that the remedy of the aggrieved party from a decision or final
reversing the decision of the Labor Arbiter and the NLRC. He claims that the resolution of the CA is to file a petition for review on certiorari under Rule 45 of
CA erred in ruling that the juridical relationship between him and respondent the Rules of Court, as amended, on questions of facts or issues of law within
under the Kasunduan was a combination of employer-employee and vendor-
fifteen days from notice of the said resolution. Otherwise, the decision of the
vendee relationships. The terms and conditions of the Kasunduan clearly state
CA shall become final and executory. The remedy under Rule 45 of the Rules
that he and respondent Bustamante had entered into a conditional deed of sale
of Court is a mode of appeal to this Court from the decision of the CA. It is a
over the jeepney; as such, their employer-employee relationship had been
continuation of the appellate process over the original case. A review is not a
transformed into that of vendor-vendee. Petitioner insists that he had the right matter of right but is a matter of judicial discretion. The aggrieved party may,

38 | P a g e
however, assail the decision of the CA via a petition for certiorari under Rule 65 Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
of the Rules of Court within sixty days from notice of the decision of the CA or exclusive original jurisdiction only over the following:
its resolution denying the motion for reconsideration of the same. This is based
on the premise that in issuing the assailed decision and resolution, the CA x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall
acted with grave abuse of discretion, amounting to excess or lack of jurisdiction have original and exclusive jurisdiction to hear and decide, within thirty (30)
and there is no plain, speedy and adequate remedy in the ordinary course of calendar days after the submission of the case by the parties for decision
law. A remedy is considered plain, speedy and adequate if it will promptly without extension, even in the absence of stenographic notes, the following
relieve the petitioner from the injurious effect of the judgment and the acts of cases involving all workers, whether agricultural or non-agricultural:
the lower court.
1. Unfair labor practice cases;
The aggrieved party is proscribed from filing a petition for certiorari if appeal is
available, for the remedies of appeal and certiorari are mutually exclusive and
2. Termination disputes;
not alternative or successive. The aggrieved party is, likewise, barred from
filing a petition for certiorari if the remedy of appeal is lost through his
negligence. A petition for certiorari is an original action and does not interrupt 3. If accompanied with a claim for reinstatement, those cases that
the course of the principal case unless a temporary restraining order or a writ workers may file involving wage, rates of pay, hours of work, and other
of preliminary injunction has been issued against the public respondent from terms and conditions of employment;
further proceeding. A petition for certiorari must be based on jurisdictional
grounds because, as long as the respondent court acted within its jurisdiction, 4. Claims for actual, moral, exemplary and other forms of damages
any error committed by it will amount to nothing more than an error of judgment arising from the employer-employee relations;
which may be corrected or reviewed only by appeal.31
5. Cases arising from violation of Article 264 of this Code, including
However, we have also ruled that a petition for certiorari under Rule 65 may be questions involving the legality of strikes and lockouts; and
considered as filed under Rule 45, conformably with the principle that rules of
procedure are to be construed liberally, provided that the petition is filed within 6. Except claims for Employees Compensation, Social Security,
the reglementary period under Section 2, Rule 45 of the Rules of Court, and Medicare and maternity benefits, all other claims, arising from
where valid and compelling circumstances warrant that the petition be resolved employer-employee relationship, including those of persons in
on its merits.32 In this case, the petition was filed within the reglementary period domestic or household service, involving an amount exceeding five
and petitioner has raised an issue of substance: whether the existence of a thousand pesos (P5,000.00) regardless of whether accompanied with
boundary-hulog agreement negates the employer-employee relationship a claim for reinstatement.
between the vendor and vendee, and, as a corollary, whether the Labor Arbiter
has jurisdiction over a complaint for illegal dismissal in such case. (b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
We resolve these issues in the affirmative.
(c) Cases arising from the interpretation or implementation of
The rule is that, the nature of an action and the subject matter thereof, as well collective bargaining agreements, and those arising from the
as, which court or agency of the government has jurisdiction over the same, interpretation or enforcement of company personnel policies
are determined by the material allegations of the complaint in relation to the shall be disposed of by the Labor Arbiter by referring the same
law involved and the character of the reliefs prayed for, whether or not the to the grievance machinery and voluntary arbitration as may
complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer or be provided in said agreements.
demand for relief is not part of the petition of the cause of action; nor does it
enlarge the cause of action stated or change the legal effect of what is In the foregoing cases, an employer-employee relationship is an indispensable
alleged.34 In determining which body has jurisdiction over a case, the better jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the NLRC under
policy is to consider not only the status or relationship of the parties but also Article 217 of the Labor Code is limited to disputes arising from an employer-
the nature of the action that is the subject of their controversy.35 employee relationship which can only be resolved by reference to the Labor

39 | P a g e
Code, other labor statutes or their collective bargaining agreement. 37 Not every Respondent was entitled to keep the excess of his daily earnings as his daily
dispute between an employer and employee involves matters that only the wage. Thus, the daily remittances also had a dual purpose: that of petitioner’s
Labor Arbiter and the NLRC can resolve in the exercise of their adjudicatory or boundary and respondent’s partial payment (hulog) for the vehicle. This dual
quasi-judicial powers. Actions between employers and employees where the purpose was expressly stated in the Kasunduan. The well-settled rule is that an
employer-employee relationship is merely incidental is within the exclusive obligation is not novated by an instrument that expressly recognizes the old
original jurisdiction of the regular courts.38 When the principal relief is to be one, changes only the terms of payment, and adds other obligations not
granted under labor legislation or a collective bargaining agreement, the case incompatible with the old provisions or where the new contract merely
falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even supplements the previous one. 47 The two obligations of the respondent to
though a claim for damages might be asserted as an incident to such claim. 39 remit to petitioner the boundary-hulog can stand together.

We agree with the ruling of the CA that, under the boundary-hulog scheme In resolving an issue based on contract, this Court must first examine the
incorporated in the Kasunduan, a dual juridical relationship was created contract itself, keeping in mind that when the terms of the agreement are clear
between petitioner and respondent: that of employer-employee and vendor- and leave no doubt as to the intention of the contracting parties, the literal
vendee. The Kasunduan did not extinguish the employer-employee relationship meaning of its stipulations shall prevail.48 The intention of the contracting
of the parties extant before the execution of said deed. parties should be ascertained by looking at the words used to project their
intention, that is, all the words, not just a particular word or two or more words
As early as 1956, the Court ruled in National Labor Union v. Dinglasan 40 that standing alone. The various stipulations of a contract shall be interpreted
the jeepney owner/operator-driver relationship under the boundary system is together, attributing to the doubtful ones that sense which may result from all of
that of employer-employee and not lessor-lessee. This doctrine was affirmed, them taken jointly.49 The parts and clauses must be interpreted in relation to
under similar factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. one another to give effect to the whole. The legal effect of a contract is to be
Llamas,42 and was analogously applied to govern the relationships between determined from the whole read together.50
auto-calesa owner/operator and driver,43 bus owner/operator and
conductor,44 and taxi owner/operator and driver.45 Under the Kasunduan, petitioner retained supervision and control over the
conduct of the respondent as driver of the jeepney, thus:
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary
compensation of the driver, that is, the latter’s daily earnings are remitted to the hulog ay ang mga sumusunod:
owner/operator less the excess of the boundary which represents the driver’s
compensation. Under this system, the owner/operator exercises control and 1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG
supervision over the driver. It is unlike in lease of chattels where the lessor PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG
loses complete control over the chattel leased but the lessee is still ultimately UNANG PANIG.
responsible for the consequences of its use. The management of the business
is still in the hands of the owner/operator, who, being the holder of the
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG
certificate of public convenience, must see to it that the driver follows the route IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o
prescribed by the franchising and regulatory authority, and the rules pangangalakal sa malinis at maayos na pamamaraan.
promulgated with regard to the business operations. The fact that the driver
does not receive fixed wages but only the excess of the "boundary" given to
the owner/operator is not sufficient to change the relationship between them. 3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG
Indubitably, the driver performs activities which are usually necessary or IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan,
desirable in the usual business or trade of the owner/operator.46 kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.

Under the Kasunduan, respondent was required to remit P550.00 daily to 4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng
petitioner, an amount which represented the boundary of petitioner as well as UNANG PANIG.
respondent’s partial payment (hulog) of the purchase price of the jeepney.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang
maglagay ng ID Card sa harap ng windshield upang sa pamamagitan

40 | P a g e
nito ay madaliang malaman kung ang nagmamaneho ay awtorisado ng 14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa
VILLAMARIA MOTORS o hindi. rehistro, comprehensive insurance taon-taon at kahit anong uri ng
aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] PANIG.
multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang
ID card sa wastong lugar o anuman kasalanan o kapabayaan. 15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo
sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang
materyales o piyesa na papalitan ng nasira o nawala ito dahil sa mungkahi sa ikasusulong ng samahan.
kanyang kapabayaan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa
hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang mga darating na panahon at hindi magiging hadlang sa lahat ng mga
nasabing sasakyan. balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at
ikakatibay ng Samahan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang
ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG 17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging
IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA buwaya sa pasahero upang hindi kainisan ng kapwa driver at
MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng maiwasan ang pagkakasangkot sa anumang gulo.
VILLAMARIA MOTORS.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi
panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas, naman ay sisikapin mapanatili ang kalinisan nito.
naka short pants at nakasando lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan upang igalang ng mga pasahero. 19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin
ng dalawa o higit pang araw sa lalawigan ay dapat lamang na
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan
niyang driver ay magpapakita ng magandang asal sa mga pasaheros ang mga anumang suliranin.
at hindi dapat magsasalita ng masama kung sakali man may
pasaherong pilosopo upang maiwasan ang anumang kaguluhan na 20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang
maaaring kasangkutan. pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang
aksidente.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG
ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay 21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon
ang opisina ng VILLAMARIA MOTORS ang may karapatang sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay
mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-
responsibilidad. Ang halagang dapat bayaran sa opisina ay may kanino] lamang upang maiwasan ang anumang usapin. Magsadya
karagdagang multa ng P50.00 sa araw-araw na ito ay nasa agad sa opisina ng VILLAMARIA MOTORS.
pangangasiwa ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi kong sinasang-ayunan at buong sikap na pangangalagaan ng
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at
nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.51
ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan
sa TAUHAN NG UNANG PANIG.

