G.R. No. 184058.

March 10, 2010

PEOPLE OF THE PHILIPPINES, appellee vs. MELISSA CHUA, appellant
DOCTRINE:
(a)An employee of a company engaged in illegal recruitment may be held liable as principal
together with his employer if it is shown that he, as in the case of appellant, actively and
consciously participated therein.
(b) Illegal Recruitment in Large Scale penalized under Republic Act No. 8042, or "The Migrant
Workers and Overseas Filipinos Act of 1995," is a special law, a violation of which is malum
prohibitum, not malum in se. Intent is thus immaterial.
FACTS:
An Information alleged that MELISSA CHUA violated Article 38 (a) PD 1413, amending
certain provisions of Book I, PD 442 (Labor Code) in relation to Art. 13 (b) and (c ) of said
Code, as further amended by PD Nos. 1693, 1920 and 2019 and as further amended by Sec. 6
(a), (1) and (m) of RA 8042 committed in large scale as follows:
willfully, unlawfully and knowingly for a fee, recruit and promise employment/job placement
abroad to ERIK DE GUIA TAN, MARILYN O. MACARANAS, NAPOLEON H. YU, JR., HARRY
JAMES P. KING and ROBERTO C. ANGELES for overseas employment abroad withoutfirst
having secured the required license from the Department of Labor and Employment as required
by law, and charge or accept directly payment; that amounts are in excess of or greater than that
specified in the schedule of allowable fees as prescribed by the POEA, and failed to actually
deploy them and failed to reimburse expenses incurred in connection with their documentation
and processing for purposes of their deployment.
Tan and King testified that they later on found out that Golden Gates (recruitment agency)
license had already expired.
Appellant claimed having worked as a temporary cashier at the office of Golden Gate, owned by
one Marilyn Calueng and maintained that Golden Gate was a licensed recruitment agency.
The RTC convicted appellant for Illegal Recruitment (Large Scale) and three (3) counts of
Estafa.
The CA affirmed the RTCs decision holding that appellants defense that, as temporary cashier
of Golden Gate, she received the money which was ultimately remitted to Marilyn Calueng is
immaterial, she having failed to prove the existence of an employment relationship between her
and Marilyn, as well as the legitimacy of the operations of Golden Gate and the extent of her
involvement therein. Citing People v. Sagayaga the appellate court ruled that an employee of a
company engaged in illegal recruitment may be held liable as principal together with his
employer if it is shown that he, as in the case of appellant, actively and consciously participated
therein.

Respecting the cases for Estafa, the appellate court, noting that a person convicted of illegal
recruitment may, in addition, be convicted of Estafa as penalized under Article 315, paragraph
2(a) of the Revised Penal Code
ISSUE: Whether the Court of Appeals was correct in affirming the RTCs decision of convicting
appellant for Illegal Recruitment (Large Scale) and three (3) counts of Estafa.
HELD: YES. In the present case, Golden Gate, of which appellant admitted being a was initially
authorized to recruit workers for deployment abroad. Per the certification from the POEA,
Golden Gates license expired and it was delisted from the roster of licensed agencies.
Appellant was positively pointed to as one of the persons who enticed the complainants to part
with their money upon the fraudulent representation that they would be able to secure for them
employment abroad. Even if appellant were a mere temporary cashier of Golden Gate, that did
not make her any less an employee to be held liable for illegal recruitment as principal by direct
participation, together with the employer, as it was shown that she actively and consciously
participated in the recruitment process.
Assuming arguendo that appellant was unaware of the illegal nature of the recruitment
business of Golden Gate that does not free her of liability either. Illegal Recruitment in
Large Scale penalized under Republic Act No. 8042, or "The Migrant Workers and
Overseas Filipinos Act of 1995," is a special law, a violation of which is malum
prohibitum, not malum in se. Intent is thus immaterial. And that explains why appellant
was, aside from Estafa, convicted of such offense.

G.R. No. 187730

June 29, 2010

PEOPLE OF THE PHILIPPINES versus RODOLFO GALLO y GADOT, FIDES

PACARDO y JUNGCO and PILAR MANTA y DUNGO
DOCTRINE:
To commit syndicated illegal recruitment, three elements must be established: (1) the offender
undertakes either any activity within the meaning of recruitment and placement defined
under Article 13(b), or any of the prohibited practices enumerated under Art. 34 of the Labor
Code; (2) he has no valid license or authority required by law to enable one to lawfully engage
in recruitment and placement of workers; and (3) the illegal recruitment is committed by a
group of three (3) or more persons conspiring or confederating with one another.
Even with a license, however, illegal recruitment could still be committed under Section 6 of
Republic Act No. 8042 (R.A. 8042), otherwise known as the Migrants and Overseas
Filipinos Act of 1995.
FACTS:
Originally, accused-appellant Gallo and accused Pacardo and Manta, together with Mardeolyn
and nine (9) others, were charged with syndicated illegal recruitment and eighteen (18) counts of
estafa committed against eighteen complainants, including Dela Caza, Guantero and Sare. The
cases were respectively docketed as Criminal Case Nos. 02-2062936 to 02-206311. However,
records reveal that only Criminal Case No. 02-206293, which was filed against accusedappellant Gallo, Pacardo and Manta for syndicated illegal recruitment, and Criminal Case Nos.
02-206297, 02-206300 and 02-206308, which were filed against accused-appellant Gallo,
Pacardo and Manta for estafa, proceeded to trial due to the fact that the rest of the accused
remained at large. Further, the other cases, Criminal Case Nos. 02 206294 to 02-206296, 02206298 to 02-206299, 02-206301 to 02-206307 and 02-206309 to 02-206311 were likewise
provisionally dismissed upon motion of Pacardo, Manta and accused-appellant for failure of the
respective complainants in said cases to appear and testify during trial.
It should also be noted that after trial, Pacardo and Manta were acquitted in Criminal Case Nos.
02-206293, 02-206297, 02-206300 and 02-206308 for insufficiency of evidence. Likewise,
accused-appellant Gallo was similarly acquitted in Criminal Case Nos. 02-206300, the case filed
by Guantero, and 02-206308, the case filed by Sare. However, accused-appellant was found
guilty beyond reasonable doubt in Criminal Case Nos. 02-206293 and 02-206297, both filed by
Dela Caza, for syndicated illegal recruitment and estafa, respectively. Thus, the present appeal
concerns solely accused-appellants conviction for syndicated illegal recruitment in Criminal
Case No. 02-206293 and for estafa in Criminal Case No. 02-206297.
Version of the Prosecution (for purposes of recitation)
On May 22, 2001, Dela Caza was introduced by Eleanor Panuncio to accused-appellant Gallo,
Pacardo, Manta, Mardeolyn, Lulu Mendanes, Yeo Sin Ung and another Korean national at the
office of MPM Agency located in Malate, Manila. Dela Caza was told that Mardeolyn was the
President of MPM Agency, while Nelmar Martir was one of the incorporators. Also, that

Marcelino Martir, Norman Martir, Nelson Martir and Ma. Cecilia Ramos were its board
members. Lulu Mendanes acted as the cashier and accountant, while Pacardo acted as the
agencys employee who was in charge of the records of the applicants. Manta, on the other hand,
was also an employee who was tasked to deliver documents to the Korean embassy. Accusedappellant Gallo then introduced himself as a relative of Mardeolyn and informed Dela Caza that
the agency was able to send many workers abroad. Together with Pacardo and Manta, he also
told Dela Caza about the placement fee of One Hundred Fifty Thousand Pesos (PhP 150,000)
with a down payment of Forty-Five Thousand Pesos (PhP 45,000) and the balance to be paid
through salary deduction. Dela Caza, together with the other applicants, were briefed by
Mardeolyn about the processing of their application papers for job placement in Korea as a
factory worker and their possible salary. Accused Yeo Sin Ung also gave a briefing about the
business and what to expect from the company and the salary. With accused-appellants
assurance that many workers have been sent abroad, as well as the presence of the two (2)
Korean nationals and upon being shown the visas procured for the deployed workers, Dela Caza
was convinced to part with his money. Thus, on May 29, 2001, he paid Forty-Five Thousand
Pesos (PhP 45,000) to MPM Agency through accused-appellant Gallo who, while in the presence
of Pacardo, Manta and Mardeolyn, issued and signed Official Receipt No. 401. Two (2) weeks
after paying MPM Agency, Dela Caza went back to the agencys office in Malate, Manila only to
discover that the office had moved to a new location at Batangas Street, Brgy. San Isidro, Makati.
He proceeded to the new address and found out that the agency was renamed to New Filipino
Manpower Development & Services, Inc. (New Filipino). At the new office, he talked to
Pacardo, Manta, Mardeolyn, Lulu Mendanes and accused-appellant Gallo. He was informed that
the transfer was done for easy accessibility to clients and for the purpose of changing the name
of the agency. Dela Caza decided to withdraw his application and recover the amount he paid but
Mardeolyn, Pacardo, Manta and Lulu Mendanes talked him out from pursuing his decision. On
the other hand, accused-appellant Gallo even denied any knowledge about the money. After
two (2) more months of waiting in vain to be deployed, Dela Caza and the other applicants
decided to take action. The first attempt was unsuccessful because the agency again moved to
another place. However, with the help of the Office of Ambassador Seeres and the Western
Police District, they were able to locate the new address at 500 Prudential Building,
Carriedo,Manila. The agency explained that it had to move in order to separate those who are
applying as entertainers from those applying as factory workers. Accused-appellant Gallo,
together with Pacardo and Manta, were then arrested.
Version of the Defense (for purposes of recitation)
For his defense, accused-appellant denied having any part in the recruitment of Dela Caza. In
fact, he testified that he also applied with MPM Agency for deployment to Korea as a factory
worker. According to him, he gave his application directly with Mardeolyn because she was his
town mate and he was allowed to pay only Ten Thousand Pesos (PhP 10,000) as processing fee.
Further, in order to facilitate the processing of his papers, he agreed to perform some tasks for
the agency, such as taking photographs of the visa and passport of applicants, running errands
and performing such other tasks assigned to him, without salary except for some allowance. He
said that he only saw Dela Caza one or twice at the agencys office when he applied for work

abroad. Lastly, that he was also promised deployment abroad but it never materialized.
RTC rendered its Decision convicting the accused of syndicated illegal recruitment and estafa.
CA affirmed with modification to the sentence in the the estafa case.
ISSUE:
WON CA gravely erred in finding appellant guilty of illegal recruitment and estafa.
HELD:
NO. Accused-appellant avers that he cannot be held criminally liable for illegal recruitment
because he was neither an officer nor an employee of the recruitment agency. He alleges that the
trial court erred in adopting the asseveration of the private complainant that he was indeed an
employee because such was not duly supported by competent evidence. According to him, even
assuming that he was an employee, such cannot warrant his outright conviction sans evidence
that he acted in conspiracy with the officers of the agency.
The Court disagree.
To commit syndicated illegal recruitment, three elements must be established: (1) the offender
undertakes either any activity within the meaning of recruitment and placement defined under
Article 13(b), or any of the prohibited practices enumerated under Art. 34 of the Labor Code; (2)
he has no valid license or authority required by law to enable one to lawfully engage in
recruitment and placement of workers; and (3) the illegal recruitment is committed by a group of
three (3) or more persons conspiring or confederating with one another.
When illegal recruitment is committed by a syndicate or in large scale, i.e., if it is committed
against three (3) or more persons individually or as a group, it is considered an offense involving
economic sabotage. Under Art. 13(b) of the Labor Code, recruitment and placement refers
to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring
workers, and includes referrals, contract services, promising or advertising for employment,
locally or abroad, whether for profit or not.
After a thorough review of the records, we believe that the prosecution was able to establish the
elements of the offense sufficiently. The evidence readily reveals that MPM Agency was never
licensed by the POEA to recruit workers for overseas employment.
Even with a license, however, illegal recruitment could still be committed under Section 6 of
Republic Act No. 8042 (R.A. 8042), otherwise known as the Migrants and Overseas
Filipinos Act of 1995.
Sec. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers and
includes referring, contract services, promising or advertising for employment abroad, whether
for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated
under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor
Code of the Philippines: Provided, That any such non-licensee or non-holder who, in any
manner, offers or promises for a fee employment abroad to two or more persons shall be deemed

so engaged. It shall, likewise, include the following act, whether committed by any person,
whether a non-licensee, non-holder, licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount greater than that specified in the
schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a
worker pay any amount greater than that actually received by him as a loan or advance;
xxxx
(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation
and processing for purposes of deployment and processing for purposes of deployment, in cases
where the deployment does not actually take place without the workers fault. Illegal recruitment
when committed by a syndicate or in large scale shall be considered an offense involving
economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or
more persons conspiring or confederating with one another. It is deemed committed in large scale
if committed against three (3) or more persons individually or as a group.
The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having control, management or direction of
their business shall be liable.
In the instant case, accused-appellant committed the acts enumerated in Sec. 6 of R.A. 8042.
Testimonial evidence presented by the prosecution clearly shows that, in consideration of a
promise of foreign employment, accused-appellant received the amount of Php 45,000.00 from
Dela Caza. When accused-appellant made misrepresentations concerning the agencys purported
power and authority to recruit for overseas employment, and in the process, collected money in
the guise of placement fees, the former clearly committed acts constitutive of illegal recruitment.
Essentially, Dela Caza appeared very firm and consistent in positively identifying accusedappellant as one of those who induced him and the other applicants to part with their money. His
testimony showed that accused-appellant made false misrepresentations and promises in assuring
them that after they paid the placement fee, jobs in Korea as factory workers were waiting for
them and that they would be deployed soon. In fact, Dela Caza personally talked to accusedappellant and gave him the money and saw him sign and issue an official receipt as proof of his
payment. Without a doubt, accused-appellants actions constituted illegal recruitment.
Additionally, accused-appellant cannot argue that the trial court erred in finding that he was
indeed an employee of the recruitment agency. On the contrary, his active participation in the
illegal recruitment is unmistakable. The fact that he was the one who issued and signed the
official receipt belies his profession of innocence.
This Court likewise finds the existence of a conspiracy between the accused-appellant and the
other persons in the agency who are currently at large, resulting in the commission of the crime

of syndicated illegal recruitment.

In this case, it cannot be denied that the accused-appellent together with Mardeolyn and the rest
of the officers and employees of MPM Agency participated in a network of deception. Verily,
the active involvement of each in the recruitment scam was directed at one single purpose to
divest complainants with their money on the pretext of guaranteed employment abroad. The
prosecution evidence shows that complainants were briefed by Mardeolyn about the processing
of their papers for a possible job opportunity in Korea, as well as their possible salary. Likewise,
Yeo Sin Ung, a Korean national, gave a briefing about the business and what to expect from the
company. Then, here comes accused-appellant who introduced himself as Mardeolyns relative
and specifically told Dela Caza of the fact that the agency was able to send many workers
abroad. Dela Caza was even showed several workers visas who were already allegedly deployed
abroad. Later on, accused-appellant signed and issued an official receipt acknowledging the
down payment of Dela Caza. Without a doubt, the nature and extent of the actions of accusedappellant, as well as with the other persons in MPM Agency clearly show unity of action towards
a common undertaking. Hence, conspiracy is evidently present.
ESTAFA
The elements of estafa in general are: (1) that the accused defrauded another (a) by abuse of
confidence, or (b) by means of deceit; and (2) that damage or prejudice capable of pecuniary
estimation is caused to the offended party or third person.[15] Deceit is the false representation
of a matter of fact, whether by words or conduct, by false or misleading allegations, or by
concealment of that which should have been disclosed; and which deceives or is intended to
deceive another so that he shall act upon it, to his legal injury.
All these elements are present in the instant case: the accused-appellant, together with the
other accused at large, deceived the complainants into believing that the agency had the power
and capability to send them abroad for employment; that there were available jobs for them in
Korea as factory workers; that by reason or on the strength of such assurance, the complainants
parted with their money in payment of the placement fees; that after receiving the money,
accused-appellant and his co-accused went into hiding by changing their office locations without
informing complainants; and that complainants were never deployed abroad. As all these
representations of the accused-appellant proved false, paragraph 2(a), Article 315 of the Revised
Penal Code is thus applicable.

GR NO. 179532
CLAUDIO S. YAP VS. THENAMARIS SHIP'S MANAGEMENT (TSM) and

INTERMARE MARITIME AGENCIES, INC. (IMAI)

FACTS:
Yap was employed as electrician of the vessel M/T SEASCOUT by IMAI in behalf of its
principal, Venture Shipping Ltd.
Contract of employment was for 12 months
After 3 months, the vessel was sold
Yap received different kinds of bonuses but he did not accept the payment of one-month basic
wage.
The petitioner insisted that he was entitled to the payment of the unexpired portion of his
contract since he was illegally dismissed from the employment.
The respondent alleged that Yap's employment contract was validly terminated due to the sale of
the vessel and no arrangement as made for Yap's transfer to TSM vessels.
LABOR ARBITER (LA):
The petitioner filed a complaint for Illegal Dismissal before the LA
The petitioner claimed that he was entitled to the Salaries corresponding to the unexpired portion
of his contract
Decision: In favor of the petitioner. The respondent acted in bad faith when they assured the
petitioner of the re-embarkation and required him to produce an electrician certificate during the
period of his contract, but actually he was not able to board one despite of the respondents
numerous vessels.
The petitioner made several follow-ups for his re-embarkation but respondent failed to heed his
plea; thus, petitioner was forced to litigate in order to vindicate his rights.
The LA opined that since the unexpired portion of the petitioners contract was less than one
year, petitioner was entitled to his salaries for the unexpired portion of his contract for a period
of nine months.
NLRC:
The respondents filed a petition to the NLRC
The NLRC affirmed the LAs decision
With modification : Instead of nine months, the NLRC ruled that it should be for 3 months,
pursuant to Section 10 of Republic Act (RA) 8042.
The respondents filed a Motion for Partial Reconsideration (MPR)
The petitioners also filed a MPR to reinstate the decision of the LA that it should be nine months.
Decision: The MPR of the respondents has been DENIED. The MPR of the petitioners has been

GRANTED.
The respondents filed a Motion for Reconsideration (MR), but the same was DENIED.
COURT OF APPEALS (CA)
The respondents filed a petition for certiorari before the CA
Decision: The CA affirmed the decision of NLRC and LAs findings and rulings.
With modification: 3 months only
Both the petitioners and respondents filed a MR.
Decision: DENIED
ISSUE:
WON Section 10 of RA 8042 to the extent that it affords an illegally dismissed migrant worker
the lesser benefit of --- salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less is constitutional.
RULING:
The Court held that Section 10 of RA 8092 is unconstitutional, as what is provided under the
case of Serrano.
Verily, we have already declared in Serrano that the clause or for three months for every year of
the unexpired term, whichever is less provided in the 5thparagraph of Section 10 of R.A. No.
8042 is unconstitutional for being violative of the rights of Overseas Filipino Workers (OFWs) to
equal protection of the laws. In an exhaustive discussion of the intricacies and ramifications of
the said clause, this Court, in Serrano, pertinently held:
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more
in their contracts, but none on the claims of other OFWs or local workers with fixed-term
employment. The subject clause singles out one classification of OFWs and burdens it with a
peculiar disadvantage.
Following Serrano, the court held that the case should not be included in the aforementioned
exception. After all, it was not the fault of petitioner that he lost his job due to an act of illegal
dismissal committed by respondents. To rule otherwise would be iniquitous to petitioner and
other OFWs, and would, in effect, send a wrong signal that principals/employers and
recruitment/manning agencies may violate an OFWs security of tenure which an employment
contract embodies and actually profit from such violation based on an unconstitutional provision
of law.
As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it
affords no protection; it creates no office; it is inoperative as if it has not been passed at all. The

general rule is supported by Article 7 of the Civil Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance
shall not be excused by disuse or custom or practice to the contrary.