41 | P a g e
The parties expressly agreed that petitioner, as vendor, and respondent, as Moreover, requiring petitioner to drive the unit for commercial use, or to wear
vendee, entered into a contract to sell the jeepney on a daily installment basis an identification card, or to don a decent attire, or to park the vehicle in
of P550.00 payable in four years and that petitioner would thereafter become Villamaria Motors garage, or to inform Villamaria Motors about the fact that the
its owner. A contract is one of conditional sale, oftentimes referred to as unit would be going out to the province for two days of more, or to drive the unit
contract to sell, if the ownership or title over the carefully, etc. necessarily related to control over the means by which the
petitioner was to go about his work; that the ruling applicable here is not Singer
property sold is retained by the vendor, and is not passed to the vendee unless Sewing Machine but National Labor Union since the latter case involved
and until there is full payment of the purchase price and/or upon faithful jeepney owners/operators and jeepney drivers, and that the fact that the
compliance with the other terms and conditions that may lawfully be "boundary" here represented installment payment of the purchase price on the
stipulated.52 Such payment or satisfaction of other preconditions, as the case jeepney did not withdraw the relationship from that of employer-employee, in
may be, is a positive suspensive condition, the failure of which is not a breach view of the overt presence of supervision and control by the employer. 56
of contract, casual or serious, but simply an event that would prevent the
obligation of the vendor to convey title from acquiring binding force. 53 Stated Neither is such juridical relationship negated by petitioner’s claim that the terms
differently, the efficacy or obligatory force of the vendor's obligation to transfer and conditions in the Kasunduan relative to respondent’s behavior and
title is subordinated to the happening of a future and uncertain event so that if deportment as driver was for his and respondent’s benefit: to insure that
the suspensive condition does not take place, the parties would stand as if the respondent would be able to pay the requisite daily installment of P550.00, and
conditional obligation had never existed.54 The vendor may extrajudicially that the vehicle would still be in good condition despite the lapse of four years.
terminate the operation of the contract, refuse conveyance, and retain the What is primordial is that petitioner retained control over the conduct of the
sums or installments already received, where such rights are expressly respondent as driver of the jeepney.
provided for.55
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise,
Under the boundary-hulog scheme, petitioner retained ownership of the is entitled to exercise supervision and control over the respondent, by seeing to
jeepney although its material possession was vested in respondent as its it that the route provided in his franchise, and the rules and regulations of the
driver. In case respondent failed to make his P550.00 daily installment Land Transportation Regulatory Board are duly complied with. Moreover, in a
payment for a week, the agreement would be of no force and effect and business establishment, an identification card is usually provided not just as a
respondent would have to return the jeepney to petitioner; the employer- security measure but to mainly identify the holder thereof as a bona fide
employee relationship would likewise be terminated unless petitioner would employee of the firm who issues it.57
allow respondent to continue driving the jeepney on a boundary basis of
P550.00 daily despite the termination of their vendor-vendee relationship. As respondent’s employer, it was the burden of petitioner to prove that
respondent’s termination from employment was for a lawful or just cause, or, at
The juridical relationship of employer-employee between petitioner and the very least, that respondent failed to make his daily remittances of P550.00
respondent was not negated by the foregoing stipulation in the Kasunduan, as boundary. However, petitioner failed to do so. As correctly ruled by the
considering that petitioner retained control of respondent’s conduct as driver of appellate court:
the vehicle. As correctly ruled by the CA:
It is basic of course that termination of employment must be effected in
The exercise of control by private respondent over petitioner’s conduct in accordance with law. The just and authorized causes for termination of
operating the jeepney he was driving is inconsistent with private respondent’s employment are enumerated under Articles 282, 283 and 284 of the Labor
claim that he is, or was, not engaged in the transportation business; that, even Code.
if petitioner was allowed to let some other person drive the unit, it was not
shown that he did so; that the existence of an employment relation is not Parenthetically, given the peculiarity of the situation of the parties here, the
dependent on how the worker is paid but on the presence or absence of control default in the remittance of the boundary hulog for one week or longer may be
over the means and method of the work; that the amount earned in excess of considered an additional cause for termination of employment. The reason is
the "boundary hulog" is equivalent to wages; and that the fact that the power of because the Kasunduan would be of no force and effect in the event that the
dismissal was not mentioned in the Kasunduan did not mean that private purchaser failed to remit the boundary hulog for one week. The Kasunduan in
respondent never exercised such power, or could not exercise such power. this case pertinently stipulates:

42 | P a g e
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng "Sumasainyo
BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na
ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG "Attendance: 8/27/99
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG
na wala ng paghahabol pa.
"(The Signatures appearing herein

Moreover, well-settled is the rule that, the employer has the burden of proving include (sic) that of petitioner’s) (Sgd.)
that the dismissal of an employee is for a just cause. The failure of the
employer to discharge this burden means that the dismissal is not justified and
that the employee is entitled to reinstatement and back wages. OSCAR VILLAMARIA, JR."

In the case at bench, private respondent in his position paper before the Labor If it were true that petitioner did not remit the boundary hulog for one week or
Arbiter, alleged that petitioner failed to pay the miscellaneous fee of more, why did private respondent not forthwith take steps to recover the unit,
P10,000.00 and the yearly registration of the unit; that petitioner also stopped and why did he have to wait for petitioner to abandon it?1avvphil.net
remitting the "boundary hulog," prompting him (private respondent) to issue a
"Paalala," which petitioner however ignored; that petitioner even brought the On another point, private respondent did not submit any police report to
unit to his (petitioner’s) province without informing him (private respondent) support his claim that petitioner really figured in a vehicular mishap. Neither did
about it; and that petitioner eventually abandoned the vehicle at a gasoline he present the affidavit of the guard from the gas station to substantiate his
station after figuring in an accident. But private respondent failed to claim that petitioner abandoned the unit there.58
substantiate these allegations with solid, sufficient proof. Notably, private
respondent’s allegation viz, that he retrieved the vehicle from the gas station, Petitioner’s claim that he opted not to terminate the employment of respondent
where petitioner abandoned it, contradicted his statement in the Paalala that he because of magnanimity is negated by his (petitioner’s) own evidence that he
would enforce the provision (in the Kasunduan) to the effect that default in the took the jeepney from the respondent only on July 24, 2000.
remittance of the boundary hulog for one week would result in the forfeiture of
the unit. The Paalala reads as follows: IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of
the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against
"Sa lahat ng mga kumukuha ng sasakyan petitioner.

"Sa pamamagitan ng ‘BOUNDARY HULOG’ SO ORDERED.

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular

na ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng
Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and
nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong

ipatutupad ang nasabing Kasunduan kaya’t aking pinaaalala sa inyong lahat na
tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.

"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na

tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong
sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang
magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging
dahilan ng pagsampa ng kaso.
Republic of the Philippines
SUPREME COURT

43 | P a g e
 SECOND DIVISION complainants full backwages and other benefits, less earnings elsewhere, and
to reimburse the drivers the amount paid as washing charges; and
G.R. No. 119268 February 23, 2000
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS,
LUIS DE LOS ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners, SO ORDERED.4
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI Private respondent's first motion for reconsideration was denied. Remaining hopeful,
(PHILJAMA INTERNATIONAL, INC.) respondents. private respondent filed another motion for reconsideration. This time, public
respondent, in its decision5 dated October 28, 1994, granted aforesaid second motion
QUISUMBING, J.: for reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and
private respondent have no employer-employee relationship. It held that the relationship
This special civil action for certiorari seeks to annul the decision1 of public respondent of the parties is leasehold which is covered by the Civil Code rather than the Labor
promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92, and its Code, and disposed of the case as follows:
resolution2 dated December 13, 1994 which denied petitioners motion for
reconsideration. VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under
reconsideration is hereby given due course.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic
corporation engaged in the operation of "Goodman Taxi." Petitioners used to drive Accordingly, the Resolution of August 10, 1994, and the Decision of April 28,
private respondent's taxicabs every other day on a 24-hour work schedule under the 1994 are hereby SET ASIDE. The Decision of the Labor Arbiter subject of the
boundary system. Under this arrangement, the petitioners earned an average of appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the
P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from complaint for lack of jurisdiction.
petitioners, daily earnings the amount of P30.00 supposedly for the washing of the taxi
units. Believing that the deduction is illegal, petitioners decided to form a labor union to No costs.
protect their rights and interests.
SO ORDERED.6
Upon learning about the plan of petitioners, private respondent refused to let petitioners
drive their taxicabs when they reported for work on August 6, 1991, and on succeeding
days. Petitioners suspected that they were singled out because they were the leaders Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision
and active members of the proposed union. Aggrieved, petitioners filed with the labor which was denied. Hence, the instant petition.
arbiter a complaint against private respondent for unfair labor practice, illegal dismissal
and illegal deduction of washing fees. In a decision 3 dated August 31, 1992, the labor In this recourse, petitioners allege that public respondent acted without or in excess of
arbiter dismissed said complaint for lack of merit. jurisdiction, or with grave abuse of discretion in rendering the assailed decision, arguing
that:
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994,
reversed and set aside the judgment of the labor arbiter. The labor tribunal declared that I
petitioners are employees of private respondent, and, as such, their dismissal must be
for just cause and after due process. It disposed of the case as follows: THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND
MOTION FOR RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING
WHEREFORE, in view of all the foregoing considerations, the decision of the PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON
Labor Arbiter appealed from is hereby SET ASIDE and another one entered: GROUNDS NOT EVEN INVOKED THEREIN.