People of the Philippines vs. Domingo Panis

GR No. L5867477, July 11, 1990
FACTS:
On January 9, 1981, four information were filed in the in the Court of First Instance (CFI) of
Zambales and Olongapo City alleging that herein private respondent Serapio Abug, "without first
securing a license from the Ministry of Labor as a holder of authority to operate a fee-charging
employment agency, did then and there wilfully, unlawfully and criminally operate a private fee
charging employment agency by charging fees and expenses (from) and promising employment
in Saudi Arabia" to four separate individuals. Abug filed a motion to quash contending that he
cannot be charged for illegal recruitment because according to him, Article 13(b) of the Labor
Code says there would be illegal recruitment only "whenever two or more persons are in any
manner promised or offered any employment for a fee.
Denied at first, the motion to quash was reconsidered and granted by the Trial Court in its Orders
dated June 24, 1981, and September 17, 1981. In the instant case, the view of the private
respondents is that to constitute recruitment and placement, all the acts mentioned in this article
should involve dealings with two or more persons as an indispensable requirement. On the other
hand, the petitioner argues that the requirement of two or more persons is imposed only where
the recruitment and placement consists of an offer or promise of employment to such persons and
always in consideration of a fee.
ISSUE: Whether or not Article 13(b) of the Labor Code provides for the innocence or guilt of
the private respondent of the crime of illegal recruitment
HELD: The Supreme Court reversed the CFIs Orders and reinstated all four information filed
against private respondent.
The Article 13(b) of the Labor Code was merely intended to create a presumption, and not to
impose a condition on the basic rule nor to provide an exception thereto.
Where a fee is collected in consideration of a promise or offer of employment to two or more
prospective workers, the individual or entity dealing with them shall be deemed to be engaged in
the act of recruitment and placement. The words "shall be deemed" create the said presumption.

Transaction Overseas Corporation vs DOLE Secretary

September 5, 1997
Facts: From July 24 to September 9, 1987, Trans Action Overseas Corporation scoured Iloilo
City for possible recruits for alleged job vacancies in Hongkong. Private respondents sought
employment domestic helpers and paid placement fees to the petitioner ranging from 1K to 14K
but petitioner failed to deploy them. Private respondents demanded refund but their demands
were ignored so they instituted complaints against the petitioner.
On April 5, 1991, Labor Usec Confesor ordered that the petitioner refund the payments of the 33
private respondents. The petitioner was also held liable for 28 counts of violation of Article 32 of
the Labor Code and 5 counts of Articles 34 with corresponding suspension in aggregate period of
66 months. Since the petitioners suspension exceeded 12 months, the penalty of cancellation of
license was also ordered.
Petitioner filed for Motion for Temporary Lifting of Order of Cancellation alleging that such
would jeopardize its operations and affect the interests of the workers about to leave for their
respective assignments. It manifested its willingness to post a bond to insure payment to the 33
private respondents. Cancellation was lifted on May 1991 but cancellation was reinstated in April
1992. Thus, the petitioner filed this case. Petitioner contends that the Secretary Confesor acted
with grave abuse of discretion because it believed that the POEA has the exclusive and original
jurisdiction to hear and decide illegal recruitment cases, including authority to cancel recruitment
licenses.
ISSUE: WON the Secretary of Labor has the authority to cancel recruitment license?
HELD:

YES

The power to suspend or cancel any license or authority to recruit employees for overseas
employment is vested upon the Secretary of DOLE under Article 35 of the Labor Code.

In Eastern Assurance and Surety Corp vs Secretary of Labor, the Court held that the Secretary of
Labor has the power under Section 35 to apply the penalties of suspension and cancellation of
license.

In People Diaz, the Court held that: A non-licensee or non-holder of authority means any
person, corporation or entity which has not been issued a valid license or authority to engage in
recruitment and placement by the Secretary of Labor, or whose license or authority has been
suspended, revoked or cancelled by the POEA or the Secretary.

The power to suspend or cancel any license or authority to recruit employees for overseas
employment is concurrently vested with the POEA and the Secretary of Labor.

REPUBLIC OF THE PHILIPPINES, represented by the ADMINISTRATOR OF THE

PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), vs

PRINCIPALIA MANAGEMENT AND PERSONNEL CONSULTANTS,
INCORPORATED

G.R. No. 167639 April 19, 2006

This case stemmed from two separate complaints filed before the Philippine Overseas
Employment Administration (POEA) against Principalia Management and Personnel
Consultants, Incorporated (Principalia) for violation of the 2002 POEA Rules and Regulations.

The first complaint dated July 16, 2003 filed by Ruth Yasmin Concha (Concha) The second
complaint dated October 14, 2003 filed by Rafael E. Baldoza (Baldoza)

Concha alleged that in August 2002, she applied with Principalia for placement and
employment as caregiver or physical therapist in the USA or Canada. Despite paying
P20,000.00 out of the P150,000.00 fee required by Principalia which was not properly receipted,
Principalia failed to deploy Concha for employment abroad. the Adjudication Office of the
POEA found Principalia liable for violations of the 2002 POEA Rules and Regulations,
particularly for collecting a fee from the applicant before employment was obtained; for nonissuance of official receipt; and for misrepresenting that it was able to secure employment for
Concha. Principalias license was ordered suspended for 12 months or in lieu thereof,
Pricipalia is ordered to pay a fine of P120,000.00 and to refund Conchas placement fee of
P20,000.00.

Baldoza alleged that Principalia assured him of employment in Doha, Qatar as a machine
operator with a monthly salary of $450.00. After paying P20,000.00 as placement fee, he
departed for Doha, Qatar but when he arrived at the jobsite, he was made to work as welder, a
job which he had no skills. He insisted that he was hired as machine operator but the alternative
position offered to him was that of helper, which he refused. Thus, he was repatriated on July 5,
2003. On November 12, 2003, Baldoza and Principalia entered into a compromise agreement
with quitclaim and release whereby the latter agreed to redeploy Baldoza for employment
abroad. Principalia, however, failed to deploy Baldoza as agreed hence, in an Order dated April
29, 2004, the POEA suspended Principalias documentary processing. Principalia moved for
reconsideration which the POEA granted on June 25, 2004. The latter lifted its order suspending
the documentary processing by Principalia after noting that it exerted efforts to obtain overseas
employment for Baldoza within the period stipulated in the settlement agreement but due to
Baldozas lack of qualification, his application was declined by its foreign principal
Meanwhile, on June 14, 2004, or before the promulgation of POEAs order lifting the suspension,
Principalia filed a Complaint8 (Complaint) against Rosalinda D. Baldoz in her capacity as
Administrator of POEA and Atty. Jovencio R. Abara in his capacity as POEA Conciliator, before
the Regional Trial Court (RTC) of Mandaluyong City for "Annulment of Order for Suspension of
Documentation Processing with Damages and Application for Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction, and a Writ of Preliminary Mandatory
Injunction." Principalia claimed that the suspension of its documentary processing would ruin
its reputation and goodwill and would cause the loss of its applicants, employers and principals.
Thus, a writ of preliminary injunction and a writ of mandatory injunction must be issued to

prevent serious and irreparable damage to it.

The Trial Court grant the prayer for a Temporary Restraining Order enjoining the defendant[s]
Rosalinda D. Baldoz and Atty. Jovencio R. Abara, from implementing the Orders of Suspension.
After the hearing on the preliminary injunction, the trial court held that the issue on the
application for preliminary mandatory injunction has become moot because POEA had already
released the renewal of license of Principalia. It however issue the Writ of Preliminary
Prohibitory Injunction prayed for by the plaintiff, upon posting of a bond in the amount of FIVE
HUNDRED THOUSAND PESOS (Php 500,000.00), stressing that the Order of Suspension
dated March 15, 2004 is still pending appeal before the Office of the Secretary of Labor and
Employment, and that the said Order dated March 15, 2004 does not categorically state that the
suspension of Plaintiffs License is immediately executory contrary to the contention of the
defendants.
Counsel for POEA argued that the basis for the immediate implementation thereof is Section 5,
Rule V, Part VI of the 2002 POEA Rules and Regulation, which is quoted hereunder, as follows:
"Section 5. Stay of Execution. The decision of the Administration shall be stayed during the
pendency of the appeal; Provided that where the penalty imposed carried the maximum penalty
of twelve (12) months suspension o[r] cancellation of license, the decision shall be immediately
executory despite pendency of the appeal."
The Order dated March 15, 2004 decreed Plaintiff as having violated Section 2 (a) (d) and (e) of
Rule I, Part VI of the POEA Rules and Regulations and the Plaintiffs was imposed the penalty of
twelve (12) months suspension of license (or in lieu, to pay fine of P120,000, it being it[s] first
offense).
Violation of Section 2 (a) (d) and (e) Rule I, Part VI of POEA Rules and Regulations imposes a
penalty of two (2) months to six (6) months suspension of license for the FIRST offender (sic).
And in the absence of mitigating or aggravating circumstance, the medium range of the
imposable penalty which is four (4) months shall be meted out. Being a first offender, the
plaintiff was imposed suspension of license for four (4) months for each violation or an
aggregate period of suspension for twelve (12) months for the three (3) violations.
POEA avers that the trial court gravely abused its discretion in granting the writ of preliminary
prohibitory injunction when the requirements to issue the same have not been met. It asserts that
Principalia had no clear and convincing right to the relief demanded as it had no proof of
irreparable damage as required under the Rules of Court.
Issue: Whether or not the trial court erred in issuing the writ of preliminary injunction?
Held: No. The trial court did not decree that the POEA, as the granting authority of Principalias
license to recruit, is not allowed to determine Principalias compliance with the conditions for the
grant, as POEA would have us believe. For all intents and purposes, POEA can determine
whether the licensee has complied with the requirements. In this instance, the trial court
observed that the Order of Suspension dated March 15, 2004 was pending appeal with the

Secretary of the Department of Labor and Employment (DOLE). Thus, until such time that
the appeal is resolved with finality by the DOLE, Principalia has a clear and convincing
right to operate as a recruitment agency.
Furthermore, irreparable damage was duly proven by Principalia. Suspension of its license is not
easily quantifiable nor is it susceptible to simple mathematical computation, as alleged by
POEA.
If the injunctive writ was not granted, Principalia would have been labeled as an
untrustworthy recruitment agency before there could be any final adjudication of its case
by the DOLE. It would have lost both its employer-clients and its prospective Filipinoapplicants. Loss of the former due to a tarnished reputation is not quantifiable.
Moreover, POEA would have no authority to exercise its regulatory functions over Principalia
because the matter had already been brought to the jurisdiction of the DOLE. Principalia has
been granted the license to recruit and process documents for Filipinos interested to work abroad.
Thus, POEAs action of suspending Principalias license before final adjudication by the
DOLE would be premature and would amount to a violation of the latters right to recruit
and deploy workers.

G.R. No. 156029

November 14, 2008

SANTOSA B. DATUMAN vs. FIRST COSMOPOLITAN MANPOWER AND

PROMOTION SERVICES, INC.
Facts:

Sometime in 1989, respondent First Cosmopolitan Manpower & Promotion Services, Inc.
recruited petitioner Santosa B. Datuman to work in Bahrain as a saleslady with basic monthly
salary of US$370.00. The duration of the contract of employment was for one year and the
foreign employer is identified as Mohammed Sharif Abbas Ghulam Hussain.

On April 17, 1989, petitioner was deployed to Bahrain after paying the required placement fee.
However, her employer Mohammed Hussain took her passport when she arrived there; and
instead of working as a saleslady, she was forced to work as a domestic helper with a salary of
Forty Bahrain Dinar (BD40.00), equivalent only to One Hundred US Dollars (US$100.00),
contrary to the agreed salary of US$370.00 indicated in her Contract of Employment signed in
the Philippines and approved by the Philippine Overseas Employment Administration (POEA).

On September 1, 1989, her employer compelled her to sign another contract, transferring her to

another employer as housemaid with a salary of BD40.00 for the duration of two (2) years. She
pleaded with him to give her a release paper and to return her passport but her pleas were
unheeded. Left with no choice, she continued working against her will. Worse, she even worked
without compensation from September 1991 to April 1993 because of her employer's continued
failure and refusal to pay her salary despite demand.

In May 1993, she was able to finally return to the Philippines through the help of the Bahrain
Passport and Immigration Department

May 1995: Petitioner filed a complaint before the POEA Adjudication Office against respondent
for underpayment and nonpayment of salary, vacation leave pay and refund of her plane fare;
while the case was pending, Datuman filed the instant case before the NLRC for underpayment
of salary for a period of one year and six months, nonpayment of vacation pay and
reimbursement of return airfare.

The parties failed to arrive at an amicable settlement before the Labor Arbiter
Respondent: Contends the following
1) Petitioner actually agreed to work in Bahrain as a housemaid for one (1) year because it was
the only position available then. However, since such position was not yet allowed by the POEA
at that time, they mutually agreed to submit the contract to the POEA indicating petitioner's
position as saleslady;
2) It was actually petitioner herself who violated the terms of their contract when she allegedly
transferred to another employer without respondent's knowledge and approval;
3) Respondent raised the defense of prescription of cause of action since the claim was filed
beyond the three (3)-year period from the time the right accrued, reckoned from either 1990 or
1991.
Labor Arbiter decision: (April 29, 1998) Labor Arbiter Jovencio Mayor, Jr. rendered a Decision
finding respondent liable for violating the terms of the Employment Contract and ordering it to
pay petitioner:
(a) the amount of US$4,050.00, or its equivalent rate prevailing at the time of payment,
representing her salary differentials for fifteen (15) months since the record is bereft of any
evidence to show that complainant Datuman is either not entitled to her wage differentials or
have already received the same from respondent
(From January 1992 April 1993 (15 months)
US$370.00 - agreed salary; US$100.00 - actual paid salary; US$270.00 - balance
US$270.00 x 15 months = US$4050.00);
(b) the amount of BD 180.00 or its equivalent rate prevailing at the time of payment,
representing the refund of plane ticket.
The Labor Arbiter noted that respondent admitted that it had entered into an illegal contract with

complainant by proposing the position of a housemaid which said position was then not allowed
by the POEA, by making it appear in the Employment Contract that the position being applied
for is the position of a saleslady. It is indubitably clear that the foreign employer had taken
advantage to the herein hopeless complainant and because of this ordeal, the same obviously
rendered complainant's continuous employment unreasonable if not downright impossible.
However, claim for vacation leave pay and overtime pay cannot granted for failure on the part of
complainant to prove with particularity the months that she was not granted vacation leave and
the day wherein she did render overtime work.
Award of damages and attorney's fees are also denied for lack of factual and legal basis.
NLRC Decision: The NLRC affirmed with modification the Decision of Labor Arbiter Mayor,
Jr., by reducing the award of salary differentials from US$4,050.00 to US$2,970.00.
(Basis: The claims for salary differentials accruing earlier than April of 1993 had already
prescribed. This is so as complainant had filed her complaint on May 31, 1995 when she arrived
from the jobsite in April 1993. Since the cause of action for salary differential accrues at the time
when it falls due, it is clear that only the claims for the months of May 1993 to April 1994 have
not yet prescribed.)
CA Decision: The CA agreed with the respondent Commission in declaring that claims of
private respondent "for salary differentials accruing earlier than April of 1993 had indeed
prescribed." The CA noted that petitioner company is privy only to the first contract. Granting
arguendo that its liability extends to the acts of its foreign principal, the Towering Recruiting
Services, which appears to have a hand in the execution of the second contract, the same would,
at the most, extend only up to the expiration of the second contract or until 01 September 1991.
Clearly, the money claims subject of the complaint filed in 1995 had prescribed.
However, this Court declares respondent Commission as not only having abused its discretion,
but as being without jurisdiction at all, in declaring private respondent entitled to salary
differentials. After decreeing the money claims accruing before April 1993 as having prescribed,
it has no more jurisdiction to hold petitioner company for salary differentials after that period.
The provisions in number 2, Section 10 (a), Rule V, Book I of the Omnibus Rules Implementing
the Labor Code Section 1 (f), Rule II, Book II of the 1991 POEA Rules and Regulations were not
made to make the local agency a perpetual insurer against all untoward acts that may be done by
the foreign principal or the direct employer abroad. It is only as regards the principal contract to
which it is privy shall its liability extend.
Issue: Whether the CA erred in not holding respondent liable for petitioner's money claims
pursuant to their Contract of Employment.
Ruling:
On whether respondent is solidarily liable for petitioner's monetary claims Section 1 of Rule II of the POEA Rules and Regulations states that the private employment
agency shall assume joint and solidary liability with the employer. Private employment agencies

are held jointly and severally liable with the foreign-based employer for any violation of the
recruitment agreement or contract of employment. The SC disagrees with the view of the CA that
the solidary liability of respondent extends only to the first contract (i.e. the original, POEAapproved contract which had a term of until April 1990). The signing of the "substitute" contracts
with the foreign employer/principal before the expiration of the POEA-approved contract and
any continuation of petitioner's employment beyond the original one-year term, against the will
of petitioner, are continuing breaches of the original POEA-approved contract.

Republic Act

No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the worker of
employment contracts already approved and verified by the Department of Labor and
Employment (DOLE) from the time of actual signing thereof by the parties up to and including
the period of the expiration of the same without the approval of the DOLE. The diminution in the
salary of petitioner from US$370.00 to US$100 (BD 40.00) per month is void for violating the
POEA-approved contract which set the minimum standards, terms, and conditions of her
employment. Consequently, the solidary liability of respondent with petitioner's foreign
employer for petitioner's money claims continues although she was forced to sign another
contract in Bahrain. It is the terms of the original POEA-approved employment contract that
shall govern the relationship of petitioner with the respondent recruitment agency and the foreign
employer. Respondent's evident bad faith and admitted circumvention of the laws and regulations
on migrant workers belie its protestations of innocence and put petitioner in a position where she
could be exploited and taken advantage of overseas, as what indeed happened to her in this case.
On whether petitioner's claims for underpaid salaries have prescribed The SC agreed with the NLRC ruling that the right to claim unpaid salaries (or in this case,
unpaid salary differentials) accrue as they fall due. Thus, petitioner's cause of action to claim
salary differential for October 1989 only accrued after she had rendered service for that month
(or at the end of October 1989). Her right to claim salary differential for November 1989 only
accrued at the end of November 1989, and so on and so forth.
To determine for which months petitioner's right to claim salary differentials has not
prescribed, we must count three years prior to the filing of the complaint on May 31, 1995. Thus,
only claims accruing prior to May 31, 1992 have prescribed when the complaint was filed on
May 31, 1995. Petitioner is entitled to her claims for salary differentials for the period May 31,
1992 to April 1993, or approximately eleven (11) months.
The NLRC correctly computed the salary differential due to petitioner at US$2,970.00.
However, it should be for the period May 31, 1992 to April 1993 and not May 1993 to April
1994 as erroneously stated in the NLRC's Decision.

Stolt-Nielsen Transportation Group, Inc. and Chung Gai Ship Mgt.v.Sulpecio Medequillo,
Jr. January 18, 2012

FACTS:
On March 6, 1995, respondent Sulpecio Medequillo filed a complaint before the Adjudication
Office of the POEA against petitioners for illegal dismissal under a first contract and failure to
deploy under a second contract.
In his complaint-affidavit, respondent Medequillo alleged the ff.:
1. Respondent was hired by Stolt-Nielsen Transportation Group, Inc. on behalf of the principal
Chung Gai Ship Management as Third Assistant on board the vessel Stolt Aspiration for a
period of 9 months for $1,212.00 per month;
2. He then joined the vessel MV Stolt Aspiration, but only after 3 months, he was told by the
ship's master to disembark the vessel. He was repatriated back to Manila for no reason or
explanation.
3. Upon his return to Manila, he proceeded immediately to the petitioner's office. He was
transferred employment to another vessel MV Stolt Pride under the same terms and conditions
as the First Contract.
4. POEA approved the Second Contract, however, respondent was not deployed by petitioners
despite the commencement of the contract. POEA subsequently certified the Second
Employment Contract without the knowledge that petitioners failed to deploy the respondent.
5. Because of petitioners alleged non-compliance with the Second Contract, respondent
Medequilla demanded for the return of his passport and other employment documents from the
petitioners. He claimed that he was made to involuntarily sign a document in order to recover his
employment papers.
Medequilla asked for payment of damages for illegal dismissal (First Contract) and noncompliance in bad faith with the Second Contract.
ISSUE:
Whether or not petitioners have the obligation to deploy the respondent by virtue of the perfected
contract, and thus will be held liable for damages in case of non-deployment.
HELD:
Yes, petitioners are liable for damages. The petitioners argue that under the POEA Contract,
actual deployment of the seafarer is a suspensive condition for the commencement of the
employment. The Court agreed with petitioners on such point. However, even without actual
deployment, the perfected contract gives rise to obligations on the part of petitioners.
Parties are bound not only to the fulfillment of what has been expressly stipulated but also to all
the consequences which, according to their nature, may be in keeping with good faith, usage and
law.
Thus, even if by the standard contract employment commences only upon actual departure of
the seafarer, this does not mean that the seafarer has no remedy in case of non-deployment
without any valid reason.

The Court further made a distinction between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract occurred
when petitioner and respondent agreed on the object and the cause, as well as the rest of the
terms and conditions therein. The commencement of the employer-employee relationship would
have taken place had petitioner been actually deployed from the point of hire. Thus, even before
the start of any employer-employee relationship, contemporaneous with the perfection of
the employment contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party.

G.R. No. 121777

January 24, 2001

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs.

CAROL M. DELA PIEDRA, accused-appellant.
ILLEGAL RECRUITMENT:
Illegal recruitment is committed when two elements concur. First, the offender has no valid
license or authority required by law to enable one to lawfully engage in recruitment and
placement of workers. Second, he or she undertakes either any activity within the meaning of
"recruitment and placement" defined under Article 13 (b), or any prohibited practices enumerated
under Article 34 of the Labor Code.38 In case of illegal recruitment in large scale, a third element
is added: that the accused commits said acts against three or more persons, individually or as a
group.
A conviction forlarge scale illegal recruitment must be based on a finding in each case of
illegal recruitment of three or more persons whether individually or as a group.
FACTS:

Carol M. dela Piedra is convicted for illegal recruitment in large scale and assails, as well, the
constitutionality of the law defining and penalizing said crime.

On January 30, 1994, at exactly 10:00 in the morning, Erlie Ramos, Attorney II of the Philippine
Overseas Employment Agency (POEA), received a telephone call from an unidentified woman
inquiring about the legitimacy of the recruitment conducted by a certain Mrs. Carol Figueroa.

Bellotindos entered the house and pretended to be an applicant; She received a bio-data form
from a Carol Fegueroa

Ramos contacted a friend, Mayeth Bellotindos, so they could both go to No. 26-D, Tetuan
Highway, Sta. Cruz, Zamboanga City, where the recruitment was reportedly being undertaken

A raiding team was planned between POEA and CIS team led by Capt. Mendoza to commence
the next day with SPO2 Fermindoza posing as a would-be-applicant

Fermindoza talked personally with Carol and as the latter was filling up the application form,
Fermindoza signaled to the raiding party waiting outside the house. Carol Fegueroa was caught
holding filled up application forms

The CIS asked Figueroa if she had a permit to recruit. Figueroa retorted that she was not engaged
in recruitment. Capt. Mendoza nevertheless proceeded to arrest Figueroa. He took the application
forms she was holding as the raiding party seized the other papers on the table.

The CIS team then brought Figueroa, a certain Jasmine Alejandro, and the three women
suspected to be applicants, to the office for investigation.

In the course of their investigation, the CIS discovered that Carol Figueroa had many aliases,
among them, Carol Llena and Carol dela Piedra. The accused was not able to present any
authority to recruit when asked by the investigators. A check by Ramos with the POEA
revealed that the acused was not licensed or authorized to conduct recruitment. A
certification dated February 2, 1994 stating thus was executed by Renegold M. Macarulay,
Officer-in-Charge of the POEA.

Accused was charged before RTC of Zamboanga in an information alleging:

That on or about January 30, 1994, in the City of Zamboanga, Philippines, Carol dela Piedra,
having no POEA license or authority to engage in recruitment and overseas placement of
workers willfully, unlawfully, and feloniously, offered and promised for a fee an employment
in Singapore to: Maria Lourdes Modesto [y] Gadrino, Nancy Araneta y Aliwanag and Jennelyn
Baez y Timbol

Maria Lourdes had already advanced P2k to accused in consideration of the promised
employment.

The accused denied in court that she went to Jasmine's residence to engage in recruitment. She
claimed she came to Zamboanga City to visit her friends, to whom she could confide since she
and her husband were having some problems. She denied she knew Nancy Araneta or that she
brought information sheets for job placement. She also denied instructing Jasmine to collect
P2,000 from alleged applicants as processing fee.

RTC: finds the accused Carol dela Piedra alias Carol Llena and Carol Figueroa guilty beyond
reasonable doubt of Illegal Recruitment committed in a large scale and hereby sentences her to
suffer the penalty of LIFE IMPRISONMENT and to pay a fine of P100,000.00, and also to pay
the costs. Being a detention prisoner, the said accused is entitled to the full time of the period of
her detention during the pendency of this case under the condition set forth in Article 29 of the
Revised Penal Code

Appellant submits that Article 13 (b) of the Labor Code defining "recruitment and placement" is
void for vagueness and, thus, violates the due process clause

ISSUES:

Constitutionality of Sec 13(B) of PD 442, as amended Illegal Recruitment Law

Absence of illegal recruitment in the alleged victims of Carol dela Piedra

Alleged crime of illegal recruitment was not committed on a Large Scale, hence penalty should
not be life imprisonment
HELD:

IT IS CONSTITUTIONAL.
In the first assigned error, appellant maintains that the law defining "recruitment and placement"
violates due process. Appellant also aver, that she was denied the equal protection of the laws.
Due process requires that the terms of a penal statute must be sufficiently explicit to inform those
who are subject to it what conduct on their part will render them liable to its penalties. As a rule,
a statute or act may be said to be vague when it lacks comprehensible standards that men "of
common intelligence must necessarily guess at its meaning and differ as to its application." It is
repugnant to the Constitution in two respects: (1) it violates due process for failure to accord
persons, especially the parties targeted by it, fair notice of the conduct to avoid; and (2) it leaves
law enforcers unbridled discretion in carrying out its provisions and become an arbitrary flexing
of the Government muscle.
We added, however, that:
x x x the act must be utterly vague on its face, that is to say, it cannot be clarified by either a
saving clause or by construction.

As we see it, the proviso (see ARTICLE 13(B) of the Illegal Recruitment Law) was intended
neither to impose a condition on the basic rule nor to provide an exception thereto but merely to
create a presumption. The presumption is that the individual or entity is engaged in recruitment
and placement whenever he or it is dealing with two or more persons to whom, in consideration
of a fee, an offer or promise of employment is made in the course of the "canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring (of) workers."

The number of persons dealt with is not an essential ingredient of the act of recruitment
and placement of workers. Any of the acts mentioned in the basic rule in Article 13(b) will
constitute recruitment and placement even if only one prospective worker is involved. The
proviso merely lays down a rule of evidence that where a fee is collected in consideration of a
promise or offer of employment to two or more prospective workers, the individual or entity
dealing with them shall be deemed to be engaged in the act of recruitment and placement. The
words "shall be deemed" create that presumption.
2. In this case, the first element of illegal recruitment is present.

The certification of POEA Officer-in-Charge Macarulay states that appellant is not licensed or
authorized to engage in recruitment and placement.

The second element is also present. Appellant is presumed engaged in recruitment and
placement under Article 13 (b) of the Labor Code. Both Nancy Araneta and Lourdes Modesto

testified that appellant promised them employment for a fee. Their testimonies corroborate each
other on material points: the briefing conducted by appellant, the time and place thereof, the fees
involved.
Affirmative testimony of persons who are eyewitnesses of the fact asserted easily overrides
negative testimony.

That appellant did not receive any payment for the promised or offered employment is of
no moment. From the language of the statute, the act of recruitment may be "for profit or
not;" it suffices that the accused "promises or offers for a fee employment" to warrant
conviction for illegal recruitment.
Considering that the two elements of lack of license or authority and the undertaking of an
activity constituting recruitment and placement are present, appellant, at the very least, is
liable for "simple" illegal recruitment.
3. NO, She is not guilty of illegal recruitment in a large scale

A conviction for large scale illegal recruitment must be based on a finding in each case of illegal
recruitment of three or more persons whether individually or as a group. In this case, only two
persons, Araneta and Modesto, were proven to have been recruited by appellant. The third person
named in the complaint as having been promised employment for a fee, Jennelyn Baez, was not
presented in court to testify.

It is true that law does not require that at least three victims testify at the trial; nevertheless, it is
necessary that there is sufficient evidence proving that the offense was committed against three
or more persons. In this case, evidence that appellant likewise promised her employment for a
fee is sketchy. The only evidence that tends to prove this fact is the testimony of Nancy Araneta,
who said that she and her friends, Baez and Sandra Aquino, came to the briefing and that they
(she and her "friends") filled up application forms.

Baez affidavit executed with Araneta cannot support Aranetas testimony. Insofar as it purports
to prove that appellant recruited Baez, therefore, the affidavit is hearsay and inadmissible.

Neither can appellant be convicted for recruiting CIS agent Eileen Fermindoza or even the other
persons present in the briefing of January 30, 1994. Appellant is accused of recruiting only the
three persons named in the information Araneta, Modesto and Baez. The information does not
include Fermindoza or the other persons present in the briefing as among those promised or
offered employment for a fee.
Section 19 (1), Article III of the Constitution states: "Excessive fines shall not be imposed,
nor cruel, degrading or inhuman punishment inflicted."
The penalty of life imprisonment imposed upon appellant must be reduced. Because the
prosecution was able to prove that appellant committed recruitment and placement against two
persons only, she cannot be convicted of illegal recruitment in large scale, which requires that
recruitment be committed against three or more persons.

 Appellant can only be convicted of two counts of "simple" illegal recruitment, one for that
committed against Nancy Araneta, and another count for that committed against Lourdes
Modesto. Appellant is sentenced, for each count, to suffer the penalty of four (4) to six (6) years
of imprisonment and to pay a fine of P30,000.00.
WHEREFORE, the decision of the regional trial court is MODIFIED. Appellant is hereby
declared guilty of illegal recruitment on two (2) counts and is sentenced, for each count, to suffer
the penalty of four (4) to six (6) years of imprisonment and to pay a fine of P30,000.00.

ESTATE OF NELSON R. DULAY, represented by his wife MERRIDY JANE P. DULAY,

versus ABOITIZ JEBSEN MARITIME, INC. and GENERAL CHARTERERS, INC.,
FACTS:

Nelson R. Dulay was employed by General Charterers Inc. (GCI), a subsidiary of co-petitioner
Aboitiz Jebsen Maritime Inc. since 1986.

He initially worked as an ordinary seaman and later as bosun on a contractual basis. From
September 3, 1999 up to July 19, 2000, Nelson was detailed in petitioners vessel, the MV
Kickapoo Belle.

After the completion of his employment contract, Nelson died due to acute renal failure
secondary to septicemia.

At the time of his death, Nelson was a bona fide member of the Associated Marine Officers and
Seamans Union of the Philippines (AMOSUP), GCIs collective bargaining agent.

Nelsons widow, Merridy Jane, thereafter claimed for death benefits through the grievance
procedure of the Collective Bargaining Agreement (CBA) between AMOSUP and GCI.

However, the grievance procedure was declared deadlocked as petitioners refused to grant the
benefits sought by the widow. Merridy Jane filed a complaint with the NLRC Sub-Regional
Arbitration Board in General Santos City against GCI for death and medical benefits and
damages.

The amount claimed by Nelsons widow is $90,000 however GCI awarded P20,000 in favor of
the deceaseds brother. Merridy claims the remaining amount less the P20,000 her brother-in-law
received.

Respondent on the other hand refused to award the same on the ground that there is no employeremployee relationship between GC and Nelson at the time of his death. His contract with
respondent was already completed upon his death.

The Labor Arbiter ruled in favor of petitioner, ordering respondents to pay the $90,000 death
benefits less the P20,000 already received.

NLRC affirmed the decision of the Labor Arbiter during appeal. When the matter was brought
before the Court of Appeals for certiorari, the CA granted the petition and referred the case to the

National Conciliation and Mediation Board (NCMB) for the designation of the Voluntary
Arbitrator. The CA ruled that since the case involve interpretation of the CBA, the Voluntary
Arbitrator has jurisdiction and not the CA.
ISSUE:
Whether or not the Labor Arbiter has no jurisdiction over the case. YES, the Voluntary
Arbitrator must take cognizance of the case.
RULING:
The Court agrees with the CA in holding that this issue clearly involves the interpretation or
implementation of the said CBA. Thus, the specific or special provisions of the Labor Code
govern. Articles 217(c) and 261 of the Labor Code are very specific in stating that voluntary
arbitrators have jurisdiction over cases arising from the interpretation or implementation of
collective bargaining agreements.
In any case, the Court agrees with petitioner's contention that the CBA is the law or contract
between the parties. Article 13.1 of the CBA entered into by and between respondent GCI and
AMOSUP, the union to which petitioner belongs, provides as follows:
The Company and the Union agree that in case of dispute or conflict in the interpretation or
application of any of the provisions of this Agreement, or enforcement of Company policies,
the same shall be settled through negotiation, conciliation or voluntary arbitration.
In the same manner, Section 29 of the prevailing Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean Going Vessels, promulgated by the Philippine
Overseas Employment Administration (POEA), provides as follows:
Section 29. Dispute Settlement Procedures. In cases of claims and disputes arising from
this employment, the parties covered by a collective bargaining agreement shall submit the
claim or dispute to the original and exclusive jurisdiction of the voluntary arbitrator or
panel of arbitrators.
It is clear from the above that the interpretation of the DOLE, in consultation with their
counterparts in the respective committees of the Senate and the House of Representatives, as
well as the DFA and the POEA is that with respect to disputes involving claims of Filipino
seafarers wherein the parties are covered by a CBA, the dispute or claim should be submitted to
the jurisdiction of a voluntary arbitrator or panel of arbitrators. It is only in the absence of a CBA
that parties may opt to submit the dispute to either the NLRC or to voluntary arbitration.
On the basis of the foregoing, the Court finds no error in the ruling of the CA that the voluntary
arbitrator has jurisdiction over the instant case.
Santiago v. CF Sharp Crew Management Inc.
FACTS:
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for
about five (5) years. He signed a new contract of employment with the duration of 9 months on

Feb 3 1998 and he was to be deployed 10 days after. This contract was approved by POEA. A
week before the date of departure, the respondent received a phone call from petitioners wife
and some unknown callers asking not to send the latter off because if allowed, he will jump ship
in Canada.
Because of the said information, petitioner was told that he would not be leaving for Canada
anymore. This prompted him to file a complaint for illegal dismissal against the respondent. The
LA held the latter responsible. On appeal, the NLRC ruled that there is no employer-employee
relationship between petitioner and respondent, hence, the claims should be dismissed. The CA
agreed with the NLRCs finding that since petitioner had not departed from the Port of Manila,
no employer-employee relationship between the parties arose and any claim for damages against
the so-called employer could have no leg to stand on.
On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award
petitioners monetary claims. His employment with respondent did not commence because his
deployment was withheld for a valid reason. Consequently, the labor arbiter and/or the NLRC
cannot entertain adjudication of petitioners case much less award damages to him. The
controversy involves a breach of contractual obligations and as such is cognizable by civil
courts.
ISSUES:
1) When does the employer-employee relationship involving seafarers commence?
2) Assuming that there is no employer-employee relationship, does the Las of the NLRC have
jurisdiction over the case?
RULING:
#1
A distinction must be made between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract, which in
this case coincided with the date of execution thereof, occurred when petitioner and respondent
agreed on the object and the cause, as well as the rest of the terms and conditions therein. The
commencement of the employer-employee relationship by virtue of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels
(POEA Standard Contract) states that the employment contract shall commence upon actual
departure of the seafarer from the airport or seaport at the point of hire and with a POEAapproved contract. Thus, even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was the birth of certain rights
and obligations, the breach of which may give rise to a cause of action against the erring party.

Thus, if the reverse had happened, that is the seafarer failed or refused to be deployed as agreed
upon, he would be liable for damages.
Respondents act of preventing petitioner from departing the port of Manila and boarding "MSV

Seaspread" constitutes a breach of contract, giving rise to petitioners cause of action.

Respondent unilaterally and unreasonably reneged on its obligation to deploy petitioner and must
therefore answer for the actual damages he suffered.
Despite the fact that the employer-employee relationship did not commence, the perfection of the
contract between petitioner and respondent gave birth to certain contractual obligations which
were clearly violated in the case at bar.
#2
Despite the absence of an employer-employee relationship between petitioner and respondent,
the Court rules that the NLRC has jurisdiction over petitioners complaint. The jurisdiction of
labor arbiters is not limited to claims arising from employer-employee relationships. Section 10
of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship OR by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages. x x x

Hon. Patricia Sto. Tomas, et. al. v. Rey Salac, et. al.
Facts:
These are consolidated cases which assails the constitutionality of some of the provisions of R.
A. No. 8042, otherwise known as the "Migrant Workers and Overseas Filipinos Act of 1995." In

G.R. 152642 and G.R. 152710, respondents Rey Salac, et. al. filed before the RTC of Quezon
City a petition for certiorari, prohibition and mandamus against petitioners DOLE Secretary,
POEA administrator and TESDA Secretary General and enjoin them from complying with the
policy of deregulation mandated under Sections 29 and 30 of R.A. No. 8042. However, Sec. 29
and 30 of R.A. No. 8042 has been repealed by R.A 9422 which makes the issues raised by Salac,
et. al. moot and academic. In G.R. 167590, respondent Philippine Association of Service
Exporters, Inc. (PASEI) filed a petition for declaratory relief and prohibition with prayer for
issuance of TRO and writ of preliminary injunction before the RTC of Manila, seeking to annul
Sections 6, 7, and 9 of R.A. 8042 for being unconstitutional. Sec. 6 defines the crime of "illegal
recruitment" and enumerates the acts constituting the same. Sec. 7 provides for the penalties for
prohibited acts. Sec. 9 allowed the filing of criminal actions arising from illegal recruitment
before the RTC of the province or city where the offense was committed or where the offended
party actually resides at the time of the commission of the offense. The RTC of Manila declared
Section 6 unconstitutional after hearing on the ground that its definition of illegal recruitment
is vague as it fails to distinguish between licensed and non-licensed recruiters and for that reason
gives undue advantage to the non-licensed recruiters in violation of the right to equal protection
of those that operate with government licenses or authorities. The Manila RTC also declared
Section 7 unconstitutional on the ground that its sweeping application of the penalties failed to
make any distinction as to the seriousness of the act committed for the application of the penalty
imposed on such violation. The Manila RTC also invalidated Section 9 of R.A. 8042 on the
ground that allowing the offended parties to file the criminal case in their place of residence
would negate the general rule on venue of criminal cases which is the place where the crime or
any of its essential elements were committed. Venue, said the RTC, is jurisdictional in penal laws
and, allowing the filing of criminal actions at the place of residence of the offended parties
violates their right to due process. In G.R. No. 167590, G.R. 182978-79 and G.R. 184298-99,
Respondent spouses Simplicio and Mila Cuaresma (the Cuaresmas) filed a claim for death and
insurance benefits and damages against petitioners Becmen Service Exporter and Promotion, Inc.
(Becmen) and White Falcon Services, Inc. (White Falcon) for the death of their daughter Jasmin
Cuaresma while working as staff nurse in Riyadh, Saudi Arabia. The Labor Arbiter (LA)
dismissed the claim on the ground that the Cuaresmas had already received insurance benefits
arising from their daughters death from the Overseas Workers Welfare Administration (OWWA)
but the NLRC found Becmen and White Falcon jointly and severally liable for Jasmin's death.
On appeal, CA also found them liable. Petitioners now assail the constitutionality of the 2nd
paragraph of Sec. 10 of R.A. 8042 which holds the corporate directors, officers, and partners of
recruitment and placement agencies jointly and solidarily liable for money claims and damages
that may be adjudged against the latter agencies.