1. Declaring the respondent company guilty of illegal dismissal and accordingly II

it is directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel
T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE
Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo PARTIES IS ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH
Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former positions THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.
without loss of seniority and other privileges appertaining thereto; to pay the

44 | P a g e
 III public respondent denied. With this motion for reconsideration, the labor tribunal had
ample opportunity to rectify errors or mistakes it may have committed before resort to
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE courts of justice can be had.14 Thus, when private respondent filed a second motion for
VIEW THAT PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT reconsideration, public respondent should have forthwith denied it in accordance with
TAXI COMPANY.7 Rule 7, Section 14 of its New Rules of Procedure which allows only one motion for
reconsideration from the same party, thus:
The petition is impressed with merit.
Sec. 14. Motions for Reconsideration. — Motions for reconsideration of any
order, resolution or decision of the Commission shall not be entertained except
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has when based on palpable or patent errors, provided that the motion is under
settled meaning in the jurisprudence of procedure. It means such capricious and oath and filed within ten (10) calendar days from receipt of the order, resolution
whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial power or decision with proof of service that a copy of the same has been furnished
as to amount to lack of power.8 In labor cases, this Court has declared in several within the reglementary period the adverse party and provided further, that only
instances that disregarding rules it is bound to observe constitutes grave abuse of one such motion from the same party shall be entertained. [Emphasis
discretion on the part of labor tribunal. supplied]

In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor The rationale for allowing only one motion for reconsideration from the same party is to
arbiter's decision, wrote the labor arbiter who rendered the decision and expressed assist the parties in obtaining an expeditious and inexpensive settlement of labor cases.
dismay over the judgment. Neither notice of appeal was filed nor cash or surety bond For obvious reasons, delays cannot be countenanced in the resolution of labor disputes.
was posted by private respondent. Nevertheless, the labor tribunal took cognizance of The dispute may involve no less than the livelihood of an employee and that of his loved
the letter from private respondent and treated said letter as private respondent's appeal. ones who are dependent upon him for food, shelter, clothing, medicine, and education.
In a certiorari action before this Court, we ruled that the labor tribunal acted with grave It may as well involve the survival of a business or an industry. 15
abuse of discretion in treating a mere letter from private respondent as private
respondent's appeal in clear violation of the rules on appeal prescribed under Section
3(a), Rule VI of the New Rules of Procedure of NLRC. As correctly pointed out by petitioner, the second motion for reconsideration filed by
private respondent is indubitably a prohibited pleading 16 which should have not been
entertained at all. Public respondent cannot just disregard its own rules on the pretext of
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave "satisfying the ends of justice",17 especially when its disposition of a legal controversy
abuse of discretion when he failed to resolve immediately by written order a motion to ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in
dismiss on the ground of lack of jurisdiction and the supplemental motion to dismiss as the subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by
mandated by Section 15 of Rule V of the New Rules of Procedure of the NLRC. this Court is not a way of rectifying an error or mistake. In our view, public respondent
gravely abused its discretion in taking cognizance and granting private respondent's
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its second motion for reconsideration as it wrecks the orderly procedure in seeking reliefs
discretion by allowing and deciding an appeal without an appeal bond having been filed in labor cases.
as required under Article 223 of the Labor Code.
But, there is another compelling reason why we cannot leave untouched the flip-flopping
In Mañebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion decisions of the public respondent. As mentioned earlier, its October 28, 1994 judgment
in disregarding the rule governing position papers. In this case, the parties have already is not in accord with the applicable decisions of this Court. The labor tribunal reasoned
filed their position papers and even agreed to consider the case submitted for decision, out as follows:
yet the labor arbiter still admitted a supplemental position paper and memorandum, and
by taking into consideration, as basis for his decision, the alleged facts adduced therein On the issue of whether or not employer-employee relationship exists,
and the documents attached thereto. admitted is the fact that complainants are taxi drivers purely on the "boundary
system". Under this system the driver takes out his unit and pays the
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in owner/operator a fee commonly called "boundary" for the use of the unit. Now,
treating the motion to set aside judgment and writ of execution as a petition for relief of in the determination the existence of employer-employee relationship, the
judgment. In doing so, public respondent had, without sufficient basis, extended the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199,
reglementary period for filing petition for relief from judgment contrary to prevailing rule 26 October 1988) has applied the following four-fold test: "(1) the selection and
and case law. engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power of control the employees conduct."
In this case before us, private respondent exhausted administrative remedy available to
it by seeking reconsideration of public respondent's decision dated April 28, 1994, which

45 | P a g e
 "Among the four (4) requisites", the Supreme Court stresses that "control is Neither were there two (2) written notices sent by private respondent informing each of
deemed the most important that the other requisites may even be the petitioners that they had been dismissed from work. These lack of valid cause and
disregarded". Under the control test, an employer-employee relationship exists failure on the part of private respondent to comply with the twin-notice requirement
if the "employer" has reserved the right to control the "employee" not only as to underscored the illegality surrounding petitioners' dismissal.
the result of the work done but also as to the means and methods by which the
same is to be accomplished. Otherwise, no such relationship exists. (Ibid.) Under the law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
Applying the foregoing parameters to the case herein obtaining, it is clear that backwages, inclusive of allowances, and to his other benefits or their monetary
the respondent does not pay the drivers, the complainants herein, their wages. equivalent computed from the time his compensation was withheld from him up to the
Instead, the drivers pay a certain fee for the use of the vehicle. On the matter time of his actual reinstatement.23 It must be emphasized, though, that recent judicial
of control, the drivers, once they are out plying their trade, are free to choose pronouncements24 distinguish between employees illegally dismissed prior to the
whatever manner they conduct their trade and are beyond the physical control effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal
of the owner/operator; they themselves determine the amount of revenue they dismissals were effected after such date. Thus, employees illegally dismissed prior to
would want to earn in a day's driving; and, more significantly aside from the March 21, 1989, are entitled to backwages up to three (3) years without deduction or
fact that they pay for the gasoline they consume, they likewise shoulder the qualification, while those illegally dismissed after that date are granted full backwages
cost of repairs on damages sustained by the vehicles they are driving. inclusive of allowances and other benefits or their monetary equivalent from the time
their actual compensation was withheld from them up to the time of their actual
Verily, all the foregoing attributes signify that the relationship of the parties is reinstatement. The legislative policy behind Republic Act No. 6715 points to "full
more of a leasehold or one that is covered by a charter agreement under the backwages" as meaning exactly that, i.e., without deducting from backwages the
Civil Code rather than the Labor Code.18 earnings derived elsewhere by the concerned employee during the period of his illegal
dismissal. Considering that petitioners were terminated from work on August 1, 1991,
they are entitled to full backwages on the basis of their last daily earnings.
The foregoing ratiocination goes against prevailing jurisprudence.
With regard to the amount deducted daily by private respondent from petitioners for
In a number of cases decided by this Court,19 we ruled that the relationship between washing of the taxi units, we view the same as not illegal in the context of the law. We
jeepney owners/operators on one hand and jeepney drivers on the other under the note that after a tour of duty, it is incumbent upon the driver to restore the unit he has
boundary system is that of employer-employee and not of lessor-lessee. We explained driven to the same clean condition when he took it out. Car washing after a tour of duty
that in the lease of chattels, the lessor loses complete control over the chattel leased is indeed a practice in the taxi industry and is in fact dictated by fair play. 25 Hence, the
although the lessee cannot be reckless in the use thereof, otherwise he would be drivers are not entitled to reimbursement of washing charges.1âwphi1.nêt
responsible for the damages to the lessor. In the case of jeepney owners/operators and
jeepney drivers, the former exercise supervision and control over the latter. The
management of the business is in the owner's hands. The owner as holder of the WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public
certificate of public convenience must see to it that the driver follows the route respondent dated October 28, 1994, is hereby SET ASIDE. The DECISION of public
prescribed by the franchising authority and the rules promulgated as regards its respondent dated April 28, 1994, and its RESOLUTION dated December 13, 1994, are
operation. Now, the fact that the drivers do not receive fixed wages but get only that in hereby REINSTATED subject to MODIFICATION. Private respondent is directed to
excess of the so-called "boundary" they pay to the owner/operator is not sufficient to reinstate petitioners to their positions held at the time of the complained dismissal.
withdraw the relationship between them from that of employer and employee. We have Private respondent is likewise ordered to pay petitioners their full backwages, to be
applied by analogy the abovestated doctrine to the relationships between bus computed from the date of dismissal until their actual reinstatement. However, the order
owner/operator and bus conductor,20 auto-calesa owner/operator and driver,21 and of public respondent that petitioners be reimbursed the amount paid as washing
recently between taxi owners/operators and taxi drivers. 22 Hence, petitioners are charges is deleted. Costs against private respondents.
undoubtedly employees of private respondent because as taxi drivers they perform
activities which are usually necessary or desirable in the usual business or trade of their SO ORDERED.
employer.

As consistently held by this Court, termination of employment must be effected in

accordance with law. The just and authorized causes for termination of employment are
enumerated under Articles 282, 283 and 284 of the Labor Code. The requirement of
notice and hearing is set-out in Article 277 (b) of the said Code. Hence, petitioners,
being employees of private respondent, can be dismissed only for just and authorized
cause, and after affording them notice and hearing prior to termination. In the instant
case, private respondent had no valid cause to terminate the employment of petitioners.