Issue: Whether or not Sec. 6, 7, 9 and 10(par.2) of Republic Act No 8042 are constitutional
Ruling:
The Court held that Sec. 6, 7, 9, and 10(par.2) of R.A. No. 8042 valid and constitutional.
Section 6

Illegal recruitment as defined in Section 6 is clear and unambiguous and, contrary to the RTCs
finding, actually makes a distinction between licensed and non-licensed recruiters. By its terms,
persons who engage in canvassing, enlisting, contracting, transporting, utilizing, hiring, or
procuring workers without the appropriate government license or authority are guilty of illegal
recruitment whether or not they commit the wrongful acts enumerated in that section. On the
other hand, recruiters who engage in the canvassing, enlisting, etc. of OFWs, although with the
appropriate government license or authority, are guilty of illegal recruitment only if they commit
any of the wrongful acts enumerated in Section 6.
Section 7
In fixing uniform penalties for each of the enumerated acts under Section 6, Congress was within
its prerogative to determine what individual acts are equally reprehensible, consistent with the
State policy of according full protection to labor, and deserving of the same penalties. It is not
within the power of the Court to question the wisdom of this kind of choice. Notably, this
legislative policy has been further stressed in July 2010 with the enactment of R.A. 1002212
which increased even more the duration of the penalties of imprisonment and the amounts of fine
for the commission of the acts listed under Section 7. In fixing such tough penalties, the law
considered the unsettling fact that OFWs must work outside the countrys borders and beyond its
immediate protection. The law must, therefore, make an effort to somehow protect them from
conscienceless individuals within its jurisdiction who, fueled by greed, are willing to ship them
out without clear assurance that their contracted principals would treat such OFWs fairly and
humanely.
Section 9
There is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for
violations of Section 6 of R.A. 8042 that differs from the venue established by the Rules on
Criminal Procedure. Indeed, Section 15(a), Rule 110 of the latter Rules allows exceptions
provided by laws. Section 9 of R.A. 8042, as an exception to the rule on venue of criminal
actions is, consistent with that laws declared policy15 of providing a criminal justice system that
protects and serves the best interests of the victims of illegal recruitment.
Section 10
The Court has already held, pending adjudication of this case, that the liability of corporate
directors and officers is not automatic. To make them jointly and solidarily liable with their
company, there must be a finding that they were remiss in directing the affairs of that company,
such as sponsoring or tolerating the conduct of illegal activities.19 In the case of Becmen and
White Falcon,20 while there is evidence that these companies were at fault in not investigating
the cause of Jasmins death, there is no mention of any evidence in the case against them that
intervenors Gumabay, et al., Becmens corporate officers and directors, were personally involved
in their companys particular actions or omissions in Jasmins case.
Century Canning Corp. v. CA
Facts:
On 15 July 1997, Century Canning Corporation (petitioner) hired Gloria C. Palad (Palad) as fish

cleaner atpetitioners tuna and sardines factory. Palad signed on 17 July 1997 an apprenticeship
agreement with petitioner.Palad received an apprentice allowance of P138.75 daily. On 25 July
1997, petitioner submitted its apprenticeshipprogram for approval to the Technical Education and
Skills Development Authority (TESDA) of the Department of Labor and Employment (DOLE).
On 26 September 1997, the TESDA approved petitioners apprenticeship program. According to
petitioner, a performance evaluation was conducted on 15 November 1997, where petitioner
gavePalad a rating ofN.I. or needs improvement since she scored only27.75% based on a 100%
performance indicator.Furthermore, according to the performance evaluation, Palad incurred
numerous tardiness and absences. As aconsequence, petitioner issued a termination notice dated
22 November 1997 to Palad, informing her of hertermination effective at the close of business
hours of 28 November 1997. Palad then filed a complaint for illegaldismissal, underpayment of
wages, and non-payment of pro-rated 13th month pay for the year 1997.
Issue:
1. Whether or not the apprenticeship agreement was valid and binding between the parties
2. Whether or not Palad was illegally dismissed by petitioner
Ruling:
1) The Court held that the apprenticeship agreement which Palad signed was not valid and
binding because it was executed more than two months before the TESDA approved petitioners
apprenticeship program. The Court cited Nitto Enterprises v. National Labor Relations
Commission, where it was held that an apprenticeship program should first be approved by the
DOLE before an apprentice may be hired, otherwise the person hired will be considered a regular
employee. It is mandated that apprenticeship agreements entered into by the employer and
apprentice shall be entered only in accordance with the apprenticeship program duly approved by
the Minister of Labor and Employment. Prior approval by the Department of Labor and
Employment of the proposed apprenticeship program is, therefore, a condition sine qua non
before an apprenticeship agreement can be validly entered into. The Labor Code defines an
apprentice as a worker who is covered by a written apprenticeship agreement with an employer.
Since Palad is not considered an apprentice because the apprenticeship agreement was enforced
before the TESDAs approval of petitioners apprenticeship program, Palad is deemed a regular
employee performing the job of a fish cleaner. Clearly, the job of a fish cleaner is necessary in
petitioners business as a tuna and sardines factory. Under Article 280 of the Labor Code, an
employment is deemed regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer.
2) Under Article 279 of the Labor Code, an employer may terminate the services of an employee
for just causes or for authorized causes. Under Article 277(b) of the Labor Code, the employer
must send the employee who is about to be terminated, a written notice stating the causes for
termination and must give the employee the opportunity to be heard and to defend himself. Thus,
to constitute valid dismissal from employment, two requisites must concur: (1) the dismissal
must be for a just or authorized cause; and (2) the employee must be afforded an opportunity to
be heard and to defend himself. Palad was not accorded due process. Even if petitioner did

conduct a performance evaluation on Palad, petitioner failed to warn Palad of her alleged poor
performance. In fact, Palad denies any knowledge of the performance evaluation conducted and
of the result thereof. Petitioner likewise admits that Palad did not receive the notice of
termination because Palad allegedly stopped reporting for work. The records are bereft of
evidence to show that petitioner ever gave Palad the opportunity to explain and defend herself.
Clearly, the two requisites for a valid dismissal are lacking in this case.

Bernardo v. NLRC
Facts:
The 43 petitions are deaf-mutes who were hired on various periods from 188 to 1993 by
respondent Far East Bank and Trust Co. as Money Sorters and Counters through uniformly
wondered agreement called Employment Contract for Handicapped Workers. The said
agreement provides for the manner of how they are hired and rehired, the amount of their wages
(P118.00 per day), period of employment (5 days a week, 8 hours a day, training for 1 month, 6
months period) and the manner and method of their works are to be done ( sort out bills
according to colors; Count each denomination per hundred, either manually or with the aid of a
counting machine; Wrap and label bills per hundred; put the wrapped bills into bundles; and
Submit bundled bills to bank teller for verification.) Many of their employments were renewed
every six months. Claiming that they should be considered as regular employees they filed
complaint for illegal dismissal and recovery of various benefits.
Labor arbiters decision: complaint is dismissed for lack of merit (the terms of the contract shall
be law between the parties.). Affirmed by the NLRC (Art. 280 controlling herein but Art. 80)
(the Magna Carta for Disabled Persons was not applicable, considering the prevailing
circumstances of the case.) and denied motion for consideration.
Issue:
Are petitioners considered as regular employees?

Ruling:
Yes. The petition is meritorious. However, only the employees, who worked for more than six
months and whose contracts were renewed are deemed regular. Hence, their dismissal from
employment was illegal. The stipulations in the employment contracts indubitably conform with
article 80, however the application of Article 280 of the Labor Code is justified because of the
advent of RA No. 7277 ( the Magna Carta for Disabled Persons) which mandates that a qualified
employee should be given the same terms and conditions of employment as a qualified ablebodied person ( compensation, privileges, benefits, incentives or allowances) 27 of the
petitioners are considered regular employees by provision of law regardless of any agreement
between the parties as embodied in the article 280 in relation to article 281 of the Labor Code.

The test is whether the former is usually necessary or desirable in the usual business or trade of
the employer. Hence, the employment is considered regular, but only with respect to such
activity, and while such activity exist. Without doubt, the task of counting and sorting bills is
necessary and desirable to the business of respondent bank. When the bank renewed the contract
after the lapse of the six-month probationary period, the employees thereby became regular
employees. No employer is allowed to determine indefinitely the fitness of its employees. Those
who have worked for only 6 months and employments were not renewed are not considered
regular employees.

ANGELINA FRANCISCO vs. NLRC, KASEI CORPORATION, et al.

G.R. No. 170087
August 31, 2006

DOCTRINE: Courts have relied on the so-called right of control test where the person for
whom the services are performed reserves a right to control not only the end to be achieved
but also the means to be used in reaching such end. In addition to the standard of right-ofcontrol, the existing economic conditions prevailing between the parties, like the inclusion of
the employee in the payrolls, can help in determining the existence of an employer-employee
relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the
relationship between the parties, owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances when, aside from the employers
power to control the employee with respect to the means and methods by which the work is to
be accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employers power to control the employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship.
FACTS:
In 1995, petitioner Angelina Francisco was hired by Kasei Corporation (Kasei) during its
incorporation stage. She was designated as Accountant, Corporate Secretary and Liaison Officer

of the company. In 1996, Francisco was designated Acting Manager to handle recruitment of all
employees and perform management administration functions, represent the company in all
dealings with government agencies, and to administer all other matters pertaining to the
operation of Kasei Restaurant which is owned and operated by Kasei.
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her
salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei
Corporation.
In January 2001, Francisco was replaced as Manager. She alleged that she was required to sign a
prepared resolution for her replacement but she was assured that she would still be connected
with Kasei. The Treasurer convened a meeting of all employees and announced that Francisco
was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge
of all BIR matters.
Thereafter, Kasei reduced her salary by P2,500.00 a month beginning January up to September
2001 for a total reduction of P22,500.00 as of September 2001. She was not paid her mid-year
bonus allegedly because the company was not earning well. In October 2001, she did not receive
her salary from the company, made repeated follow-ups with the cashier but was advised that the
company was not earning well. On October 15, 2001, she asked for her salary, but she was
informed that she is no longer connected with the company.
Since she was no longer paid her salary, petitioner did not report for work and filed an action for
constructive dismissal before the labor arbiter.
Kasei Corporation claimed that Francisco was not their employee, having been designated as
technical consultant who performed work at her own discretion without the control and
supervision of the Corporation, and that her consultancy may be terminated any time considering
that her services were only temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a
list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner
was not among the employees reported to the BIR, as well as a list of payees subject to expanded
withholding tax which included petitioner. SSS records were also submitted showing that
petitioners latest employer was Seiji Corporation.
ISSUES: Whether or not there was an employer-employee relationship between Francisco and
Kasei Corporation; and whether Francisco was illegally dismissed.
HELD: YES. Generally, courts have relied on the so-called right of control test where the person
for whom the services are performed reserves a right to control not only the end to be achieved
but also the means to be used in reaching such end. In addition to the standard of right-ofcontrol, the existing economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, can help in determining the existence of an employer-employee
relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the
relationship between the parties, owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances when, aside from the employers

power to control the employee with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent contractor,
corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employers power to control the employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship.
This two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the
period of the latters employment.
Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: (1) the extent to which the services
performed are an integral part of the employers business; (2) the extent of the workers
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that line
of business.
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporations Technical Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper
operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to
December 18, 2000. When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of
Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces
the existence of an employer-employee relationship between petitioner and respondent
corporation.

It is therefore apparent that petitioner is economically dependent on respondent corporation for

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

JOSE Y. SONZA vs. ABS-CBN BROADCASTING CORPORATION

G.R. No. 188051 June 10, 2004
DOCTRINE:A radio broadcast specialist who works under minimal supervision is an
independent contractor.
Case law has consistently held that the elements of an employer-employee relationship are: (a)

the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the means and methods by
which the work is accomplished. The last element, the so-called "control test", is the most
important element.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there
is an employer-employee relationship under labor laws. Not every performance of services for
a fee creates an employer-employee relationship. To hold that every person who renders
services to another for a fee is an employee - to give meaning to the security of tenure clause will lead to absurd results.
FACTS: In May 1994, respondent ABS-CBN signed an Agreement with the Mel and Jay
Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and General
Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the
Agreement as "AGENT," MJMDC agreed to provide SONZAs services exclusively to ABSCBN as talent for radio and television. The Agreement listed the services SONZA would render
to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first
year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which
reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.
Thank you for your attention.
Very truly yours,

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

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor
and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN
did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July
1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due
him under the Agreement.
The Labor Arbiter dismissed the case for lack of jurisdiction ruling that there exist no employeremployee relationship in the case. Sonza appealed to NLRC and the latter affirmed the decision
of the Labor Arbiter. Sonza then filed for a special civil action for certiorari before the Court of
Appeals and the same was dismissed by the latter.
ISSUE: Whether or not there was an employer-employee relationship.
HELD: NO. The existence of an employer-employee relationship is a question of fact. Appellate
courts accord the factual findings of the Labor Arbiter and the NLRC not only respect but also
finality when supported by substantial evidence. Case law has consistently held that the elements
of an employer-employee relationship are: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employee on the means and methods by which the work is accomplished.The last element, the
so-called "control test", is the most important element.
A. Selection and Engagement of Employee
Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary
employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN
would not have entered into the Agreement with SONZA but would have hired him through its
personnel department just like any other employee.
B. Payment of Wages

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay" which the law
automatically incorporates into every employer-employee contract. Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge
and out of the ordinary that they indicate more an independent contractual relationship rather
than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees
precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary
employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to bargain talent fees way above the
salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship.
SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach
of contract, such as retrenchment to prevent losses as provided under labor laws.
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
"AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee
or an independent contractor, we refer to foreign case law in analyzing the present case. The
United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De
Puerto Rico Para La Difusin Pblica ("WIPR") that a television program host is an
independent contractor.
Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor. This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true as well
the less control the hirer exercises, the more likely the worker is considered an independent
contractor.
The Court find that ABS-CBN was not involved in the actual performance that produced the
finished product of SONZAs work. ABS-CBN did not instruct SONZA how to perform his job.

ABS-CBN merely reserved the right to modify the program format and airtime schedule "for
more effective programming. Clearly, ABS-CBNs right not to broadcast SONZAs show,
burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not
amount to control over the means and methods of the performance of SONZAs work. This
proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees
in full until the expiry of the Agreement.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is
an employee of the former. In this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio programs that comply with
standards of the industry.
Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
Even an independent contractor can validly provide his services exclusively to the hiring party.
In the broadcast industry, exclusivity is not necessarily the same as control.
WHEREFORE, the Court DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

BITOY JAVIER V. FLY ACE CORP AND FLORDELYN CASTILLO

G.R. NO. 192558 FEB. 15, 2012

Doctrine: In an illegal dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established.
FACTS: Javier alleged that he was an employee of Fly Ace since September 2007, performing
various tasks at the respondents warehouse such as cleaning and arranging the canned items
before their delivery to certain locations, except in instances when he would be ordered to
accompany the companys delivery vehicles, as pahinante; that he reported for work
from Monday to Saturday from 7:00 oclock in the morning to 5:00 oclock in the afternoon; that
during his employment, he was not issued an identification card and payslips by the
company; that on May 6, 2008, he reported for work but he was no longer allowed to enter the
company premises by the security guard upon the instruction of Ruben Ong (Mr. Ong), his
superior; that after several minutes of begging to the guard to allow him to enter, he saw Ong
whom he approached and asked why he was being barred from entering the premises; that Ong
replied by saying, Tanungin mo anak mo; that he then went home and discussed the matter
with his family; that he discovered that Ong had been courting his daughter Annalyn after the
two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and convince
him to spare her father from trouble but he refused to accede; that thereafter, Javier was
terminated from his employment without notice; and that he was neither given the opportunity
to refute the cause/s of his dismissal from work.
ISSUE: Whether or not an Employer-Employee Relationship existed.
HELD: NO. Javier was not able to persuade the Court that the four-fold test elements exist. He
could not submit competent proof that Fly Ace engaged his services as a regular employee; that
Fly Ace paid his wages as an employee, or that Fly Ace could dictate what his conduct should be
while at work.
Javier simply assumed that he was an employee of Fly Ace. He performed his contracted work
outside the premises of the respondent; he was not even required to report to work at regular
hours; he was not made to register his time in and time out every time he was contracted to work;
he was not subjected to any disciplinary sanction imposed to other employees for company
violations; he was not issued a company I.D.; he was not accorded the same benefits given to
other employees; he was not registered with the Social Security System (SSS) as petitioners
employee; and, he was free to leave, accept and engage in other means of livelihood as there is
no exclusivity of his contracted services with the petitioner, his services being co-terminus with
the trip only. Fly Ace claims that it had no right to control the result, means, manner and
methods by which Javier would perform his work or by which the same is to be
accomplished. Javiers function as a pahinante was not directly related or necessary to its
principal business of importation and sales of groceries. Even without Javier, the business could
operate its usual course as it did not involve the business of inland transportation. Lastly, the
acknowledgment receipts bearing Javiers signature and words pakiao rate, referring to his
earned salaries on a per trip basis, have evidentiary weight that the LA correctly considered in
arriving at the conclusion that Javier was not an employee of the company.

Locsin v. PLDT (October 2, 2009)

Facts: On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the
Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services Agreement
(Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various
offices. Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement
effective October 1, 2001. Despite the termination of the Agreement, however, petitioners continued to
secure the premises of their assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided the Labor Arbiter with
copies of petitioner Locsins pay slips for the period of January to September 2002.
Then, on September 30, 2002, petitioners services were terminated. Thus, petitioners filed a complaint
before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay, holiday
pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living
Allowance, and moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the
Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was
arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As such
employees, petitioners were entitled to substantive and procedural due process before termination of
employment.

Issue: Is there employer-employee relationship?

Held: Yes. From the foregoing circumstances, reason dictates that we conclude that petitioners
remained at their post under the instructions of respondent. We can further conclude that
respondent dictated upon petitioners that the latter perform their regular duties to secure the
premises during operating hours. This, to our mind and under the circumstances, is sufficient to
establish the existence of an employer-employee relationship.
To reiterate, while respondent and SSCP no longer had any legal relationship with the
termination of the Agreement, petitioners remained at their post securing the premises of
respondent while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes
no sense, and the denials proffered by respondent do not shed any light to the situation. It is but
reasonable to conclude that, with the behest and, presumably, directive of respondent, petitioners
continued with their services. Evidently, such are indicia of control that respondent exercised
over petitioners.
Evidently, respondent having the power of control over petitioners must be considered as
petitioners employerfrom the termination of the Agreement onwardsas this was the only
time that any evidence of control was exhibited by respondent over petitioners and in light of our
ruling in Abella. Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and
benefits of employees of respondent, including due process requirements in the termination of
their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process
requirements. Having failed to do so, respondent is guilty of illegal dismissal.

PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), v. THE

SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE
REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN
FACTS:
Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of
Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for illegal deduction,
nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day
and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAGIBIG and Philhealth. After the conduct of summary investigations, and after the parties
submitted their position papers, the DOLE Regional Director found that private respondent was
an employee of petitioner, and was entitled to his money claims. Petitioner sought
reconsideration of the Directors Order, but failed. The Acting DOLE Secretary dismissed
petitioners appeal on the ground that petitioner submitted a Deed of Assignment of Bank
Deposit instead of posting a cash or surety bond. When the matter was brought before the CA,
where petitioner claimed that it had been denied due process, it was held that petitioner was
accorded due process as it had been given the opportunity to be heard, and that the DOLE
Secretary had jurisdiction over the matter, as the jurisdictional limitation imposed by Article 129
of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been
repealed by Republic Act No. (RA) 7730.
The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not
considered as co-extensive with the power to determine the existence of an employer-employee
relationship.] In its Comment, the DOLE sought clarification as well, as to the extent of its
visitorial and enforcement power under the Labor Code, as amended.
ISSUE: May the DOLE make a determination of whether or not an employer-employee
relationship exists, and if so, to what extent?
HELD:
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint
against petitioner was dismissed.
The Court found that there was no employer-employee relationship between petitioner and
private respondent. It was held that while the DOLE may make a determination of the existence
of an employer-employee relationship, this function could not be co-extensive with the visitorial
and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA
7730. The National Labor Relations Commission (NLRC) was held to be the primary agency in
determining the existence of an employer-employee relationship. This was the interpretation of
the Court of the clause in cases where the relationship of employer-employee still exists in Art.
128(b).
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing
officers to hear and decide any matter involving the recovery of wages and other monetary
claims and benefits was qualified by the proviso that the complaint not include a claim for

reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act
Further Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor, did away
with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and
enforcement power for claims beyond PhP 5,000. The only qualification to this expanded power
of the DOLE was only that there still be an existing employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been terminated
or it has not existed from the start, the DOLE has no jurisdiction. The Court held that the
determination of the existence of an employer-employee relationship is still primarily within the
power of the NLRC, that any finding by the DOLE is merely preliminary. This conclusion must
be revisited.
The elements to determine the existence of an employment relationship are:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal;
(4) the employers power to control the employees conduct.
The use of this test is not solely limited to the NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the course of inspection, making use of the
same evidence that would have been presented before the NLRC.
If a complaint is brought before the DOLE to give effect to the labor standards provisions of the
Labor Code or other labor legislation, and there is a finding by the DOLE that there is an
existing employer-employee relationship, the DOLE exercises jurisdiction to the exclusion
of the NLRC. If the DOLE finds that there is no employer-employee relationship, the
jurisdiction is properly with the NLRC.
If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which
provides that the Labor Arbiter has original and exclusive jurisdiction over those cases involving
wages, rates of pay, hours of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is
still an existing employer-employee relationship, the jurisdiction is properly with the
DOLE. The findings of the DOLE, however, may still be questioned through a petition for
certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an employeremployee relationship has been subjected to review by this Court, with the finding being that
there was no employer-employee relationship between petitioner and private respondent, based
on the evidence presented. Private respondent presented self-serving allegations as well as selfdefeating evidence. The findings of the Regional Director were not based on substantial
evidence, and private respondent failed to prove the existence of an employer-employee
relationship. The DOLE had no jurisdiction over the case, as there was no employer-employee
relationship present. Thus, the dismissal of the complaint against petitioner is proper.

Ymbong v. ABSCBN
Facts:
Petitioner Ernesto G. Ymbong started working for ABS-CBN in 1993 at its regional station in
Cebu as a television talent, co-anchoring Hoy Gising and TV Patrol Cebu. His stint in ABS-CBN
later extended to radio when ABS-CBN Cebu launched its AM station in 1995.
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he worked
as talent, director and scriptwriter for various radio programs aired.
On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy on Employees Seeking
Public Office. The pertinent portions read:
1. Any employee who intends to run for any public office position, must file his/her letter of
resignation,
2. Any employee who intends to join a political group/party or even with no political
affiliation but who intends to openly and aggressively campaign for a candidate or group of
candidates must file a request for leave of absence subject to managements approval.
Because of the 1998 elections and based on his immediate recollection of the policy Mr. Dante
Luzon, Assistant Station Manager issued a memorandum stating any employee/talent who
wants to run for any position in the coming election will have to file a leave of absence the
moment he/she files his/her certificate of candidacy. And added further that The services
rendered by the concerned employee/talent to this company will then be temporarily suspended
for the entire campaign/election period.
Luzon, however, admitted that upon double-checking of the exact text of the policy he saw that
the policy actually required suspension for those who intend to campaign for a political party or
candidate and resignation for those who will actually run in the elections.
After the issuance of the Memorandum, Ymbong got in touch with Luzon. Luzon claims that
Ymbong approached him and told him that he would leave radio for a couple of months because
he will campaign for the administration ticket. It was only after the elections that they found out
that Ymbong actually ran for public office himself at the eleventh hour. Ymbong, on the other
hand, claims that in accordance with the Memorandum, he informed Luzon through a letter that
he would take a few months leave of absence because he was running for councilor of LapuLapu City.
As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run as
councilor for Naga. According to Luzon, he clarified to Patalinghug that he will be considered
resigned and not just on leave once he files a certificate of candidacy. Thus, Patalinghug wrote
Luzon his resignation letter.
Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections.
Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu. According
to Luzon, he informed them that they cannot work there anymore because of company policy.

ABS-CBN, however, agreed out of pure liberality to give them a chance to wind up their
participation in the radio drama since it was rating well and to avoid an abrupt ending. The
agreed winding-up, however, dragged on for so long prompting Luzon to issue to Ymbong a
memorandum stating that his involvement as narrator of the drama continues until its director
wraps it up one week upon receipt of a separate memo.
Ymbong in contrast contended that after the expiration of his leave of absence, he reported back
to work as a regular talent and in fact continued to receive his salary. On he received a
memorandum stating that his services are being terminated immediately, much to his surprise.
Thus, he filed an illegal dismissal. He argued that the ground cited by ABS-CBN for his
dismissal was not among those enumerated in the Labor Code. And even granting without
admitting the existence of the company policy supposed to have been violated, Ymbong averred
that it was necessary that the company policy meet certain requirements before willful
disobedience of the policy may constitute a just cause for termination. Ymbong further argued
that the company policy violates his constitutional right to suffrage.
Patalinghug likewise filed an illegal dismissal complaint against ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that there is no employeremployee relationship between the company and Ymbong and Patalinghug.
The Labor Arbiter found that there exists an employer-employee relationship between ABS-CBN
and Ymbong and Patalinghug considering the stipulations in their appointment letters/talent
contracts.
In its memorandum of appeal before the National Labor Relations Commission (NLRC), ABSCBN contended that the Labor Arbiter has no jurisdiction over the case because there is no
employer-employee relationship between the company and Ymbong and Patalinghug.
In its Supplemental Appeal, ABS-CBN insisted that Ymbong and Patalinghug were engaged as
radio talents and their contract is one between a self-employed contractor and the hiring party
which is a standard practice in the broadcasting industry.
The NLRC dismissed ABS-CBNs Supplemental Appeal for being filed out of time.
As to the issue of whether they were illegally dismissed, the NLRC treated their cases differently.
In the case of Patalinghug, it found that he voluntarily resigned from employment when he
submitted his resignation letter. As to Ymbong, however, the NLRC ruled otherwise. It ruled that
the Memorandum merely states that an employee who seeks any elected position in the
government will only merit the temporary suspension of his services. It held that under the
principle of social justice, the Memorandum shall prevail and ABS-CBN is estopped from
enforcing the other memorandum issued to Ymbong stating that his services had been
automatically terminated when he ran for an elective position.
ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a Resolution.
ABS-CBN then filed a petition for certiorari before the CA.
CA rendered the assailed decision. The CA declared Ymbong resigned from employment and not

to have been illegally dismissed.

Issues:
1) Whether Ymbong, by seeking an elective post, is deemed to have resigned and not dismissed by
ABS-CBN.
2) Whether such policy is valid.
Held:
We have consistently held that so long as a companys management prerogatives are exercised in
good faith for the advancement of the employers interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this
Court will uphold them. In the instant case, ABS-CBN validly justified the implementation of the
Policy. It is well within its rights to ensure that it maintains its objectivity and credibility and
freeing itself from any appearance of impartiality.
We find no merit in Ymbongs argument that [his] automatic termination x x x was a blatant
[disregard] of [his] right to due process as he was never asked to explain why he did not tender
his resignation before he ran for public office as mandated by [the subject company policy].
Ymbongs overt act of running for councilor of is tantamount to resignation on his part. He was
separated from ABS-CBN not because he was dismissed but because he resigned.
Since there was no termination to speak of, the requirement of due process in dismissal cases
cannot be applied to Ymbong.
Thus, ABS-CBN is not duty-bound to ask him to explain why he did not tender his resignation
before he ran for public office as mandated by the subject company policy.

Professional Services, Inc., petitioner v The Court of Appeals and Natividad and Enrique
Agana

Facts:
Natividad Agana was admitted at the Medical City General Hospital because of difficulty of
bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from
cancer of the sigmoid. Dr. Ampil performed an anterior resection surgery upon her, and found
that the malignancy in her sigmoid area had spread to her left ovary, necessitating the removal of
certain portions of it. Upon the consent of Atty. Enrique Agana, Natividads husband, a
hypersectomy was performed upon Natividad by Dr. Fuentes. Afterwards, Dr. Ampil took over,
completed the operation and closed the incision. In the Record of Operation, the attending nurse
entered these remarks: sponge count lacking 2; announced to surgeon searched done but to no
avail.
After a couple of days, Natividad complained of pain in her anal region and consulted both Dr.
Ampil and Dr. Fuentes. The doctors told her that the pain was the natural consequence of the
surgical operation performed upon her. Dr. Ampil recommended that she consult an oncologist to
treat the cancerous nodes which were not removed during the operation. After four months of
consultations and examinations in the US, she was told that she was free of cancer.
Two weeks after returning to the Philippines, her daughter found a piece of gauze (1.5 in)
protruding from her vagina. Dr. Ampil was immediately informed. Dr. Ampil extracted by hand
the piece of gauze and assured Natividad that the pains would soon vanish. However, the pains
intensified prompting Natividad to seek treatment at the Polymedic General Hospital, where
another Dr. Gutierrez detected the presence of a foreign object in her vagina. Natividad
underwent another surgery.
Spouses Agana filed with the Regional Trial Court a complaint for damages against Professional
Services, Inc. (owner of Medical City), Dr. Ampil and Dr. Fuentes. Pending the outcome of the
case, Natividad died. The RTC found PSI, Dr. Ampil and Dr. Fuentes jointly and severally liable.
On appeal, the Court of Appeals affirmed the assailed judgment with modification that the
complaint against Dr. Fuentes was dismissed.
Issue: Whether or not there was an employer-employee relationship between the Medical City
and Dr. Ampil?
Ruling: Yes, there exists an employer-employee relationship between the Medical City and Dr.
Ampil. The Court, relying on Ramos v Court of Appeals, held that for the purpose of
apportioning responsibility in medical negligence cases, an employer-employee relationship in
effect exists between hospitals and their attending and visiting physicians. Hospitals exercise
significant control in the hiring and firing of consultants and in the conduct of their work within
the hospital premises. Furthermore, PSIs act of publicly displaying in the lobby of the Medical
City the names and specializations of its accredited physicians estopped it from denying the
existence of an employer-employee relationship between them under the doctrine of ostensible
agency or agency by estoppel.
GREGORIO V. TONGKO, petitioner vs. THE MANUFACTURERS LIFE INSURANCE
CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.

G.R. No. 167622

November 7, 2008
DOCTRINE: In the determination of whether an employer-employee relationship exists
between two parties, this court applies the four-fold test to determine the existence of the
elements of such relationship. Jurisprudence is firmly settled that whenever the existence of
an employment relationship is in dispute, four elements constitute the reliable yardstick: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct.
It is the so-called control test which constitutes the most important index of existence of the
employer-employee relationship that is, whether the employer controls or has reserved the
right to control the employee not only as to the result of the work to be done but also as to the
means and methods by which the same is to be accomplished. Stated otherwise, an employeremployee relationship exists where the person for whom the services are performed reserves
the right to control not only the end to be achieved but also the means to be used in reaching
such end.
FACTS: The contractual relationship between Tongko and Manulife had two basic phases.
The first phase began on July 1, 1977, under a Career Agents Agreement, which provided that
the Agent is an independent contractor and nothing contained herein shall be construed
or interpreted as creating an employer-employee relationship between the Company and the
Agent.
The second phase started in 1983 when Tongko was named Unit Manager in Manulifes Sales
Agency Organization. In 1990, he became a Branch Manager. In 1996, Tongko became a
Regional Sales Manager. Tongkos gross earnings consisted of commissions, persistency income,
and management overrides. Since the beginning, Tongko consistently declared himself selfemployed in his income tax returns. Under oath, he declared his gross business income and
deducted his business expenses to arrive at his taxable business income.
Respondent Renato Vergel de Dios, sales manager, wrote Tongko a letter dated November 6,
2001 on concerns that were brought up during the Metro North Sales Managers Meeting,
expressing dissatisfaction of Tongkos performance in their agent recruiting business, which
resulted in some changes on how Tongko would conduct his duties, including that Tongko hire at
his expense a competent assistant to unload him of routine tasks, which he had been complaining
to be too taxing for him.
On December 18, 2001, de Dios wrote Tongko another letter which served as notice of
termination of his Agency Agreement with the company effective fifteen days from the date
of the letter. Tongko filed an illegal dismissal complaint with the National Labor Relations
Commission (NLRC), alleging that despite the clear terms of the letter terminating his Agency
Agreement, that he was Manulifes employee before he was illegally dismissed.
The labor arbiter decreed that no employer-employee relationship existed between the parties.
The NLRC reversed the labor arbiters decision on appeal; it found the existence of an employer-

employee relationship and concluded that Tongko had been illegally dismissed. The Court of
Appeals found that the NLRC gravely abused its discretion in its ruling and reverted to the labor
arbiters decision that no employer-employee relationship existed between Tongko and Manulife.
ISSUE:
Is there an employer-employee relationship between Tongko and Manulife?
HELD:
NO. In the determination of whether an employer-employee relationship exists between two
parties, this court applies the four-fold test to determine the existence of the elements of such
relationship. Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employees conduct.
It is the so-called control test which constitutes the most important index of existence of the
employer-employee relationship that is, whether the employer controls or has reserved the right
to control the employee not only as to the result of the work to be done but also as to the means
and methods by which the same is to be accomplished. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to
control not only the end to be achieved but also the means to be used in reaching such end.
In the case at bar, the absence of evidence showing Manulifes control over Tongkos contractual
duties points to the absence of any employer-employee relationship between Tongko and
Manulife. In the context of the established evidence, Tongko remained an agent all along;
although his subsequent duties made him a lead agent with leadership role, he was nevertheless
only an agent whose basic contract yields no evidence of means-and-manner control.
Claimant clearly failed to substantiate his claim of employment relationship by the quantum of
evidence the Labor Code requires. Tongkos failure to comply with the guidelines of de Dios
letter, as a ground for termination of Tongkos agency, is a matter that the labor tribunals cannot
rule upon in the absence of an employer-employee relationship. Jurisdiction over the matter
belongs to the courts applying the laws of insurance, agency and contracts.

TELEVISION AND PRODUCTION EXPONENTS, INC. AND/OR ANTONIO P.

TUVIERA vs. ROBERTO SERVAA
G.R. No. 167648

January 28, 2008

DOCTRINE: It has been in held that in a business establishment, an identification card is
usually provided not just as a security measure but to mainly identify the holder thereof as a
bona fide employee of the firm who issues it.
Jurisprudence is abound with cases that recite the factors to be considered in determining the
existence of employer-employee relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power
to control the employee with respect to the means and method by which the work is to be
accomplished. The most important factor involves the control test. Under the control test,
there is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the manner and
means used to achieve that end.
FACTS: TAPE is a domestic corporation engaged in the production of television programs, such
as the long-running variety program, Eat Bulaga!. Its president is Antonio P. Tuviera
(Tuviera). Respondent Roberto C. Servaa had served as a security guard for TAPE from March
1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against
TAPE. He alleged that he was first connected with Agro-Commercial Security Agency but was
later on absorbed by TAPE as a regular company guard. He was detailed at Broadway Centrum
in Quezon City where Eat Bulaga! regularly staged its productions. On 2 March 2000,
respondent received a memorandum informing him of his impending dismissal on account of
TAPEs decision to contract the services of a professional security agency. At the time of his
termination, respondent was receiving a monthly salary of P6,000.00. He claimed that the
holiday pay, unpaid vacation and sick leave benefits and other monetary considerations were
withheld from him. He further contended that his dismissal was undertaken without due process
and violative of existing labor laws, aggravated by nonpayment of separation pay.
The Labor Arbiter ruled that respondent is a regular employee but the NLRC ruled that he was
only a mere program employee. The Court of Appeals affirmed the decision of the Labor Arbiter
that Servaa is a regular employee.
ISSUE: Whether an employer-employee relationship exist between TAPE and respondent.
HELD: YES. Jurisprudence is abound with cases that recite the factors to be considered in
determining the existence of employer-employee relationship, namely: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee with respect to the means and method by which the
work is to be accomplished. The most important factor involves the control test. Under the
control test, there is an employer-employee relationship when the person for whom the services
are performed reserves the right to control not only the end achieved but also the manner and
means used to achieve that end.
Respondent was hired by TAPE. Respondent presented his identification card to prove that he is

indeed an employee of TAPE. It has been in held that in a business establishment, an

identification card is usually provided not just as a security measure but to mainly identify the
holder thereof as a bona fide employee of the firm who issues it.
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers
to designate such amount as talent fees. Wages, as defined in the Labor Code, are remuneration
or earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be rendered. It is beyond
dispute that respondent received a fixed amount as monthly compensation for the services he
rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that TAPE
had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required
to report daily and observes definite work hours.
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying
respondent as a program employee and equating him to be an independent contractor. TAPE
failed to adduce any evidence to prove that it complied with the requirements laid down in the
policy instruction. It did not even present its contract with respondent. Neither did it comply
with the contract-registration requirement.
More importantly, respondent had been continuously under the employ of TAPE from 1995 until
his termination in March 2000, or for a span of 5 years. Regardless of whether or not respondent
had been performing work that is necessary or desirable to the usual business of TAPE,
respondent is still considered a regular employee under Article 280 of the Labor Code.
As a regular employee, respondent cannot be terminated except for just cause or when authorized
by law. It is clear from the tenor of the 2 March 2000 Memorandum that respondents
termination was due to redundancy.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any
showing that he acted with malice or bad faith in terminating respondent, he cannot be held
solidarily liable with TAPE. Thus, the Court of Appeals ruling on this point has to be modified.