46 | P a g e
 Republic of the Philippines the death of Raul Martinez; (b) petitioner was a mere housewife who did not
SUPREME COURT possess the required competence to manage the business; and, (c) private
Manila respondents were not entitled to 13th month pay because the existence of
employer-employee relationship was doubtful on account of the boundary system
FIRST DIVISION adopted by the parties. 2

G.R. No. 117495 May 29, 1997 However, respondent National Labor Relations Commission viewed the case
differently. According to NLRC, (a) private respondents were regular drivers
because payment of wages, which is one of the essential requisites for the
NELLY ACTA MARTINEZ, petitioner,
existence of employment relation, may either be fixed, on commission, boundary,
vs.
piece-rate or task basis; (b) the management of the business passed on to
NATIONAL LABOR RELATIONS COMMISSION, DOMINADOR CORRO,
petitioner who even replaced private respondents with a new set of drivers; and, (c)
PASTOR CORRO, CELESTINO CORRO, LUIS CORRO, EREBERTO CORRO,
the claims of private respondents survived the death of Raul Martinez considering
JAIME CRUZ, WENCESLAO, DELVO, GREGORIO DELVO, HERMEJIAS
that the business did not cease operation outright but continued presumably, in the
COLIBAO, JOSE OGANA and ALONSO ALBAO, respondents.
absence of proof of sale, up to the moment. As regards the claim for 13th month
pay, NLRC upheld the stand of petitioner based on the express provision of P. D.
BELLOSILLO, J.: 851 as reiterated in the revised guidelines on the implementation thereof. On 28
January 1994 respondent NLRC thus set aside the appealed decision, and as
RAUL MARTINEZ was operator of two (2) taxicab units under the business name alternative to reinstatement, ordered petitioner to grant respondents separation pay
PAMA TX and two (2) additional units under the name P. J. TIGER TX. Private equivalent to one (1) month salary for every year of service a fraction of six (6)
respondents Dominador Corro, Pastor Corro, Celestino Corro, Luis Corro, Ereberto months being considered as one (1) whole year. 3 On 30 September 1994 the
Corro, Jaime Cruz, Wenceslao Delve, Gregorio Delvo, Hermejias Colibao, Jose motion for reconsideration was denied. 4 Hence, this recourse of petitioner.
Ogana and Alonso Albao worked for him as drivers. On 18 March 1992 Raul
Martinez died leaving behind his mother, petitioner Nelly Acta Martinez, as his sole On 11 October 1995 the Court issued a temporary restraining order enjoining the
heir. execution of the assailed decision of respondent NLRC. Petitioner imputes grave
abuse of discretion on respondent NLRC in reversing the decision of the Labor
On 14 July 1992 private respondents lodged a complaint against Raul Martinez and Arbiter.
petitioner Nelly Acta Martinez before the Labor Arbiter for violation of P. D.
851 1 and illegal dismissal. They alleged that they have been regular drivers of Raul Petitioner argues that respondent NLRC acted as a probate court when it assumed
Martinez since 20 October 1989 earning no less than P400.00 per day driving jurisdiction over the estate of a deceased person, pronounced her legally entitled to
twenty-four (24) hours every other day. For the duration of employment, not once succeed the deceased and ordered her to pay the money claim of private
did they receive a 13th month pay. After the death of Raul Martinez, petitioner took respondents. Moreover, petitioner argues that the claims of private respondents
over the management and operation of the business. On or about 22 June 1992 were personal to her son and thus were abated by his death.
she informed them that because of difficulty in maintaining the business, she was
selling the units together with the corresponding franchises. However, petitioner did
Petitioner's arguments are well-taken. The claim for 13th month pay pertains to the
not proceed with her plan; instead, she assigned the units to other drivers.
personal obligation of Raul Martinez which did not survive his death. The rule is
settled that unless expressly assumed, labor contracts are not enforceable against
Petitioner traversed the claim for 13th month pay by contending that it was the transferee of an enterprise. In the present case, petitioner does not only
personal and therefore did not survive the death of her son. Besides, private disavow that she continued the operation of the business of her son but also
respondents were not entitled thereto as Sec. 3, par. (e), of the Rules and disputes the existence of labor contracts between her son and private respondents.
Regulations Implementing P. D. 851 is explicit that employers of those who are The reason for the rule is that labor contracts are in personam, 5 and that claims for
paid on purely boundary basis are not covered therein. The relationship between backwages earned from the former employer cannot be filed against the new
her son and private respondents was not that of employer-employee but of lessor- owners of an enterprise. 6 Nor is the new operator of a business liable for claims for
lessee. The operation of the business ceased upon the death of her son and that retirement pay of employees. 7 Thus the claim of private respondents should have
she did not continue the business because she did not know how to run it. been filed instead in the intestate proceedings involving the estate of Raul Martinez
in accordance with Sec. 5, Rule 86, of the Rules of Court which provides in part —
On 30 August 1993 the Labor Arbiter dismissed the complaint on the following
grounds: (a) private respondents' claims being personal were extinguished upon

47 | P a g e
 Sec. 5. Claims which must be filed under the notice. If not filed, The factual findings of quasi-judicial agencies such as respondent NLRC, which
barred; exceptions. — All claims for money against the decedent, have acquired expertise in the matters entrusted to their jurisdiction, are accorded
arising from contract, express or implied, whether the same be by this Court not only respect but also finality if they are supported by substantial
due, not due, or contingent, all claims for funeral expenses and evidence, or that amount of relevant evidence which a reasonable mind might
expenses for the last sickness of the decedent, and judgment for accept as adequate to justify a conclusion. 12 As respondent NLRC found —
money against the decedent, must be filed within the time limited
in the notice; otherwise they are barred forever, except that they The facts of the case will readily show that before respondent taxi
may be set forth as counterclaims in any action that the executor owner Raul Martinez died, he became bedridden and the
or administrator may bring against the claimants . . . management of his taxi business passed on to his mother who
was his only surviving heir. It will also be noted that despite the
Under this rule, upon the death of the defendant, a testate or intestate information given by the mother that she will sell the business and
proceeding shall be instituted in the proper court wherein all his creditors extend separation benefits to complainants, no such thing
must appear and file their claims which shall be paid proportionately out of occurred. Instead, she replaced complainants with a new set of
the property left by the deceased. The objective is to avoid duplicity of drivers (See Complainants' Position paper, p. 25, Record). 13
procedures. Hence, the ordinary actions must be taken out from the
ordinary courts. Conformably with Art. 110 of the Labor Code, money The above findings, however, were culled from mere allegations in private
claims of laborers enjoy preference over claims of other creditors in case respondents' position paper. But mere allegation is not evidence. 14 It is a
of bankruptcy or liquidation of the employer's business. 8 basic rule in evidence that each party must prove his affirmative
allegation. 15 In Opulencia Ice Plant and Storage v. NLRC 16 we ruled that
Petitioner also insists on the absence of employer-employee relationship between no particular form of evidence is required to prove the existence of an
her son and private respondents because there is no evidence that her son paid a employer-employee relationship. Any competent and relevant evidence to
single centavo by way of wages to private respondents; rather, they were governed prove the relationship may be admitted. In that case, the relationship was
by the boundary system. Neither is there such relationship between her and private sufficiently proved by testimonial evidence. In the present case, however,
respondents because she did not continue the operation of the business which private respondents simply assumed the continuance of an employer-
ceased upon the death of her son. employee relationship between them and petitioner, when she took over
the operation of the business after the death of her son Raul
As early as 3 March 1956, in National Labor Union v. Dinglasan, 9 this Court ruled Martinez, without any supporting evidence. Consequently, we cannot
that the relationship between jeepney owners/operators on one hand and jeepney sustain for lack of basis the factual finding of respondent NLRC on the
drivers on the other under the boundary system is that of employer-employee and existence of employer-employee relationship between petitioner and
not of lessor-lessee. Therein we explained that in the lease of chattels the lessor private respondents. Clearly, such finding emanates from grave abuse of
loses complete control over the chattel leased although the lessee cannot be discretion. With this conclusion, consideration of the issue on illegal
reckless in the use thereof, otherwise he would be responsible for the damages to dismissal becomes futile and irrelevant.
the lessor. In the case of jeepney owners/operators and jeepney drivers, the former
exercise supervision and control over the latter. The fact that the drivers do not WHEREFORE, the petition is GRANTED. The Decision of respondent National
receive fixed wages but get only that in excess of the so-called "boundary" they pay Labor Relations Commission dated 28 January 1994 ordering petitioner Nelly Acta
to the owner/operator is not sufficient to withdraw the relationship between them Martinez to grant respondents separation pay as well as its Order of 30 September
from that of employer and employee. The doctrine is applicable by analogy to the 1994 denying reconsideration is SET ASIDE. The Decision of the Labor Arbiter
present case. Thus, private respondents were employees of Raul Martinez dated 30 August 1993 dismissing the complaint is REINSTATED.
because they had been engaged to perform activities which were usually
necessary or desirable in the usual business or trade of the employer. 10 The The temporary restraining order issued on 11 October 1995 is made
records show that private respondents had been employed since 20 October 1989 PERMANENT.
except for Ogana, the Delvos, Albao and Colibao who were employed on later
dates. 11
SO ORDERED.
Hence, these questions arise: Do private respondents, being then employees of
Raul Martinez, necessarily continue to be employees of the petitioner as the new
operator of the business? In the affirmative, were they illegally dismissed?