GR NO.87098 November 4, 1996

ENCYCLOPAEDIA BRITANICCA VS. NLRC

FACTS:
Benjamin Limjoco was a Sales Division Manager of Encyclopaedia Britanicca.
He was in charge of selling petitioner's products through some sales representatives.
As compensation, he receives commissions from the products sold by his agents.
On June 14, 1974, Limjoco resigned from office to pursue his private business.
Then on October 30, 1975, he filed a complaint against the petitioner with the DOLE, claiming
for non-payment of separation pay and other benefits, and also illegal deduction from his sales
commissions.
LABOR ARBITER
On its decision, Limjoco was an employee of the petitioner. The company had control over
Limjoco since the latter was requires to make periodic reports of his sales activities to the
company. All transactions were subject to the final approval of the petitioner company had active
control on the sales activities.
NLRC
Petitioner appealed to NLRC
On its decision, the NLRC affirmed to Labor Arbiter's decision. There was no evidence
supporting the allegation that Limjoco was an independent contractor or dealer.
ISSUE:
WoN there exists an employer-employee relationship between Encyclopaedia Britanicca and
Benjamin Limjoco?
RULING:
The petition has been granted.
In determining the existence of an employer-employee relationship the following elements must
be present:
1. Selection and engagement of the employee;
2. Payment of wages;
3. Power of Dismissal; and
4. The power to control employee's conduct.

Under the control test, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only to end to be achieved, but also the
manner and means to be used in reaching that end.

Limjoco was merely an agent or an independent dealer of the petitioner. Had he been an
employee of the company. He could not be employed elsewhere and he would be required to
devote full time for petitioner.
In the case at bar, the element of control is absent, where a person who works for another does
so more or less at his own pleasure and is not subject to definite hours or conditions of work, and
in turn is compensated affording to the result of his efforts and not the amount thereof.

GR NO. 169510 August 8, 2011

ATOK BIG WEDGE COMPANY, INC. VS. JESUS P. GISON
FACTS:
Jesus P. Gison was engaged as part-time consultant on retainer basis to Atok Big Wedge
Company (Atok, for brevity).
As a consultant on retainer basis, he assisted Atok retained legal counsel with matters
pertaining to the prosecution of cases against illegal surface occupants within the area covered by
the company's mineral claims.
As payment, he receives 3,000 a month. This set-up continued for eleven years.
Since, Gison was getting old, he requested that Atok cause his registration with the SSS.
Such request has been denied. (Petitioner contends that he was only a retainer/consultant).
Gison filed a complaint with the SSS for Atok's refusal to cause his registration with the SSS.
On the same date, Mario Cera ( resident manager of Atok) issued a memorandum for Gison's
termination. (within 30 days upon receipt)
NLRC:
Gison filed a complaint with the NLRC for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay.
Decision of the Labor Arbiter: Ruling in favor of the petitioner. Finding that no employeremployee relationship between petitioner and respondent.
Gison filed an appeal.
Decision of the 2nd Division of the NLRC: Affirming the decision of the Labor Arbiter.
Gison filed a MR but then it was denied.
CA:
Gison filed a petition for review, questioning the decision and resolution of the NLRC.

 Decision of the CA: In favor of the respondent.

The CA opined that the NLRC and Labor Arbiter may have overlooked Article 280 of the Labor
Code, or the provision which distinguishes two kinds of employees (regular and casual).
In the case at bar, Gison is deemed a regular employee of Atok after the lapse of one year from
his employment. Considering also that he had been performing services for the petitioner for 11
years, thus, respondent is entitled to the rights and privileges of a regular employee.
ISSUE:
WoN there exists an employer-employee relationship between Atok and Gison?
SC:
The petition has been GRANTED, in favor with the petitioner. The resolutions issued by the
NLRC has been reinstated.
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably
adhered to the four-fold test, to wit:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and
4. the power to control the employee's conduct, or the so-called "control test".
The so-called "control test" is commonly regarded as the most crucial and determinative
indicator of the presence or absence of an employer-employee relationship. Under the control
test, an employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end achieved , but also the manner and
means to be used in reaching that end.
Applying the aforementioned test, an employer-employee relationship is ABSENT.
Respondent was assigned tasks to perform but petitioner did not control the manner and
methods by which respondent performed those tasks.

Dumpit- Murillo v CA
FACTS:

On October 2, 1995, under Talent Contract No. NT95-1805, Associated Broadcasting Company
(ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor for BalitangBalita, an early evening news program.
The contract was for a period of three months. Which was later renewed. In addition, petitioners
services were engaged for the program Live on Five.
On September 30, 1999, after four years of repeated renewals, petitioners talent
contract expired. Two weeks after the expiration of the last contract, petitioner sent a letter to
Mr. Jose Javier, Vice President for News and Public Affairs of ABC, informing the latter that she
was still interested in renewing her contract subject to a salary increase. Thereafter, petitioner
stopped reporting for work. She wrote Mr. Javier another letter saying "should I not receive any
formal response from you until Monday, November 8, 1999, I will deem it as a constructive
dismissal of my services."
A month later, petitioner sent a demand letter
(a) reinstatement to her former position
(b) payment of unpaid wages for services rendered from September 1 to October 20, 1999 and
full backwages
(c) payment of 13th benefits due to a regular employee starting March 31, 1996
On December 20, 1999, petitioner filed a complaint Edward Tan, for illegal constructive
dismissal, nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay,
service incentive leave pay, vacation/sick leaves and 13th pay. She likewise demanded payment
for moral, exemplary and actual damages, as well as for attorneys fees.
Labor Arbiter dismissed the complaint.
On appeal, The National Labor Relations Commission reversed the LA. The Court of Appeals
reversed the NLRC and ruled that as per the contract between ABC and Dumpit, Dumpit is a
fixed term employee.
ISSUE: Whether or not Dumpit is a regular employee.
HELD: Yes. Dumpit was a regular employee under contemplation of law. The practice of having
fixed-term contracts in the industry does not automatically make all talent contracts valid and
compliant with labor law. The assertion that a talent contract exists does not necessarily prevent a
regular employment status.The duties of Dumpit as enumerated in her employment contract
indicate that ABC had control over the work of Dumpit. Aside from control, ABC also dictated
the work assignments and payment of petitioners wages. ABC also had power to dismiss her.
All these being present, clearly, there existed an employment relationship between Dumpit and
ABC.
In addition, her work was continuous for a period of four years. This repeated engagement under
contract of hire is indicative of the necessity and desirability of the Dumpits work in ABCs
business. The primary standard for determining regular employment is the reasonable

connection private respondent to ABC, demanding: 13th month pay, vacation/sick/service

incentive leaves and other monetary against ABC.
The particular activity performed by the employee vis--vis the usual trade or business of the
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 entirety. If the employee
has been performing the job for at least a year, even if the performance is not continuous and
merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity
exists.

JOSE MEL BERNARTEvs. PBA

FACTS:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the
PBA as referees. During the leadership Bernardino, they were made to sign contracts on a yearto-year basis. During the term of Commissioner Eala, however,changes were made on the terms
of their employment.
On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising
him that his contract would not be renewed citing hisunsatisfactory performance on and off the
court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that
thedismissal was caused by his refusal to fix a game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of
referees in February 2001. On March 1, 2001, he signeda contract as trainee. Beginning 2002, he
signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued
amemorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of
referees officiating out-of-town games.
Beginning February 2004, he was no longer made to sign a contract. Respondents aver, on the
other hand, that complainants entered into two contracts of retainer with the PBA in the year
2003. The first contract wasfor the period January 1, 2003 to July 15, 2003; and the second was
for September 1 to December 2003. After the lapse of the latter period, PBA decided not to
renew their contracts.Complainants were not illegally dismissed because they were not
employees of the PBA.
Labor Arbiter declared petitioner an employee whose dismissal by respondents was illegal.
Accordingly, the Labor Arbiter ordered the reinstatement . The NLRC affirmed the Labor
Arbiter's judgment. Respondents filed a petition for certiorari with the Court of Appeals, which
overturned the decisions of the NLRC and Labor Arbiter.
ISSUE:
Whether petitioner is an employee of respondents, which in turn determines whether petitioner
was illegally dismissed
HELD:
NO, Petitioner is not an employee of the respondents. The SC DENIED the petition and
AFFIRMED the assailed decision of the Court of Appeals. To determine the existence of an
employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a)
the selection andengagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employers power to control the employee on themeans and methods by which the work
is accomplished.
The so-called control test is the most important indicator of the presence or absence of
anemployer-employee relationship. In this case, PBA admits repeatedly engaging petitioners
services, as shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per

diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract
for petitioners violation of its terms and conditions. However, respondents argue that the allimportant element of control is lacking in this case, making petitioner an independent contractor
and not an employee of respondents. The contractual stipulations do not pertain to, much less
dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they
merely serve as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league.
We agree with respondents that once in the playing court, the referees exercise their own
independent judgment, based on the rules of the game, as towhen and how a call or decision is to
be made. The referees are the only, absolute, and final authority on the playing court. The very
nature of petitioners job of officiating a professional basketball game undoubtedly calls for
freedom of control by respondents. Moreover, unlike regular employees who ordinarily report
for work eight hours per day for five days a week, petitioner is required to report for work only
when PBA games are scheduled or three times a week at two hours per game.
In addition, there are no deductions for contributions to the SocialSecurity System, Philhealth or
Pag-Ibig, which are the usual deductions from employees salaries. These undisputed
circumstances buttress the factthat petitioner is an independent contractor, and not an employee
of respondents.

Jardin vs. National Labor Relations Commission

Facts:
Petitioners were drivers of private respondent, Philjama International, Inc. a domestic
corporation engaged in the operation of Goodman Taxi. Petitioners used to drive private
respondents taxicabs every other day on a 24-hour work schedule under the boundary system.
Under this arrangement, the petitioners earned an average of P400.00 daily. Nevertheless, private
respondent admittedly, regularly deducts from 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 protect their rights and interests.

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 and active

members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of
washing fees. The labor arbiter dismissed said complaint for lack of merit. On appeal, the NLRC
reversed the decision of the labor arbiter. Private Respondent then filed a motion for
reconsideration but was denied. Private Respondent filed another motion for reconsideration
which eventually was granted dismissing the complaint of the petitioners for lack of jurisdiction
on the ground that there was no employer-employee relationship. Petitioners
sought reconsideration of the labor tribunals latest decision which was denied.
ISSUE: Whether or not employer-employee relationship exist.
HELD: Yes. In the number of cases decided by the court, it ruled that the relationship between
operators and drivers under the boundary system is that of employer-employee and not of lessorlessee as argued by the NLRC. The court already explained that in the lease of chattels, the lessor
loses complete control over the chattel leased although the lessee cannot be reckless in the use
thereof, otherwise he would be responsible for the damages to the lessor.
In the case of jeepney owners/operators and jeepney operators and drivers, the former exercise
supervision and control over the latter. The management of the business is in the owners hand.
The owner as holder of the certificate of public convenience must see to it that the drivers follow
the route prescribed by the franchising authority and the rules promulgated as regards its
operation.
The fact that the drivers do not receive a fixed salary but get only that excess of the boundary is
not sufficient to withdraw the relationship between that of the employer- employee. This is based
in the four fold test provided to determine the relationship, to wit: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee's conduct, or the so-called "control test." Of these four, the last
one is the most important. The so-called "control test" is commonly regarded as the most crucial
and determinative indicator of the presence or absence of an employer-employee relationship.
Under the control test an employer-employee relationship exists if the employer has reserved the
right to control the employee not only as to 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.
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent
does not pay the drivers, the complainants herein, their wages. Instead, the drivers pay a certain
fee for the use of the vehicle. On the matter of control, the drivers, once they are out plying their
trade and are beyond the physical control of the owner/operator, they themselves determine the
amount of revenue they would want to earn in a days driving and, more significantly, aside from
the fact that they pay for the gasoline they consume, they likewise shoulder the cost of repairs on
damages sustained by the vehicles they are driving.
As consistently held by the Supreme 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 the petitioners. Neither were there two written notices sent
by private respondent informing each of the petitioners that they had been dismissed from work.
This lack of valid cause and failure on the part of private respondent to comply with the twinnotice requirement underscored the illegality surrounding petitioners dismissal.
In the issue of the washing fee, the court held that it was a valid deduction. It is incumbent upon
the driver to restore the unit he has driven to the same clean condition when he took it out.
Private respondent is directed to reinstate petitioners to their positions held at the time of the
complained dismissal. Private respondent is likewise ordered to pay petitioners their full
backwages, to be computed for the date of the dismissal until their actual reinstatement.
However, the order of public respondent that petitioners be reimbursed the amount paid as
washing charges is deleted.

Chavez v. NLRC
January 17, 2005

Facts: Petitioner Pedro Chavez was hired as truck driver of Private Respondent Supreme
Packaging, Inc. Chavez requested to avail himself of the benefits that a regular employees were
receiving but his request was denied. Chavez filed before NLRC a complaint for regularization.
Later on he was dismissed by SPI. He later on filed an amended complaint for illegal dismissal.
Issue/s:
1. W/N there existed an employer-employee relationship between SPI and Chavez?
2. W/N Chavez is an independent contractor?
Held: Yes, there existed an employer-employee relationship between SPI and Chavez.
Applying four-fold test, all elements are present:
1. selection and engagement of the employee
- it was SPI who engaged the services of Chavez without intervention of third party
2. payment of wages
- that petitioner was paid on per trip basis is not significant, this is merely a method of computing
compensation and not a basis for determining the existence or absence of er-ee relationship
3. power of dismissal
- power to dismiss was inherent in the fact that they engaged the services of Chavez as driver
4. power to control employee's conduct
-

an employee is subject to employer's power to control the means and method by which the
work is to be performed while an independent contractor is free from control and supervision of
employer

Manifestation of Power of Control of SPI to Chavez truck was owned by SPI express
instruction in the method of delivery instruction on parking of delivery truck instruction on when
and where Chavez would perform his task by issuing to him gate passes and routing slips Chavez
is not and Independent Contractor

Proof that Chavez is not an Independent Contractor. Chavez did not own the truck SPI did not
have substantial capitalization or investment. Delivery was exclusively done for SPI for 10years.
* Er-Ee Relationship cannot be negated by expressly repudiating it in contract and providing
therein that the employee is an independent contractor. Indeed the employment status of the
person is defined and prescribed by law and not by what parties say it should be.

16. COCA-COLA BOTTLERS PHILS., INC., vs. CLIMACO

G.R. No. 146881

February 15, 2007

Facts:
Dr. Climaco is a medical doctor who was hired by the petitioner by virtue of retainer agreement.
The agreement states that there is no employer-employee relationship between the parties. The
retainer agreement was renewed annually. The last one expired on Dec. 31, 1993. Despite of the
non-renewal of the agreement, respondent continued to perform his functions as company doctor
until he received a letter in March 1995 concluding their retainer agreement.
Respondent filed a complaint before the NLRC seeking recognition as a regular employee of the
petitioner company and prayed for the payment of all benefits of a regular employee. In the
decision of the Labor Arbiter, the company lacked control over the respondents performance of
his duties. Respondent appealed where it rendered that no employer-employee relationship
existed between the parties.
The CA ruled that an employer-employee relationship existed.
Issue:
Whether or not there exists an employer-employee relationship between the parties.
Held:
The Court, in determining the existence of an employer-employee relationship, has invariably
adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to control the employees conduct, or the
so-called control test, considered to be the most important element.
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of
this case show that no employer-employee relationship exists between the parties. The
Comprehensive Medical Plan, provided guidelines merely to ensure that the end result was
achieved, but did not control the means and methods by which respondent performed his
assigned tasks. In addition, the Court finds that the schedule of work and the requirement to be
on call for emergency cases do not amount to such control, but are necessary incidents to the
Retainership Agreement.
Considering that there is no employer-employee relationship between the parties, the termination
of the Retainership Agreement, which is in accordance with the provisions of the Agreement,
does not constitute illegal dismissal of respondent.

Gabriel vs Bilon
Employee-Employer Relations

FACTS:

Complaint for illegal dismissal and illegal deductions

Gabriel owner-operator of public transport business Gabriel Jeepney with a fleet of 54 jeepneys
plying the Baclaran-Divisoria-Tondo route

Gabriel had a pool of drivers, which included Bilon and other respondents, operating under the
boundary system of Php 400/day

Drivers (private respondents) drove for Gabriel November 1984 until April 1995

Driving 5 days a week with daily earnings of Php 400

Alleged illegal deductions: Php 20 for police protection + Php 20 washing + Php 10 for deposit
+ Php 5 for garage fees

April 30, 1995 Gabriel told them not to drive anymore

NOTE: Gabriel died after the Labor Arbiter gave his decision.
ISSUE: WON there is an employee-employer relationship between the Gabriel and his drivers so
that Gabriel can be made guilty of illegal dismissal?
HELD: YES

As held in Martinez vs NLRC: [T]he relationship between jeepney owners/operators and jeepney
drivers under the boundary system is that of employer-employee and not of lessor-lessee because
in the lease of chattels the lessor loses complete control over the chattel leased although the
lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages
to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercises
supervision and control over the latter. The fact that the drivers do not receive fixed wages but
get only that in excess of the so-called "boundary" [that] they pay to the owner/operator is not
sufficient to withdraw the relationship between them from that of employer and employee.

Drivers were also illegally dismissed because they were not accorded due process and petitioner
failed to show the cause for termination.

Reinstatement of the drivers is obtainable because it has not been shown that there is an ensuing
strained relation between petitioners and respondents.

ALFREDO B. FELIX, vs.DR. BRIGIDA BUENASEDA

Facts: After passing the Physician's Licensure Examinations given by the Professional

Regulation Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the National
Center for Mental Health (then the National Mental Hospital) on May 26, 1980 as a Resident
Physician with an annual salary of P15,264.00. 5 In August of 1983, he was promoted to the
position of Senior Resident Physician 6 a position he held until the Ministry of Health
reorganized the National Center for Mental Health (NCMH) in January of 1988, pursuant to
Executive Order No. 119.
Under the reorganization, petitioner was appointed to the position of Senior Resident Physician
in a temporary capacity immediately after he and other employees of the NCMH allegedly
tendered their courtesy resignations to the Secretary of Health. 7 In August of 1988, petitioner
was promoted to the position of Medical Specialist I (Temporary Status), which position was
renewed the following year. 8
In 1988, the Department of Health issued Department Order No. 347 which required board
certification as a prerequisite for renewal of specialist positions in various medical centers,
hospitals and agencies of the said department. Specifically, Department Order No. 347 provided
that specialists working in various hospitals and branches of the Department of Health be
recognized as "Fellows" of their respective specialty societies and/or "Diplomates" of their
specialty boards or both. The Order was issued for the purpose of upgrading the quality of
specialties in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside)
examinations given by recognized specialty boards, in keeping up with international standards of
medical practice.
Upon representation of the Chiefs of Hospitals of various government hospitals and medical
centers, (then) Secretary of Health Alfredo Bengzon issued Department Order No. 347 providing
for an extension of appointments of Medical Specialist positions in cases where the termination
of medical specialist who failed to meet the requirement for board certification might result in
the disruption of hospital services.
On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss,
among other matters, the petitioner's case. In the said meeting Dr. Vismindo de Grecia,
petitioner's immediate supervisor, pointed out petitioner's poor performance, frequent tardiness
and inflexibility as among the factors responsible for the recommendation not to renew his
appointment. With one exception, other department heads present in the meeting expressed the
same opinion, and the overwhelming concensus was for non-renewal.
The Board likewise finds as baseless complainant's allegation of harassment. It should be noted
that the subsistence, quarters and laundry benefits provided to the Complainant were in
connection with his employment with the NCMH. Now that his employment ties with the said
agency are severed, he eventually loses his right to the said benefits. Hence, the Hospital
Management has the right to take steps to prevent him from the continuous enjoyment thereof,
including the occupancy of the said cottage, after his cessation form office.

ISSUE: WON petitioners dismissal is illegal and violative of the constitutional provision on
security of tenure allegedly because his removal was made pursuant to an invalid reorganization.