48 | P a g e
 Republic of the Philippines directly report to Babiano, and receive a monthly subsidy of P60,000.00, 0.5%
SUPREME COURT commission, and cash incentives.13 On March 31, 2008, Concepcion executed
Manila a similar contract14 anew with CPI in which she would receive a monthly
subsidy of P50,000.00, 0.5% commission, and cash incentives as per company
FIRST DIVISION policy. Notably, it was stipulated in both contracts that no employer-employee
relationship exists between Concepcion and CPI.15
G.R. No. 220978 July 5, 2016
After receiving reports that Babiano provided a competitor with information
CENTURY PROPERTIES, INC., Petitioner, regarding CPI's marketing strategies, spread false information regarding CPI
and its projects, recruited CPI's personnel to join the competitor, and for being
vs
EDWIN J. BABIANO and EMMA B. CONCEPCION, Respondents. absent without official leave (AWOL) for five (5) days, CPI, through its
Executive Vice President for Marketing and Development, Jose Marco R.
Antonio (Antonio), sent Babiano a Notice to Explain16 on February 23, 2009
DECISION directing him to explain why he should not be charged with disloyalty, conflict of
interest, and breach of trust and confidence for his actuations.17
PERLAS-BERNABE, J.:
On February 25, 2009, Babiano tendered18 his resignation and revealed that he
Assailed in this petition for review oncertiorari1are
the Decision2
dated April 8, had been accepted as Vice President of First Global BYO Development
2015 and the Resolution3 dated October 12, 2015 of the Court of Appeals (CA) Corporation (First Global), a competitor of CPI.19 On March 3, 2009, Babiano
in CA-G.R. SP No. 132953, which affirmed with modification the was served a Notice of Termination20 for: (a) incurring AWOL; (b) violating the
Decision4 dated June 25, 2013 and the Resolution5 dated October 16, 2013 of "Confidentiality of Documents and Non-Compete Clause" when he joined a
the National Labor Relations Commission (NLRC) in NLRC LAC No. 05- competitor enterprise while still working for CPI and provided such competitor
001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay enterprise information regarding CPI' s marketing strategies; and (c) recruiting
respondents Edwin J. Babiano (Babiano) and Emma B. Concepcion CPI personnel to join a competitor.21
(Concepcion; collectively, respondents) unpaid commissions in the amounts of
P889,932.42 and P591,953.05, respectively. On the other hand, Concepcion resigned as CPI's Project Director through a
letter22 dated February 23, 2009, effective immediately.
The Facts
On August 8, 2011, respondents filed a complaint23 for non-payment of
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was commissions and damages against CPI and Antonio before the NLRC,
eventually6 appointed as Vice President for Sales effective September 1, 2007. docketed as NLRC Case No. NCR-08-12029-11, claiming that their repeated
As CPI' s Vice President for Sales, Babiano was remunerated with, inter demands for the payment and release of their commissions remained
alia, the following benefits: (a) monthly salary of P70,000.00; (b) allowance of unheeded.24
P50,000.00; and (c) 0.5% override commission for completed sales. His
employment contract7 also contained a "Confidentiality of Documents and For its part, CPI maintained25 that Babiano is merely its agent tasked with
Non:-Compete Clause"8 which, among others, barred him from disclosing selling its projects. Nonetheless, he was afforded due process in the
confidential information, and from working in any business enterprise that is in termination of his employment which was based on just causes. 26 It also
direct competition with CPI "while [he is] employed and for a period of one year claimed to have validly withheld Babiano' s commissions, considering that they
from date of resignation or termination from [CPI]." Should Babiano breach any were deemed forfeited for violating the "Confidentiality of Documents and Non-
of the terms thereof, his "forms of compensation, including commissions and Compete Clause."27 On Concepcion's money claims, CPI asserted that the
incentives will be forfeited."9 NLRC had no jurisdiction to hear the same because there was no employer-
employee relations between them, and thus, she should have litigated the
During the same period, Concepcion was initially hired as Sales Agent by CPI same in an ordinary civil action.28
and was eventually10 promoted as Project Director on September 1, 2007.11 As
such, she signed an employment agreement, denominated as "Contract of The LA Ruling
Agency for Project Director"12 which provided, among others, that she would

49 | P a g e
In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's The CA Ruling
favor and, accordingly, dismissed the complaint for lack of merit. 30 The LA
found that: (a) Babiano's acts of providing information on CPI’s marketing In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with
strategies to the competitor and spreading false information about CPI and its modification increasing the award of unpaid commissions to Babiano and
projects are blatant violations of the "Confidentiality of Documents and Non- Concepcion in the amounts of P889,932.42 and P591,953.05, respectively,
Compete Clause" of his employment contract, thus, resulting in the forfeiture of and imposing interest of six percent (6%) per annum on all monetary awards
his unpaid commissions in accordance with the same clause; 31 and (b) it had from the finality of its decision until fully paid.45
no jurisdiction over Concepcion's money claim as she was not an employee but
a mere agent of CPI, as clearly stipulated in her engagement contract with the The CA held that Babiano properly instituted his claim for unpaid commissions
latter.32
before the labor tribunals as it is a money claim arising from an employer-
employee relationship with CPI. In this relation, the CA opined that CPI cannot
Aggrieved, respondents appealed33 to the NLRC.1âwphi1 withhold such unpaid commissions on the ground of Babiano's alleged breach
of the "Confidentiality of Documents and Non-Compete Clause" integrated in
The NLRC Ruling the latter's employment contract, considering that such clause referred to acts
done after the cessation of the employer-employee relationship or to the "post-
In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA employment" relations of the parties. Thus, any such supposed breach thereof
ruling, and entered a new one ordering CPI to pay Babiano and Concepcion is a civil law dispute that is best resolved by the regular courts and not by labor
the amounts of P685,211.76 and P470,754.62, respectively, representing their tribunals.46
commissions from August 9, 2008 to August 8, 2011, as well as 10% attorney's
fees of the total monetary awards.35 Similarly, the CA echoed the NLRC's finding that there exists an employer-
employee relationship between Concepcion and CPI, because the latter
While the NLRC initially concurred with the LA that Babiano's acts constituted exercised control over the performance of her duties as Project Director which
just cause which would warrant the termination of his employment from CPI, it, is indicative of an employer-employee relationship. Necessarily therefore, CPI
however, ruled that the forfeiture of all earned commissions ofBabiano under also exercised control over Concepcion's duties in recruiting, training, and
the "Confidentiality of Documents and Non-Compete Clause" is confiscatory developing directors of sales because she was supervised by Babiano in the
and unreasonable and hence, contrary to law and public policy. 36 In this light, performance of her functions. The CA likewise observed the presence of
the NLRC held that CPI could not invoke such clause to avoid the payment of critical factors which were indicative of an employer-employee relationship with
Babiano's commissions since he had already earned those monetary benefits CPI, such as: (a) Concepcion's receipt of a monthly salary from CPI; and
and, thus, should have been released to him. However, the NLRC limited the (b) that she performed tasks besides selling CPI properties. To add, the title of
grant of the money claims in light of Article 291 (now Article 306) 37 of the Labor her contract which was referred to as "Contract of Agency for Project Director"
Code which provides for a prescriptive period of three (3) years. was not binding and conclusive, considering that the characterization of the
Consequently,· the NLRC awarded unpaid commissions only from August 9, juridical relationship is essentially a matter of law that is for the courts to
2008 to August 8, 2011 - i.e., which was the date when the complaint was determine, and not the parties thereof. Moreover, the totality of evidence
filed.38 Meanwhile, contrary to the LA's finding, the NLRC ruled that sustains a finding of employer-employee relationship between CPI and
Concepcion was CPI's employee, considering that CPI: (a) repeatedly hired Concepcion.47
and promoted her since 2002; (b) paid her wages despite referring to it as
"subsidy"; and (c) exercised the power of dismissal and control over Further, the CA held that despite the NLRC's proper application of the three
her.39 Lastly, the NLRC granted respondents' claim for attorney's fees since (3)-year prescriptive period under Article 291 of the Labor Code, it nonetheless
they were forced to litigate and incurred expenses for the protection of their failed to include all of respondents' earned commissions during that time -
rights and interests.40 i.e., August 9, 2008 to August 8, 2011 - thus, necessitating the increase in
award of unpaid commissions in respondents' favor. 48
Respondents did not assail the NLRC findings. In contrast, only CPI moved for
reconsideration,41 which the NLRC denied in a Resolution42 dated October 16, Undaunted, CPI sought for reconsideration, 49 which was, however, denied in a
2013. Aggrieved, CPI filed a petition for certiorari43before the CA. Resolution50 dated October 12, 2015; hence, this petition.