HELD: Responding to the instant petition, the Solicitor General contends that 1) the petitioner's
temporary appointment after the reorganization pursuant to E.O. No. 119 were valid and did not
violate his constitutional right of security of tenure; 2) petitioner is guilty of estoppel or laches,
having acquiesced to such temporary appointments from 1988 to 1991; and 3) the respondent
Commission did not act with grave abuse of discretion in affirming the petitioner's non-renewal
of his appointment at the National Center for Mental Hospital. We agree. The patent absurdity of
petitioner's posture is readily obvious. A residency or resident physician position in a medical
specialty is never a permanent one. Residency connotes training and temporary status. It is the
step taken by a physician right after post-graduate internship (and after hurdling the Medical
Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a given field.
Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made
pursuant to Executive Order No. 119 would therefore be akin to a college student asking to be
sent back to high school and staying there. From the position of senior resident physician, which
he held at the time of the government reorganization, the next logical step in the stepladder
process was obviously his promotion to the rank of Medical Specialist I, a position which he
apparently accepted not only because of the increase in salary and rank but because of the
prestige and status which the promotion conferred upon him in the medical community.
Estoppel. We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of
his temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his acquiescence to
if not his unqualified acceptance of the promotion (albeit of a temporary nature) made in
1988. Whatever objections petitioner had against the earlier change from the status of permanent
senior resident physician to temporary senior physician were neither pursued nor mentioned at or
after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting
upon a right or claim which he had plainly abandoned when he, from all indications,
enthusiastically accepted the promotion. His negligence to assert his claim within a reasonable
time, coupled with his failure to repudiate his promotion to a temporary position, warrants a
presumption, in the words of this Court in Tijam vs. Sibonghanoy, 20 that he "either abandoned
(his claim) or declined to assert it."
It is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary
appointment (Medical Specialist I). As respondent Civil Service Commission has correctly
pointed out 23, the appointment was for a definite and renewable period which, when it was not
renewed, did not involve a dismissal but an expiration of the petitioner's term.

AUTO BUS TRANSPORT SYSTEMS, INC. v. BAUTISTA

GR No. 156367; May 26, 2005

FACTS:
Respondent Antonio Bautista was employed with petitioner Auto Bus Transport System, Inc.
since May 24, 1995 as a driver-conductor of the latters bus. Bautista was paid on commission
basis per travel on a twice a month basis. On January 3, 2000, the bus driven by Bautista
accidentally bumped another bus owned by the respondent. As a result, Auto Bus did not allow
Bautista to work until he paid the cost of the repair of the damaged bus. Bautista failed to pay
and after given the opportunity to explain his side, Auto Bus sent him a letter for termination.
Bautista then instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of
13th month pay and service incentive leave pay (SILP) against Auto Bus. Labor Arbiter Tabingan
decided on the case in favor of Auto Bus, dimissing the Complaint of Bautista. However, the LA
ordered Auto Bus to pay Bautista his 13th month pay from the date of his hiring to the date of his
dismissal and his SILP for all the years he has been in service for the former. Auto Bus appealed
the decision to the NLRC wherein the latter affirmed with modification LAs decision. It held
that Bautista, being an employee paid on commission basis, was not entitled for 13th month pay
in accordance with Section 3 of the Rules and Regulations Implementing PD No. 851, leaving
Bautista with a claim for his SILP. Auto Bus filed a motion for reconsideration on the ground that
Bautista was also not entitled for it. It averred that Bautista, being a field personnel, was an
exception to the rule that employees are entitled to SILP. As a legal basis, it cited Section 1(d),
Rule V, Book 3 of the Implementing Rules and Regulations of the Labor Code which delimits the
grant of the SIL, excluding among others field personnel and other employees whose
performance is unsupervised by the employer including those who are engaged on task or
contract basis, purely commission basis, or those who are paid in a fixed amount for performing
work irrespective of the time consumed in the performance thereof. Auto Bus motion was
denied and so it elevated the case to the CA which affirmed NLRCs decision.
ISSUES:
1. Whether or not Bautista is a field personnel.
2. Whether or not Bautista is entitled for service incentive leave pay.
RULING:
1. The Court ruled in negative. According to Article 82 of the Labor Code, field personnel shall
refer to non-agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. The term field personnel is not merely
concerned with the location where the employee regularly performs his duties but also with the
fact that the employees performance is unsupervised by the employer. Thus, in order to conclude
whether an employee is a field employee, it is also necessary to ascertain if actual hours of work
in the field can be determined with reasonable certainty by the employer.
In the case of Bautista, it was observed in the facts found by the LA that he must be at a specific

place in a specified time to be able to observe prompt departure and arrival from his point of
origin to his point of destination. In each and every depot, there is always a dispatcher whose
function is to see to it that Bautistas bus and its crew leave the premises at specific time and
arrive at the estimated proper time. Therefore, Bautista was under constant supervision while in
the performance of his work. In conclusion, he was not a field personnel but a regular employee
who performs tasks usually necessary and desirable to the usual trade of Auto Bus.
2. The Court ruled in affirmative. Being a regular employee, he has the right to claim service
incentive leave pay under Article 95 of the Labor Code.

Songco vs. NLRC

G.R. No. L-50999 March 23, 1990
FACTS:
Private respondent F.E Zuellig (Zuellig) filed with the Department of Labor an application
seeking clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and
Amancio Manuel (petitioners) allegedly on the ground of retrenchment due to financial losses,
which was seasonably opposed by petitioners alleging that the company is not suffering from any
losses. They alleged further that they are being dismissed because of their membership in the
union. At the last hearing of the case, however, the parties agreed that the sole issue to be
resolved is the basis of the separation pay due to petitioners. The salesmen received monthly
salaries of at least P400.00 and commissions for every sale they made.
The CBA between Zuellig and the Union contained the following provision: Any employee,
who is separated from employment due to old age, sickness, death or permanent lay-off not due
to the fault of said employee shall receive from the company a retirement gratuity in an amount
equivalent to one (1) month's salary per year of service.
ISSUE:

Whether or not earned sales commissions allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay as included in the definition of
wage under Article 97(f) of the Labor Code.
HELD:
Yes. It is important to note that the SC resolved that the words wages, pay and salary have
the same meaning. In the issue of whether commission should be included in the computation of
their separation pay, it is proper to define first commission. Blacks Law Dictionary defined
commission as the recompense, compensation or reward of an agent, salesman, executor,
trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the work of a salesman
and the reason for such type of remuneration for services rendered demonstrate clearly that the
commission are part of petitioners wage and salary.
We take judicial notice of the fact that some salesman do not received any basic salary but
depend on commissions and allowances or commissions alone, although an employer-employee
relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite view that
commissions, do not form part of wage or salary, then, in effect, We will be saying that this kind
of salesmen do not receive any salary and therefore, not entitled to separation pay in the event of
discharge from employment.
Additionally, in Soriano v. NLRC, et al. the SC held that: The commissions also claimed by
petitioner ('override commission' plus 'net deposit incentive') are not properly includible in such
base figure since such commissions must be earned by actual market transactions attributable to
petitioner. Applying this by analogy, since the commissions in the present case were earned by
actual market transactions attributable to petitioners, these should be included in their separation
pay.
Article 97(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, piece, or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered, and includes the fair and
reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair reasonable value' shall not include
any profit to the employer or to any person affiliated with the employer.
The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that
"all doubts in the implementation and interpretation of the provisions of the Labor Code
including its implementing rules and regulations shall be resolved in favor of labor" and Article
1702 of the Civil Code which provides that "in case of doubt, all labor legislation and all labor

contracts shall be construed in favor of the safety and decent living for the laborer.

Millares Et. Al, vs. NLRC

Facts:
Petitioners were employees of Paper Industries Corporation of the Philippines (PICOP) in Bislig,
Surigao del Sur, they occupied the position of Technical Staff, Unit Manager, Section Manager,
Department Manager, Division Manager and Vice President in the mill site of respondent. In
1992 PICOP suffered a major financial setback brought about by the joint impact of restrictive
government regulations on logging and the economic crisis. To avert further losses, it undertook
a retrenchment program and terminated the services of petitioners. Accordingly, petitioners
received separation pay computed at the rate of one (1) month basic pay for every year of
service. Believing that the allowances they allegedly regularly received on a monthly basis
during their employment should have been included in the computation thereof they lodged a
complaint for separation pay differentials
The allowances in question pertained to the following
1. Staff/Manager's Allowance
Respondent PICOP provides free housing facilities to supervisory and managerial employees
assigned in Bislig. The privilege includes free water and electric consumption. Owing however
to shortage of such facilities, it was constrained to grant Staff allowance instead to those who live
in rented houses outside but near the vicinity of the mill site. But the allowance ceases whenever
a vacancy occurs in the company's housing facilities. The former grantee is then directed to fill
the vacancy. For Unit, Section and Department Managers, respondent PICOP gives an additional
amount to meet the same kind of expenses called Manager's allowance.
2. Transportation Allowance
To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for company
vehicles and to stabilize company vehicle requirements it grants transportation allowance to key
officers and Managers assigned in the mill site who use their own vehicles in the performance of
their duties. It is a conditional grant such that when the conditions no longer obtain, the privilege
is discontinued. The recipients of this kind of allowance are required to liquidate it by submitting
a report with a detailed enumeration of expenses incurred.
3. Bislig Allowance
The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig on
account of the hostile environment prevailing therein. But once the recipient is transferred
elsewhere outside Bislig, the allowance ceases.

Applying Art. 97, par. (f), of the Labor Code which defines "wage," the Executive Labor Arbiter
opined that the subject allowances, being customarily furnished by respondent PICOP and
regularly received by petitioners, formed part of the latter's wages. Thus respondent PICOP was
ordered on 28 April 1994 to pay petitioners Four Million Four Hundred Eighty-One Thousand
Pesos P(4,481,000.00) representing separation pay differentials plus ten per cent (10%) thereof
as attorney's fees.
The National Labor Relations Commission (NLRC) did not agreed with the view of the
Executive Labor Arbiter and aside the assailed decision by decreeing that the said allowances did
not form part of the salary base used in computing separation pay.
Issue:
Whether or not the allowances regularly received by the petitioners should have been included in
the computation for their separation pay?
Held:
when an employer customarily furnishes his employee board, lodging or other facilities, the fair
and reasonable value thereof, as determined by the Secretary of Labor and Employment, is
included in "wage."
"Customary" is founded on long-established and constant practice connoting regularity. The
receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and
forming part of salary because the nature of the grant is a factor worth considering. We agree
with the observation of the Office of the Solicitor General that the subject allowances were
temporarily, not regularly, received by petitioners because
In the case of the housing allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing
allowance is discontinued . . . .
On the other hand, the transportation allowance is in the form of advances for actual
transportation expenses subject to liquidation . . . given only to employees who have personal
cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig,
Surigao del Norte. Once the officer is transferred outside Bislig, the allowance stops. 16
We add that in the availment of the transportation allowance, respondent PICOP set another
requirement that the personal cars be used by the employees in the performance of their duties.
When the conditions for availment ceased to exist, the allowance reached the cutoff point. The
finding of the NLRC along the same line likewise merits concurrence, i.e., petitioners'
continuous enjoyment of the disputed allowances was based on contingencies the occurrence of
which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus

Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term
as including articles or services for the benefit of the employee or his family but excluding tools
of the trade or articles or service primarily for the benefit of the employer or necessary to the
conduct of the employer's business. The Staff/Manager's allowance may fall under "lodging" but
the transportation and Bislig allowances are not embraced in "facilities" on the main
consideration that they are granted as well as the Staff/Manager's allowance for respondent
PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.
That the assailed allowances were for the benefit and convenience of respondent company was
supported by the circumstance that they were not subjected to withholding tax.
Petitioners' allowances do not represent such fair and reasonable value as determined by the
proper authority simply because the Staff/Manager's allowance and transportation allowance
were amounts given by respondent company in lieu of actual provisions for housing and
transportation needs whereas the Bislig allowance was given in consideration of being assigned
to the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part
of petitioners' wages.
separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a
retrenched employee should be computed based not only on the basic salary but also on the
regular allowances that the employee had been receiving. But in view of the previous discussion
that the disputed allowances were not regularly received by petitioners herein, there was no
reason at all for petitioners to resort to the above cases.

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON vs.NATIONAL

LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ, EDGARDO
ZUIGA and DANILO CAETE
G.R. No. 172161, March 2, 2011
Facts:
* Sometime in 1996, and January 1997: Roldan Lopez and Danilo Caete, and Edgardo Zuiga
were hired by petitioner Lagon as apprentice or trainee cable/lineman. The three were paid the
full minimum wage and other benefits but since they were only trainees, they did not report for
work regularly but came in as substitutes to the regular workers or in undertakings that needed
extra workers to expedite completion of work.
* After their training, Zuiga, Caete and Lopez were engaged as project employees by the
petitioners in their Islacom project in Bohol from March 15, 1997 until December 1997. Upon
the completion of their project, their employment was also terminated. Private respondents

received the amount of P145.00, the minimum prescribed daily wage for Region VII.
* Minimum wage increased from P145 to P150 in July 1997 by the Regional Wage Board
(RWB) and in October of the same year, the latter was increased to P155.00.
* Sometime in March 1998 until late Sept. 1998: Zuiga and Caete were engaged again by
Lagon as project employees for its PLDT Antipolo, Rizal project. For this project, Zuiga and
Caete received only the wage of P145.00 daily. (Prescribed wage for Rizal at that time was
P160.00)
* Sometime in late November 1998: private respondents re-applied in the Racitelcom project of
Lagon in Bulacan. Zuiga and Caete were re-employed. Lopez was also hired for the said
specific project. They received the wage of P145.00. Again, after the completion of their project
in March 1999, private respondents went home to Cebu City.
* On May 21, 1999: Private respondents worked with Lagons project in Camarin, Caloocan City
with Furukawa Corporation as the general contractor. Expiration of contract: February 28, 2000,
the period of completion of the project. From May 21, 1997-December 1999, private respondents
received the wage of P145.00. (Minimum prescribed rate for Manila was then P198.00). In
January to February 28, the three received the wage of P165.00. (The existing rate at that time
was P213.00).
* The Camarin project was not completed on the scheduled date of completion due to delay of
delivery of materials. Faced with economic problems, Lagon was constrained to cut down the
overtime work of its workers. Lagon refused to allow respondents to work overtime rather told
them that if they insist, they would have to go home at their own expense and that they would not
be given anymore time nor allowed to stay in the quarters. This prompted private respondents to
leave their work and went home to Cebu.
* March 3, 2000: Private respondents filed a complaint for illegal dismissal, non-payment of
wages, holiday pay, 13th month pay for 1997 and 1998 and service incentive leave pay as well as
damages and attorneys fees.
Petitioners: They admitted employment of private respondents but claimed that the latter were
only project employees and that their services were merely engaged for a specific project or
undertaking and the same were covered by contracts duly signed by private respondents.
Petitioners further alleged that the food allowance of P63.00 per day as well as private
respondents allowance for lodging house, transportation, electricity, water and snacks allowance
should be added to their basic pay, amounting to higher wage rate than that prescribed in Rizal
and Manila.
Findings of Labor Arbiter Reynoso Belarmino:
1) As to status of respondents employment - private respondents were regular employees
because they were repeatedly hired by petitioners and they performed activities which were
usual, necessary and desirable in the business or trade of the employer.

2) On underpayment of wages - Private respondents were underpaid. The free board and lodging,
electricity, water, and food enjoyed by them could not be included in the computation of their
wages because these were given without their written consent.
3) On illegal dismissal Private respondents were not illegally dismissed. Their act of going
home showed an act of indifference when petitioners decided to prohibit overtime work.
March 31, 2004: NLRC affirmed the findings of the Labor Arbiter.
CA: Affirmed the findings that the private respondents were regular employees; The CA also
stated that the failure of petitioners to comply with the simple but compulsory requirement to
submit a report of termination to the nearest Public Employment Office every time private
respondents employment was terminated was proof that the latter were not project employees
but regular employees; The CA likewise found that the private respondents were underpaid. The
CA added that the private respondents were entitled to 13th month pay; The CA also agreed with
the NLRC that there was no illegal dismissal. The CA opined that it was the petitioners
prerogative to grant or deny any request for overtime work and that the private respondents act
of leaving the workplace after their request was denied was an act of abandonment. In modifying
the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez did not
work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in computing
the differentials for the period January and February 2000, the CA disagreed in the award of
differentials based on the minimum daily wage of P223.00, as the prevailing minimum daily
wage then was only P213.00.
Issue: Whether NLRC committed a serious error in law in awarding wage differentials to the
private complainants on the bases of mere technicalities, that is, for lack of written conformity
and lack of notice to the DOLE.
Ruling: The Court finds no merit in the petition. As a general rule, on payment of wages, a party
who alleges payment as a defense has the burden of proving it. Specifically with respect to labor
cases, the burden of proving payment of monetary claims rests on the employer, the rationale
being that the pertinent personnel files, payrolls, records, remittances and other similar
documents which will show that overtime, differentials, service incentive leave and other
claims of workers have been paid are not in the possession of the worker but in the custody
and absolute control of the employer.
In the instant case, petitioners failed to present any evidence, such as payroll or payslips, to
support their defense of payment. Private respondents, on the other hand, are entitled to be paid
the minimum wage, whether they are regular or non-regular employees. Section 3, Rule VII of
the Rules to Implement the Labor Code specifically enumerates those who are not covered by the
payment of minimum wage and project employees are not among them.
On whether the value of the facilities should be included in the computation of the "wages"
received by private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that
an employer may provide subsidized meals and snacks to his employees provided that the
subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In such

cases, the employer may deduct from the wages of the employees not more than 70% of the
value of the meals and snacks enjoyed by the latter, provided that such deduction is with the
written authorization of the employees concerned. Moreover, before the value of facilities can be
deducted from the employees wages, the following requisites must all be attendant: first, proof
must be shown that such facilities are customarily furnished by the trade; second, the provision
of deductible facilities must be voluntarily accepted in writing by the employee; and finally,
facilities must be charged at reasonable value. Mere availment is not sufficient to allow
deductions from employees wages.
SLL failed to present present any company policy or guideline showing that provisions for meals
and lodging were part of the employees salaries. It also failed to provide proof of the employees
written authorization, much less show how they arrived at their valuations.
Facilities vs. Supplements
"Supplements," constitute extra remuneration or special privileges or benefits given to or
received by the laborers over and above their ordinary earnings or wages. "Facilities," on the
other hand, are items of expense necessary for the laborer's and his family's existence and
subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer
would spend and pay for them just the same. The Court held that the food and lodging, or the
electricity and water allegedly consumed by private respondents in this case were not facilities
but supplements.
Petition is denied. The Court sustains the deletion of the award of differentials with respect to
respondent Roldan Lopez. As correctly pointed out by the CA, he did not work for the project in
Antipolo.

AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, vs.

AMERICAN WIRE AND CABLE CO., INC. and THE COURT OF APPEALS
[G.R. No. 155059. April 29, 2005]
FACTS:

American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and
cables. There are two unions in this company, the American Wire and Cable Monthly-Rated
Employees Union (Monthly-Rated Union) and the American Wire and Cable Daily-Rated
Employees Union (Daily-Rated Union).

On 16 February 2001, an original action was filed before the NCMB of the Department of Labor
and Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the
private respondent, without valid cause, suddenly and unilaterally withdrew and denied certain

benefits and entitlements which they have long enjoyed. These are the following:
a.

Service Award;

b.

35% premium pay of an employees basic pay for the work rendered during Holy Monday,

Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29;

c.

Christmas Party; and

d.

Promotional Increase.

A promotional increase was asked by the petitioner for fifteen (15) of its members who were
given or assigned new job classifications. According to petitioner, the new job classifications
were in the nature of a promotion, necessitating the grant of an increase in the salaries of the said
15 members.

On 25 September 2001, a Decision[5] was rendered by Voluntary Arbitrator Angel A. Ancheta in

favor of the private respondent.