50 | P a g e
 The Issue Before the Court All records and documents of the company and all information pertaining to its
business or affairs or that of its affiliated companies are confidential and no
The core issue for the Court's resolution is whether or not the CA erred in unauthorized disclosure or reproduction or the same will be made by you any
denying CPI's petition for certiorari, thereby holding it liable for the unpaid time during or after your employment.
commissions of respondents.
And in order to ensure strict compliance herewith, you shall not work for
The Court's Ruling whatsoever capacity, either as an employee, agent or consultant with any
person whose business is in direct competition with the company while
you are employed and for a period of one year from date of resignation or
The petition is partly meritorious.
termination from the company.
I.
In the event the undersigned breaches any term of this contract, the
undersigned agrees and acknowledges that damages may not be an adequate
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear remedy and that in addition to any other remedies available to the Company at
and leave no doubt upon the intention of the contracting parties, the literal law or in equity, the Company is entitled to enforce its rights hereunder by way
meaning of its stipulations shall control." 51 In Norton Resources and of injunction, restraining order or other relief to enjoin any breach or default of
Development Corporation v. All Asia Bank Corporation,52the Court had the this contract.
opportunity to thoroughly discuss the said rule as follows:
The undersigned agrees to pay all costs, expenses and attorney's fees
The rule is that where the language of a contract is plain and incurred by the Company in connection with the enforcement of the obligations
unambiguous, its meaning should be determined without reference to of the undersigned. The undersigned also agrees to .pay the Company all
extrinsic facts or aids. The intention of the parties must be gathered from that profits, revenues and income or benefits derived by or accruing to the
language, and from that language alone. Stated differently, where the undersigned resulting from the undersigned's breach of the obligations
language of a written contract is clear and unambiguous, the contract hereunder. This Agreement shall be binding upon the undersigned, all
must be taken to mean that which, on its face, it purports to mean, unless employees, agents, officers, directors, shareholders, partners and
some good reason can be assigned to show that the words should be representatives of the undersigned and all heirs, successors and assigns of the
understood in a different sense. Courts cannot make for the parties better or foregoing.
more equitable agreements than they themselves have been satisfied to make,
or rewrite contracts because they operate harshly or inequitably as to one of
Finally, if undersigned breaches any terms of this contract, forms of
the parties, or alter them for the benefit of one party and to the detriment of the
compensation including commissions and incentives will be
other, or by construction, relieve one of the parties from the terms which he
forfeited.56 (Emphases and underscoring supplied)
voluntarily consented to, or impose on him those which he did
not.53 (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that
Babiano is barred to "work for whatsoever capacity x x x with any person
Thus, in the interpretation of contracts, the Court must first determine whether
whose business is in direct competition with [CPI] while [he is] employed and
a provision or stipulation therein is ambiguous. Absent any ambiguity, the
for a period of one year from date of [his] resignation or termination from the
provision on its face will be read as it is written and treated as the binding law
company," it also expressly provided in no uncertain terms that should Babiano
of the parties to the contract.54
"[breach] any term of [the employment contract], forms of compensation
including commissions and incentives will be forfeited." Here, the contracting
In the case at bar, CPI primarily invoked the "Confidentiality of Documents and parties - namely Babiano on one side, and CPI as represented by its COO-
Non-Compete Clause" found in Babiano's employment contract 55 to justify the Vertical, John Victor R. Antonio, and Director for Planning and Controls, Jose
forfeiture of his commissions, viz.: Carlo R. Antonio, on the other - indisputably wanted the said clause to be
effective even during the existence of the employer-employee relationship
Confidentiality of Documents and Non-Compete Clause between Babiano and CPI, thereby indicating their intention to be bound by
such clause by affixing their respective signatures to the employment contract.

51 | P a g e
More significantly, as CPI's Vice President for Sales, Babiano held a highly called "control test." The control test is commonly regarded as the most
sensitive and confidential managerial position as he "was tasked, among important indicator of the presence or absence of an employer-employee
others, to guarantee the achievement of agreed sales targets for a project and relationship.62 Under this test, an employer-employee relationship exists where
to ensure that his team has a qualified and competent manpower resources by the person for whom the services are performed reserves the right to control
conducting recruitment activities, training sessions, sales rallies, motivational not only the end achieved, but also the manner and means to be used in
activities, and evaluation programs."57 Hence, to allow Babiano to freely move reaching that end.63
to direct competitors during and soon after his employment with CPI would
make the latter's trade secrets vulnerable to exposure, especially in a highly Guided by these parameters, the Court finds that Concepcion was an
competitive marketing environment. As such, it is only reasonable that CPI and employee of CPI considering that: (a) CPI continuously hired and promoted
Babiano agree on such stipulation in the latter's employment contract in order Concepcion from October 2002 until her resignation on February 23,
to afford a fair and reasonable protection to CPI.58 Indubitably, obligations 2009,64 thus, showing that CPI exercised the power of selection and
arising from contracts, including employment contracts, have the force of law engagement over her person and that she performed functions that were
between the contracting parties and should be complied with in good necessary and desirable to the business of CPI; (b) the monthly "subsidy" and
faith.59 Corollary thereto, parties are bound by the stipulations, clauses, terms, cash incentives that Concepcion was receiving from CPI are actually
and conditions they have agreed to, provided that these stipulations, clauses, remuneration in the concept of wages as it was regularly given to her on a
terms, and conditions are not contrary to law, morals, public order or public monthly basis without any qualification, save for the "complete submission of
policy,60 as in this case. documents on what is a sale policy";65 (c) CPI had the power to discipline or
even dismiss Concepcion as her engagement contract with CPI expressly
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non- conferred upon the latter "the right to discontinue [her] service anytime during
Compete Clause" only to acts done after the cessation of the employer- the Eeriod of engagement should [she] fail to meet the performance
employee relationship or to the "post-employment" relations of the parties. As standards,"66 among others, and that CPI actually exercised such power to
clearly stipulated, the parties wanted to apply said clause during the pendency dismiss when it accepted and approved Concepcion' s resignation letter; and
of Babiano' s employment, and CPI correctly invoked the same before the labor most importantly, (d) as aptly pointed out by the CA, CPI possessed the power
tribunals to resist the farmer's claim for unpaid commissions on account of his of control over Concepcion because in the performance of her duties as Project
breach of the said clause while the employer-employee relationship between Director - particularly in the conduct of recruitment activities, training sessions,
them still subsisted. Hence, there is now a need to determine whether or not and skills development of Sales Directors - she did not exercise independent
Babiano breached said clause while employed by CPI, which would then discretion thereon, but was still subject to the direct supervision of CPI, acting
resolve the issue of his entitlement to his unpaid commissions. through BabiaNo. 67

A judicious review of the records reveals that in his resignation letter61 dated Besides, while the employment agreement of Concepcion was denominated as
February 25, 2009, Babiano categorically admitted to CPI Chairman Jose a "Contract of Agency for Project Director," it should be stressed that the
Antonio that on February 12, 2009, he sought employment from First Global, existence of employer-employee relations could not be negated by the mere
and five (5) days later, was admitted thereto as vice president. From the expedient of repudiating it in a contract. In the case of Insular Life Assurance
foregoing, it is evidently clear that when he sought and eventually accepted the Co., Ltd. v. NLRC,68 it was ruled that one's employment status is defined and
said position with First Global, he was still employed by CPI as he has not prescribed by law, and not by what the parties say it should be, viz.:
formally resigned at that time. Irrefragably, this is a glaring violation of the
"Confidentiality of Documents and Non-Compete Clause" in his employment It is axiomatic that the existence of an employer-employee relationship cannot
contract with CPI, thus, justifying the forfeiture of his unpaid commissions. be negated by expressly repudiating it in the management contract and
providing therein that the "employee" is an independent contractor when the
II. 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
Anent the nature of Concepcion' s engagement, based on case law, the say it should be. In determining the status of the management contract, the
presence of the following elements evince the existence of an employer- "four-fold test" on employment earlier mentioned has to be
employee relationship: (a) the power to hire, i.e., the selection and engagement applied.69 (Emphasis and underscoring supplied)
of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee's conduct, or the so

52 | P a g e
Therefore, the CA correctly ruled that since there exists an employer-employee WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8,
relationship between Concepcion and CPI, the labor tribunals correctly 2015 and the Resolution dated October 12, 2015 of the Court of Appeals (CA)
assumed jurisdiction over her money claims. in CA-G.R. SP No. 132953 are hereby MODIFIED in that the commissions of
respondent Edwin J. Babiano are deemed FORFEITED. The rest of the CA
III. Decision stands.

Finally, CPI contends that Concepcion's failure to assail the NLRC ruling SO ORDERED.
awarding her the amount of P470,754.62 representing unpaid commissions
rendered the same final and binding upon her. As Such, the CA erred in
increasing her monetary award to P591,953.05.70

The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative
relief other than the one granted in the appealed decision.1avvphi1 However,
jurisprudence admits an exception to the said rule, such as when strict
adherence thereto shall result in the impairment of the substantive rights of the
parties concerned. In Global Resource for Outsourced Workers, Inc. v.
Velasco:71

Indeed, a party who has failed to appeal from a judgment is deemed to have
acquiesced to it and can no longer obtain from the appellate court any
affirmative relief other than what was already granted under said
judgment. However, when strict adherence to such technical rule will
impair a substantive right, such as that of an illegally dismissed
employee to monetary compensation as provided by law, then equity
dictates that the Court set aside the rule to pave the way for a full and
just adjudication of the case. 72 (Emphasis and underscoring supplied)

In the present case, the CA aptly pointed out that the NLRC failed to account
for all the unpaid commissions due to Concepcion for the period of August 9,
2008 to August 8, 201l.73 Indeed, Concepcion's right to her earned
commissions is a substantive right which cannot be impaired by an erroneous
computation of what she really is entitled to. Hence, following the dictates of
equity and in order to arrive at a complete and just resolution of the case, and
avoid a piecemeal dispensation of justice over the same, the CA correctly
recomputed Concepcion' s unpaid commissions, notwithstanding her failure to
seek a review of the NLRC's computation of the same.

In sum, the Court thus holds that the commissions of Babiano were properly
forfeited for violating the "Confidentiality of Documents and Non-Compete
Clause." On the other hand, CPI remains liable for the unpaid commissions of
Concepcion in the sum of P591,953.05.

53 | P a g e
 Republic of the Philippines On December 17, 2003, Alcantara filed a Complaint for Illegal
SUPREME COURT Dismissal9 against Royale Homes and its President Matilde Robles, Executive
Manila Vice-President for Administration and Finance Ma. Melinda Bernardino, and
Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that he is
SECOND DIVISION a regular employee of Royale Homes since he is performing tasks that are
necessary and desirable to its business; that in 2003 the company gave him
G.R. No. 195190 July 28, 2014 ₱1.2 million for the services he rendered to it; that in the first week of
November 2003, however, the executive officers of Royale Homes told him that
they were wondering why he still had the gall to come to office and sit at his
ROYALE HOMES MARKETING CORPORATION, Petitioner, table;10 and that the actsof the executive officers of Royale Homes amounted
vs. to his dismissal from work without any valid or just cause and in gross
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent. disregard of the proper procedure for dismissing employees. Thus, he
alsoimpleaded the corporate officers who, he averred, effected his dismissal in
DECISION bad faith and in an oppressive manner.

DEL CASTILLO, J.: Alcantara prayed to be reinstated tohis former position without loss of seniority
rights and other privileges, as well as to be paid backwages, moral and
Not every form of control that a hiring party imposes on the hired party is exemplary damages, and attorney’s fees. He further sought that the ownership
indicative of employee-employer relationship. Rules and regulations that of the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his
merely serve as guidelines towards the achievement of a mutually desired name.
result without dictating the means and methods of accomplishing it do not
establish employer-employee relationship.1 Royale Homes, on the other hand, vehemently denied that Alcantara is its
employee. It argued that the appointment paper of Alcantara isclear that it
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of engaged his services as an independent sales contractorfor a fixed term of one
the Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed and year only. He never received any salary, 13th month pay, overtime pay or
set aside the February 23, 2009 Decision4 of the National Labor Relations holiday pay from Royale Homes as hewas paid purely on commission basis. In
Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing addition, Royale Homes had no control on how Alcantara would accomplish his
Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) tasks and responsibilities as he was free to solicit sales at any time and by any
backwages and separation pay, and (iii) remanded the case to the Labor manner which he may deem appropriateand necessary. He is even free to
Arbiter for the proper determination and computation of said monetary awards. recruit his own sales personnel to assist him in pursuance of his sales target.

Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA According to Royale Homes, Alcantara decided to leave the company after his
denying Royale Homes’ Motion for Reconsideration,6 as well as its wife, who was once connectedwith it as a sales agent, had formed a brokerage
Supplemental7 thereto. company that directly competed with its business, and even recruited some of
its sales agents. Although this was against the exclusivity clause of the
Factual Antecedents contract, Royale Homes still offered to accept Alcantara’s wife back so she
could continue to engage in real estate brokerage, albeit exclusively for Royale
Homes. In a special management committee meeting on October 8,2003,
In 1994, Royale Homes, a corporation engaged in marketing real estates,
however, Alcantara announced publicly and openly that he would leave the
appointed Alcantara asits Marketing Director for a fixed period of one year. His
company by the end of October 2003 and that he would no longer finish the
work consisted mainly of marketing Royale Homes’ realestate inventories on
unexpired term of his contract. He has decided to join his wifeand pursue their
an exclusive basis. Royale Homes reappointed him for several consecutive
own brokerage business. Royale Homes accepted Alcantara’s decision. It then
years, the last of which covered the period January 1 to December 31, 2003
threw a despedidaparty in his honor and, subsequently, appointed a new
where he held the position of Division 5 Vice-President-Sales.8
independent contractor. Two months after herelinquished his post, however,
Alcantara appeared in Royale Homes and submitted a letter claiming that he
Proceedings before the Labor Arbiter was illegally dismissed.

54 | P a g e
Ruling of the Labor Arbiter contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the
regular courts.
On September 7, 2005,the Labor Arbiter rendered a Decision 11 holding that
Alcantara is an employee of Royale Homes with a fixed-term employment The falloof the NLRC Decision reads:
period from January 1 to December 31, 2003 and that the pre-termination of
his contract was against the law.Hence, Alcantara is entitled to an amount WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores
which he may have earned on the average for the unexpired portion of the Peralta-Beley dated September 5, 2005 is REVERSED and SET ASIDE and a
contract. With regard to the impleaded corporate officers, the Labor Arbiter NEW ONE rendered dismissing the complaint for lack of jurisdiction.
absolved them from any liability.
SO ORDERED.14
The dispositive portion of the Labor Arbiter’s Decision reads:
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009,
WHEREFORE, premises considered, judgment is hereby rendered ordering however, the NLRC denied his motion.
the respondent Royale Homes Marketing Corp. to pay the complainant the total
amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS
Alcantara thus filed a Petition for Certiorari 17 with the CA imputing grave abuse
(₱277,000.00) representing his compensation/commission for the unexpired
of discretion on the partof the NLRC in ruling that he is not an employee of
term of his contract. Royale Homes and that it is the regular courts which have jurisdiction over the
issue of whether the pre-termination of the contract is valid.
All other claims are dismissed for lack of merit.
Ruling of the Court of Appeals
SO ORDERED.12
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Petition and reversing the NLRC’s Decision. Applying the four-fold and
Homes claimed that the Labor Arbiter grievously erred inruling that there exists economic reality tests, it held thatAlcantara is an employee of Royale Homes.
an employer-employee relationship between the parties. It insisted that the Royale Homes exercised some degree of control over Alcantara since his job,
contract between them expressly statesthat Alcantara is an independent as observed by the CA, is subject to company rules, regulations, and periodic
contractor and not an ordinary employee. Ithad no control over the means and evaluations. He was also bound by the company code of ethics. Moreover, the
methods by which he performed his work. RoyaleHomes likewise assailed the exclusivity clause of the contract has made Alcantara economically dependent
award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. on Royale Homes, supporting the theory that he is anemployee of said
It was Alcantara who chose not to finish the contract. company.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his The CA further held that Alcantara’s termination from employment was without
employment was for a fixed-term and that he is not entitled to backwages, any valid or just cause, and it was carried out in violation of his right to
reinstatement, unpaid commissions, and damages. procedural due process. Thus, the CA ruled that he isentitled to backwages
and separation pay, in lieu of reinstatement. Considering,however, that the CA
Ruling of the National LaborRelations Commission was not satisfied with the proofadduced to establish the amount of Alcantara’s
annual salary, it remanded the caseto the Labor Arbiter to determine the same
On February 23, 2009, the NLRC rendered its Decision, 13 ruling that Alcantara and the monetary award he is entitled to. With regard to the corporate officers,
is not an employee but a mere independent contractor of Royale Homes. It the CA absolved them from any liability for want of clear proof that they
based its ruling mainly on the contract which does not require Alcantara to assented to the patently unlawful acts or that they are guilty of bad faith
observe regular working hours. He was also free to adopt the selling methods orgross negligence. Thus:
he deemed most effective and can even recruit sales agents to assist him in
marketing the inventories of Royale Homes. The NLRC also considered the WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED.
fact that Alcantara was not receiving monthly salary, but was being paid on The assailed decision of the National Labor Relations Commission in NLRC
commission basis as stipulated in the contract. Being an independent NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February

55 | P a g e
23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE Royale Homes contends that its contract with Alcantara is clear and
and a new one is entered ordering the respondent company to pay petitioner unambiguous −it engaged his services as an independent contractor. This can
backwages which shall be computed from the time of his illegal termination in be readily seen from the contract stating that no employer-employee
October 2003 up to the finality of this decision, plus separation pay equivalent relationship exists between the parties; that Alcantara was free to solicit sales
to one month salary for every year of service. This case is REMANDED to the at any time and by any manner he may deem appropriate; that he may recruit
Labor Arbiter for the proper determination and computation of back wages, sales personnel to assist him in marketing Royale Homes’ inventories; and,
separation pay and other monetary benefits that petitioner is entitled to. thathis remunerations are dependent on his sales performance.

SO ORDERED.19 Royale Homes likewise argues that the CA grievously erred in ruling that it
exercised control over Alcantara based on a shallow ground that his
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion performance is subject to company rules and regulations, code of ethics,
for Reconsideration.21 In a Resolution22 dated January 18, 2011, however, the periodic evaluation, and exclusivity clause of contract. RoyaleHomes maintains
CA denied said motions. that it is expected to exercise some degree of control over its independent
contractors,but that does not automatically result in the existence ofemployer-
employee relationship. For control to be consideredas a proof tending to
Issues
establish employer-employee relationship, the same mustpertain to the means
and method of performing the work; not on the relationship of the independent
Hence, this Petition where Royale Homes submits before this Court the contractors among themselves or their persons or their source of living.
following issues for resolution:
Royale Homes further asserts that it neither hired nor wielded the power to
A. dismiss Alcantara. It was Alcantara who openly and publicly declared that he
was pre-terminating his fixed-term contract.
WHETHER THE COURT OF APPEALS HAS DECIDED THE
INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE The pivotal issue to be resolved in this case is whether Alcantara was an
DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE independent contractor or anemployee of Royale Homes.
RULING OF THE NLRC DISMISSING THE COMPLAINT OF
RESPONDENT FOR LACK OF JURISDICTION AND
Our Ruling
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS
ILLEGALLY DISMISSED[.]
The Petition is impressed with merit.
B.
The determination of whether a party who renders services to another is an
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS employee or an independent contractor involves an evaluation of factual
matters which, ordinarily, is not within the province of this Court. In view of the
ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF
conflicting findings of the tribunals below, however, this Court is constrained to
THIS HONORABLE COURT IN THE CASEOF TONGKO VS.
go over the factual matters involved in this case.24
MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS
OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
The juridical relationship of the parties based on their written contract
C.
The primary evidence of the nature of the parties’ relationship in this case is
the written contract that they signed and executed in pursuanceof their mutual
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS
ERROR OF LAW IN DENYING THE MOTION FOR agreement. While the existence of employer-employee relationship is a matter
RECONSIDERATION OF PETITIONER AND IN REFUSING TO of law, the characterization made by the parties in their contract as to the
nature of their juridical relationship cannot be simply ignored, particularly in this
CORRECT ITSELF[.]23
case where the parties’ written contractunequivocally states their intention at

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the time they entered into it. In Tongko v. The Manufacturers LifeInsurance Co. seminars and briefing to be conducted by us from time to time for the purpose
(Phils.), Inc.,25 it was held that: of familiarizing them of terms and conditionsof sale, the natureof property sold,
etc., attendance of which shall be a condition precedent for their accreditation
To be sure, the Agreement’s legal characterization of the nature of the by us.
relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is a That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
matter of law that is for the courts to determine. At the same time, though, the
characterization the parties gave to their relationship in the Agreement cannot 1. Commission override of 0.5% for all option sales beginning January
simply be brushed aside because it embodiestheir intent at the time they 1, 2003 booked by your sales agents.
entered the Agreement, and they were governed by this understanding
throughout their relationship. At the very least, the provision on the absence of
2. Budget allocation depending on your division’s sale performance as
employer- employee relationship between the parties can be an aid in
per our budget guidelines.
considering the Agreement and its implementation, and in appreciating the
other evidence on record.26
3. Sales incentive and other forms of company support which may be
granted from time to time. It is understood, however, that no employer-
In this case, the contract,27 duly signed and not disputed by the parties,
employee relationship exists between us, that of your sales
conspicuously provides that "no employer-employee relationship exists
personnel/agents, and that you shall hold our company x x x, its
between" Royale Homes and Alcantara, as well as his sales agents. It is clear officers and directors, free and harmless from any and all claims of
that they did not want to be bound by employer-employee relationship atthe liability and damages arising from and/or incident to the marketing of
time ofthe signing of the contract. Thus:
our real estate inventories.

January 24, 2003

We reserve, however, our right to terminate this agreement in case of violation
of any company rules and regulations, policies and code of ethics upon notice
MR. FIDEL P. ALCANTARA for justifiable reason.

13 Rancho I Your performance shall be subject toperiodic evaluation based on factors

which shall be determined by the management.
Marikina City
If you are amenable to the foregoing terms and conditions, please indicate your
Dear Mr. Alcantara, conformity by signing on the space provided below and return [to] us a
duplicate copy of this letter, duly accomplished, to constitute as our agreement
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of on the matter.(Emphasis ours)
ROYALE HOMES MARKETING CORPORATION effective January 1, 2003 to
December 31, 2003. Since "the terms of the contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of itsstipulations should
Your appointment entails marketing our real estate inventories on an control."28 No construction is even needed asthey already expressly state their
EXCLUSIVE BASIS under such price, terms and condition to be provided to intention. Also, this Court adopts the observation of the NLRC that it is rather
you from time to time. strange on the part of Alcantara, an educated man and a veteran sales broker
who claimed to be receiving ₱1.2 million as his annual salary, not to have
contested the portion of the contract expressly indicating that he is not an
As such, you can solicit sales at any time and by any manner which you deem
appropriate and necessary to market our real estate inventories subject to employee of Royale Homes if their true intention were otherwise.
rules, regulations and code of ethics promulgated by the company. Further,
you are free to recruit sales personnel/agents to assist you in marketing of our The juridical relationship of the parties based on Control Test
inventories provided that your personnel/agents shall first attend the required

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In determining the existence of an employer-employee relationship, this Court It is also necessary for Royale Homes to allocateits inventories among its
has generally relied on the four-fold test, to wit: (1) the selection and independent contractors, determine who has priority in selling the same, grant
engagement of the employee; (2) the payment of wages; (3) the power of commission or allowance based on predetermined criteria, and regularly
dismissal; and (4) the employer’s power to control the employee with respect to monitor the result of their marketing and sales efforts. But tothe mind of this
the means and methods by which the work is to be accomplished. 29 Among the Court, these do not pertain to the means and methods of how Alcantara was to
four, the most determinative factor in ascertaining the existence of perform and accomplish his task of soliciting sales. They do not dictate upon
employeremployee relationship is the "right of control test". 30 "It is deemed to him the details of how he would solicit sales or the manner as to how he would
be such an important factor that the other requisites may even be transact business with prospective clients. In Tongko, this Court held that
disregarded."31 This holds true where the issues to be resolved iswhether a guidelines or rules and regulations that do notpertain to the means or
person who performs work for another is the latter’s employee or is an methodsto be employed in attaining the result are not indicative of control as
independent contractor,32 as in this case. For where the person for whom the understood inlabor law. Thus:
services are performed reserves the right to control not only the end to
beachieved, but also the means by which such end is reached, employer- From jurisprudence, an important lesson that the first Insular Lifecase teaches
employee relationship is deemed to exist.33 us is that a commitment to abide by the rules and regulations of an insurance
company does not ipso factomake the insurance agent an employee. Neither
In concluding that Alcantara is an employee of RoyaleHomes, the CA do guidelines somehow restrictive of the insurance agent’s conduct necessarily
ratiocinated that since the performance of his tasks is subject to company indicate "control" as this term is defined in jurisprudence. Guidelines indicative
rules, regulations, code of ethics, and periodic evaluation, the element of of labor law "control," as the first Insular Lifecase tells us, should not merely
control is present. relate to the mutually desirable result intended by the contractual relationship;
they must have the nature of dictating the means or methods to beemployed in
The Court disagrees. attaining the result, or of fixing the methodology and of binding or restricting the
party hired to the use of these means.In fact, results-wise, the principal can
impose production quotas and can determine how many agents, with specific
Not every form of control is indicative of employer-employee
relationship.1âwphi1 A person who performs work for another and is subjected territories, ought to be employed to achieve the company’s objectives. These
to its rules, regulations, and code of ethics does not necessarily become an are management policy decisions that the labor law element of control cannot
reach. Our ruling in these respects in the first Insular Lifecase was practically
employee.34 As long as the level of control does not interfere with the means
reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s
and methods of accomplishing the assigned tasks, the rules imposed by the
codes of conduct, all of which do not intrude into the insurance agents’ means
hiring party on the hired party do not amount to the labor law concept of control
and manner of conducting their sales and only control them as to the desired
that is indicative of employer-employee relationship. In Insular Life Assurance
Co., Ltd. v. National Labor Relations Commission35 it was pronounced that: results and Insurance Code norms, cannot be used as basis for a finding that
the labor law concept of control existed between Manulife and
Tongko.37 (Emphases in the original)
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
As the party claiming the existence of employer-employee relationship, it
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 behoved upon Alcantara to prove the elements thereof, particularly Royale
such means. The first, which aim only to promote the result, create no Homes’ power of control over the means and methods of accomplishing the
work.38 He, however, failed to cite specificrules, regulations or codes of ethics
employeremployee relationship unlike the second, which address both the
that supposedly imposed control on his means and methods of soliciting sales
result and the means used to achieve it. x x x36
and dealing with prospective clients. On the other hand, this case is replete
with instances that negate the element of control and the existence of
In this case, the Court agrees with Royale Homes that the rules, regulations, employer-employee relationship. Notably, Alcantara was not required to
code of ethics, and periodic evaluation alluded to byAlcantara do not involve observe definite working hours.39 Except for soliciting sales, RoyaleHomes did
control over the means and methods by which he was to performhis job. not assign other tasks to him. He had full control over the means and methods
Understandably, Royale Homes has to fix the price, impose requirements on of accomplishing his tasks as he can "solicit sales at any time and by any
prospective buyers, and lay down the terms and conditionsof the sale, manner which [he may] deem appropriate and necessary." He performed his
including the mode of payment, which the independent contractors must follow.

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tasks on his own account free from the control and direction of Royale Homes This Court is, therefore,convinced that Alcantara is not an employee of Royale
in all matters connected therewith, except as to the results thereof.40 Homes, but a mere independent contractor. The NLRC is, therefore, correct in
concluding that the Labor Arbiter has no jurisdiction over the case and that the
Neither does the repeated hiring of Alcantara prove the existence of employer- same is cognizable by the regular courts.
employee relationship.41 As discussed above, the absence of control over the
means and methodsdisproves employer-employee relationship. The WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010
continuous rehiring of Alcantara simply signifies the renewal of his contract with Decision of the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED
Royale Homes, and highlights his satisfactory services warranting the renewal and SET ASIDE. The February 23, 2009 Decision of the National Labor
of such contract. Nor does the exclusivity clause of contract establish the Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.
existence of the labor law concept of control. In Consulta v. Court of
Appeals,42 it was held that exclusivity of contract does not necessarily result in
employer-employee relationship, viz:

x x x However, the fact that the appointment required Consulta to solicit

business exclusively for Pamana did not mean that Pamana exercised control
over the means and methods of Consulta’s work as the term control is
understood in labor jurisprudence. Neither did it make Consulta an employee of
Pamana. Pamana did not prohibit Consulta from engaging in any other
business, or from being connected with any other company, for aslong as the
business [of the] company did not compete with Pamana’s business. 43

The same scenario obtains in this case. Alcantara was not prohibited from
engaging in any other business as long as he does not sell projects of Royale
Homes’ competitors. He can engage in selling various other products or
engage in unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in thiscase. As provided in the

contract, Alcantara’s remunerations consist only of commission override of
0.5%, budget allocation, sales incentive and other forms of company support.
There is no proof that he received fixed monthly salary. No payslip or payroll
was ever presented and there is no proof that Royale Homes deducted from
his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In
fact, his Complaint merely states a ballpark figure of his alleged salary of
₱100,000.00, more or less. All of these indicate an independent contractual
relationship.44 Besides, if Alcantara indeed consideredhimself an employee of
Royale Homes, then he, an experienced and professional broker, would have
complained that he was being denied statutorily mandated benefits. But for
nine consecutive years, he kept mum about it, signifying that he has agreed,
consented, and accepted the fact that he is not entitled tothose employee
benefits because he is an independent contractor.

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