A motion for reconsideration was filed by both unions[7] where they alleged that the Voluntary
Arbitrator manifestly erred in finding that the company did not violate Article 100 of the Labor
Code, as amended, when it unilaterally withdrew the subject benefits, and when no promotional
increase was granted to the affected employees. It was denied.

An appeal was made with the CA but it was also denied.

PETITIONERS CONTENTION: The petitioner submits that the withdrawal of the private
respondent of the 35% premium pay for selected days during the Holy Week and Christmas
season, the holding of the Christmas Party and its incidental benefits, and the giving of service
awards violated Article 100 of the Labor Code. The grant of these benefits was a customary
practice that can no longer be unilaterally withdrawn by private respondent without the tacit
consent of the petitioner. The benefits in question were given by the respondent to the petitioner
consistently, deliberately, and unconditionally since time immemorial.
RESPONDENTS CONTENTION: On respondent companys Revenues and Profitability
Analysis for the years 1996-2000, the petitioner insists that since the former was unaudited, it
should not have justified the companys sudden withdrawal of the benefits/entitlements. The
normal and/or legal method for establishing profit and loss of a company is through a financial
statement audited by an independent auditor.
ISSUE: whether or not private respondent is guilty of violating Article 100 of the Labor Code, as
amended, when the benefits/entitlements given to the members of petitioner union were
withdrawn.
HELD: NO.

ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS.

Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.

In the case of Producers Bank of the Philippines v. NLRC: A bonus is an amount granted and
paid to an employee for his industry and loyalty which contributed to the success of the

employers business and made possible the realization of profits.

Based on the foregoing pronouncement, it is obvious that the benefits/entitlements subjects of the
instant case are all bonuses which were given by the private respondent out of its generosity and
munificence.

Since they are above what is strictly due to the members of petitioner-union, the granting of the
same was a management prerogative, which, whenever management sees necessary, may be
withdrawn, unless they have been made a part of the wage or salary or compensation of the
employees.

For a bonus to be enforceable, it must have been promised by the employer and expressly
agreed upon by the parties,[30] or it must have had a fixed amount[31] and had been a long
and regular practice on the part of the employer

The benefits/entitlements in question were never subjects of any express agreement between the
parties. They were never incorporated in the Collective Bargaining Agreement (CBA). As
observed by the Voluntary Arbitrator, the records reveal that these benefits/entitlements have not
been subjects of any express agreement between the union and the company, and have not yet
been incorporated in the CBA.

The Christmas parties and its incidental benefits, and the giving of cash incentive together with
the service award cannot be said to have fixed amounts. What is clear from the records is that
over the years, there had been a downtrend in the amount given as service award.

The additional 35% premium pay for work rendered during selected days of the Holy Week and
Christmas season cannot be held to have ripened into a company practice that the petitioner
herein have a right to demand.

TSPIC CORPORATION, petitioner, vs.TSPIC EMPLOYEES UNION

G.R. No. 163419

February 13, 2008

FACTS:

TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits
to serve the communication, automotive, data processing, and aerospace industries. Respondent
TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of
the rank-and-file employees of TSPIC.

In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)8 for the
years 2000 to 2004. The CBA included a provision on yearly salary increases starting January
2000 until January 2002.

The CBA also provided that employees who acquire regular employment status within the year
but after the effectivity of a particular salary increase shall receive a proportionate part of the
increase upon attainment of their regular status.

Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital
Region, issued Wage Order No. NCR-0810 (WO No. 8) which raised the daily minimum wage
from PhP 223.50 to PhP 250 effective November 1, 2000.

On various dates during the last quarter of 2000, the above named 17 employees attained regular
employment11and received 25% of 10% of their salaries as granted under the provision on
regularization increase under Article X, Sec. 2 of the CBA.

In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result,
the nine employees (first group), who were senior to the above-listed recently regularized
employees, received less wages.

On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective,
TSPICs Human Resources Department notified 24 employees that due to an error in the
automated payroll system, they were overpaid and the overpayment would be deducted from
their salaries in a staggered basis, starting February 2001.

TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or
not the acts of the management in making deductions from the salaries of the affected employees
constituted diminution of pay.

On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral
deduction made by TSPIC violated Art. 10013 of the Labor Code.

TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21,
2001.

Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R.
SP No. 68616. The appellate court, through its October 22, 2003 Decision, dismissed the petition
and affirmed in toto the decision of the voluntary arbitrator.
ISSUE: Does the TSPICs decision to deduct the alleged overpayment from the salaries of the
affected members of the Union constitute diminution of benefits in violation of the Labor Code?
HELD: NO.

According to TSPIC, it is specifically provided in the CBA that "the salary/wage increase for the
year 2001 shall be deemed inclusive of the mandated minimum wage increases under future
wage orders that may be issued after Wage Order No. 7." The Union, on the other hand, insists
that the "crediting" provision of the CBA finds no application in the present case, since at the
time WO No. 8 was issued, the probationary employees (second group) were not yet covered by
the CBA, particularly by its crediting provision.

Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective
January 1, 2001, all employees on regular status and within the bargaining unit on or before said
date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as
of December 31, 2000. The 12% salary increase is granted to all employees who (1) are regular

employees and (2) are within the bargaining unit.

Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the
increase in salary granted under WO No. 7 and the correction of the wage distortion for
November 1999.

The last paragraph, on the other hand, states the specific condition that the wage/salary increases
for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases
under future wage orders, that may be issued after WO No. 7, and shall be considered as
correction of the wage distortions that may be brought about by the said future wage orders.
Thus, the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage
orders after WO No. 7.

Paragraph (b) is a general provision which allows a salary increase to all those who are qualified.
It, however, clashes with the last paragraph which specifically states that the salary increases for
the years 2001 and 2002 shall be deemed inclusive of wage increases subsequent to those
granted under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting
provisions should be harmonized to give effect to all.21 Likewise, when general and specific
provisions are inconsistent, the specific provision shall be paramount to and govern the general
provision.22 Thus, it may be reasonably concluded that TSPIC granted the salary increases under
the condition that any wage order that may be subsequently issued shall be credited against the
previously granted increase. The intention of the parties is clear: As long as an employee is
qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as
long as an employee is granted the 12% increase, the amount shall be credited against any wage
order issued after WO No. 7.

Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed
by the employees. There is diminution of benefits when it is shown that: (1) the grant or benefit
is founded on a policy or has ripened into a practice over a long period; (2) the practice is
consistent and deliberate; (3) the practice is not due to error in the construction or application of
a doubtful or difficult question of law; and (4) the diminution or discontinuance is done
unilaterally by the employer.
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error.
This error was immediately rectified by TSPIC upon its discovery. We have ruled before that an
erroneously granted benefit may be withdrawn without violating the prohibition against nondiminution of benefits.

LEPANTO CERAMICS, INC V LEPANTO CERAMICS EMPLOYEES ASSOCIATION

Gr no. 180866 March 2, 2010
FACTS:
In December 1988, petitioners gave a 3,000Php bonus to its employees. In September 1999,
petitioner and respondent association entered into a Collective Bargaining agreement which
provided for the grant of a Christmas gift package/bonus to the members of the employee
association. The Christmas bonus was one enumerated existing benefit, practice of traditional
rights which shall remain in full force and effect.
In the succeeding years of 1999, 2000 and 2001 the bonus was not in cash but instead petitioner
gave each of the members Tile redemption certificates equivalent to 3,000Php. IN the year 2002,
the petitioner gave a year-end cash benefit of 600Php and offered a cash advance to interested
employees equivalent to 1 month salary payable in 1 year.
They failed to amicably settle the dispute and led them to file a notice of strike for violation of
the CBA in which the case was placed under preventive mediation and after such efforts to
conciliate failed, thecase was referred to the voluntary arbiter who ruled in favor of the
Employees association. It denied the motion for reconsideration by the company at which case
they elevated the case to the Court of Appeals who likewise affirmed the decision of the labor
arbiter and as a result the case reached the Supreme Court.
Petitioner argued (Lepanto Ceramics, Inc)

nonpayment of the 2002 Christmas bonus had no basis as it was not a demandable and
enforceable obligation

the extra compensation was based on the companys available resources meaning that the
employees are entitled to the bonus only when the company has profits

Petitioner claimed that was debt ridden having incurred losses amounting to 2.7 billion by the
time the CBA was signed

The grant of 1 month salary advance was meant to show the companys desire to help its

employees despite its financial situation

They claimed that the Christmas gift/bonus refers to alternative benefits

Even if the CBA contained an unconditional obligation to grant the bonus to the respondent
association, the economic times had already legally released it from such obligation
Respondents argued that the giving of the Christmas gift/bonus has become a traditional
practice of the company
ISSUE
WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE RULING OF
THE VOLUNTARY ARBITRATOR THAT THE PETITONER IS OBLIGED TO GIVE THE
MEMBERS OF THE RESPONDENT ASSOCIATION A CHRISTMAS BONUS IN THE
AMOUN OF 3000PHP IN 2002
HELD
The Supreme Court upheld the ruling of the voluntary arbitrator and the Court of appeals.
Judgment in favor of the respondent Association.
Generally, A bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable it must have been promised by the employer and expressly agreed upon by the
parties. Given that the bonus is integrated in the CBA, it partakes of the nature of a demandable
obligation. As a result the Christmas bonus has become more than just an act of generosity on the
part of the petitioner but a contractual obligation it has undertaken.
A familiar and fundamental doctrine in labor law is that the CBA is the law between the parties
and they are obliged to comply with its provisions. The provision of the CBA provides for the
giving of a Christmas gift/bonus without qualification. The records show that the petitioner failed
to show that the bonus was dependent on any condition. If the petitioner and respondent
association intended that the 3,000 bonus wound be dependent on the company earning such
intention should have been expressed in the CBA.
Petitioner cannot insist on business losses as a basis for disregarding its undertaking. It is
manifestly clear that the petitioner was very much aware of the imminence and possibility of
business losses owing to the 1997 financial crisis (amounting to 14,347,549.00Php) yet it gave a
3,000 bonus to the members of the association. In 1999, the company have yet to favorably
affect the operations of the company (a loss of 346,925,733.00Php) but still entered into the
CBA with the Association. Even when the petitioner continued to incur losses in 2000 and
2001, they still honored the CBA and gave 3,000 to the members of the respondent
association
Business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The
rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer (art. 100). The Principle of
non-diminution of benefits is founded on the constitutional mandate to protect the rights of
workers and to promote their welfare and to afford labor full protection

Petitioners remedy lied not in the courts invalidation of the provisions but the parties
clarification of the same in subsequent CBA negotiations under Article 253 of the Labor
code.

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. v. EASTERN TELECOMS

EMPLOYEES UNION
G.R. No. 185665 February 8, 2012
Facts: Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business
of providing telecommunications facilities, particularly leasing international date lines or
circuits, regular landlines, internet and data services, employing approximately 400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the
companys rank and file employees with a strong following of 147 regular members. It has an
existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a
Side Agreement signed on September 3, 2001.
In essence, the labor dispute was a spin-off of the companys plan to defer payment of the 2003
14th, 15th and 16thmonth bonuses sometime in April 2004. The companys main ground in
postponing the payment of bonuses is due to allege continuing deterioration of companys
financial position which started in the year 2000. However, ETPI while postponing payment of
bonuses sometime in April 2004, such payment would also be subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period
2001-2004 between ETPI and ETEU which stated as follows: 4. Employment Related Bonuses.
The Company confirms that the 14th, 15th and 16th month bonuses (other than 13th month pay)
are granted. The union strongly opposed the deferment in payment of the bonuses by filing a
preventive mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint
is to determine the date when the bonus should be paid. In the conference held at the NCMB,
ETPI reiterated its stand that payment of the bonuses would only be made in April 2004 to which
date of payment, the union agreed. Thus, considering the agreement forged between the parties,
the said agreement was reduced to a Memorandum of Agreement. The union requested that the
President of the company should be made a signatory to the agreement, however, the latter
refused to sign. In addition to such a refusal, the company made a sudden turnaround in its
position by declaring that they will no longer pay the bonuses until the issue is resolved through
compulsory arbitration. The companys change in position was contained in a letter dated April

14, 2004 written to the union by Mr. Sonny Javier, Vice-President for Human Resources and
Administration, stating that the deferred release of bonuses had been superseded and voided due
to the unions filing of the issue to the NCMB on July 18, 2003. He declared that until the
matter is resolved in a compulsory arbitration, the company cannot and will not pay any
bonuses to any and all union members.
Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for
failure of ETPI to pay the bonuses in gross violation of the economic provision of the existing
CBA. On May 19, 2004, the Secretary of Labor and Employment, finding that the company is
engaged in an industry considered vital to the economy and any work disruption thereat will
adversely affect not only its operation but also that of the other business relying on its services,
certified the labor dispute for compulsory arbitration pursuant to Article 263 (q) of the Labor
Code as amended. Acting on the certified labor dispute, a hearing was called on July 16, 2004
wherein the parties have submitted that the issues for resolution are (1) unfair labor practice and
(2) the grant of 14th, 15th and 16th month bonuses for 2003, and 14th month bonus for 2004.
Thereafter, they were directed to submit their respective position papers and evidence in support
thereof after which submission, they agreed to have the case considered submitted for decision.
On April 28, 2005, the NLRC issued its Resolution dismissing ETEUs complaint and held that
ETPI could not be forced to pay the union members the 14th, 15th and 16th month bonuses for
the year 2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these
additional benefits was basically a management prerogative, being an act of generosity and
munificence on the part of the company and contingent upon the realization of profits.
In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and
2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its
employees without qualification or condition. It also found that the grant of said bonuses has
already ripened into a company practice and their denial would amount to diminution of the
employees benefits.
Issue: Whether the members of ETEU are entitled to the payment of 14th, 15th and 16th month
bonuses for the year 2003 and 14th month bonus for year 2004.
Held: From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the
recipient has no right to demand as a matter of right. The grant of a bonus is basically a
management prerogative which cannot be forced upon the employer who may not be obliged to
assume the onerous burden of granting bonuses or other benefits aside from the employees basic
salaries or wages. A bonus, however, becomes a demandable or enforceable obligation when it is
made part of the wage or salary or compensation of the employee.
In this case, there is no dispute that Eastern Telecommunications Phils., Inc. and Eastern Telecom
Employees Union agreed on the inclusion of a provision for the grant of 14th, 15th and 16th
month bonuses in the 1998-2001 CBA Side Agreement, as well as in their 2001-2004 CBA Side
Agreement, which contained no qualification for its payment. There were no conditions specified
in the CBA Side Agreements for the grant of the bonus. There was nothing in the relevant
provisions of the CBA which made the grant of the bonus dependent on the company's financial

standing or contengient upon the realization of profits. There was also no statement that if the
company derives no profits, no bonus will be given to the employees. In fine, the payment of
these bonuses was not related to the profitability of business operations. Consequently, the giving
of the subject bonuses cannot be peremptorily withdrawn by Eastern Telecommunications Phils.,
Inc. without violating Article 100 of the Labor Code, which prohibits the unilateral elimination
or diminuition of benefits by the employer. The rules is settled that any benefit and supplement
being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by
the employer.

GSIS v. NLRC; Banlasan et al.

Nov. 17, 2010
Facts:
Private respondents Banlasan et al. are security guards employed by DNL Security Agency (DNL
Security). By virtue of a contract entered into between DNL Security and petitioner GSIS on
May 1, 1978, the respondents were assigned to petitioner GSIS Tacloban office.
On February 1993, the service contract between DNL Security and petitioner was terminated.
However, the respondents, as instructed by DNL Security, continued to report to work without
pay, up until they were eventually terminated from employment by petitioner.
Respondents filed a complaint with the NLRC against DNL Security and petitioner GSIS for
illegal dismissal, separation pay, salary differential, 13th month pay, and payment of unpaid
salary. The Labor Arbiter rendered a decision finding that there was no illegal dismissal of
complainants (because the service contract was already terminated), but ordering DNL Security
to pay the separation pay and the unpaid wages of complainants from February 1993 to April
1993 (because GSIS voluntarily received services from respondents despite the termination of
the contract). Additionally, petitioner was considered as an indirect employer of respondents, and
was made solidary liable with DNL Security to pay the salary differential and 13th month pay.
Petitioner filed a petition for certiorari before the Court of Appeals, but the CA affirmed the
Labor Arbiter's decision in toto.
Petitioner GSIS argued that they should not be held liable for payment of monetary claims
because DNL Security, and not GSIS, is the employer of the respondent security guards.
Issue:
Whether or not petitioner GSIS, who contracted the services of DNL Security Agency, is liable
for the monetary claims of the contractor's employees.
Held:

Yes. While the petitioner was not held liable for payment of separation pay, the Court ruled that
petitioner GSIS is solidary liable with DNL Security Agency to pay respondents salary
differential and 13th month pay, including the unpaid wages from February 1993 until April 20,
1993. The fact that there is no actual and direct employer-employee relationship between
petitioner and respondents does not absolve the former from liability for the latters monetary
claims. When petitioner contracted DNL Securitys services, petitioner became an indirect
employer of respondents, pursuant to Article 107 of the Labor Code.
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work, task, job or
project.

After DNL Security failed to pay respondents the correct wages and other monetary benefits,
petitioner, as principal, became jointly and severally liable, as provided in Articles 106 and 109
of the Labor Code.
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the formers work, the employees of the contractor and of
the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him. x x x.
xxxx
ART. 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall be considered as direct employers.

Alviado et al. v. P&G and Promm-Gem, Inc.

June 6, 2011
Facts:
The Court rendered a decision on March 9, 2010 declaring: a) that Promm-Gem, Inc. (PrommGem) is a legitimate independent contractor; (b) that Sales and Promotions Services (SAPS) is
a labor-only contractor and consequently its employees are considered employees of Procter
& Gamble Phils., Inc. (P&G); (c) that Promm-Gem is guilty of illegal dismissal; (d) that

SAPS/P&G is likewise guilty of illegal dismissal; (e) that petitioners are entitled to
reinstatement; and (f) that the dismissed employees of SAPS/P&G are entitled to moral damages
and attorneys fees there being bad faith in their dismissal.
P&G contended that the court should have applied the four-fold test in determining whether
SAPS is a legitimate independent contractor or a labor-only contractor, and argued that SAPS
passed the control test and therefore SAPS is the employer of the petitioners and not P&G.
Issues:
a) Whether or not the Court erred in not applying the four-fold test in determining whether
SAPS is a legitimate independent contractor or a labor-only contractor.
b) Whether or not SAPS has substantial capital to be considered as a legitimate independent
contractor.
Held:
a) No. There is no basis for P&G's claim that the Court erred in not applying the four-fold test,
particularly the control test in determining whether SAPS is a legitimate independent
contractor or a labor-only contractor. The applicable rules are Article 106 of the Labor Code
and Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18-02.
Article 106 defines labor-only contracting, viz:
There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed
by him.
On the same vein, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor
Code, as amended by Department Order No. 18-02, pertinently provides:
Section 5. Prohibition against labor-only contracting. Labor only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal, and ANY of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are

performing activities which are directly

related to the main business of the principal; OR

ii) [T]he contractor does not exercise the right to control over the performance of the work
of the contractual employee.

Therefore, the control test is merely one of the factors to consider. The above-provision states
that labor-only contracting exists when any of the two elements is present. In the March 9, 2010
Decision of the Court, it was established that SAPS has no substantial capitalization and it was
performing merchandising and promotional activities which are directly related to P&G's
business. Since SAPS met one of the requirements, it was enough basis for us to hold that it is a
labor-only contractor. Consequently, its principal, P&G, is considered the employer of its
employees. This is pursuant to the ruling in Aklan v. San Miguel Corporation where the Court
held that [a] finding that a contractor is a labor-only contractor, as opposed to
permissible job contracting, is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor, and the
labor-only contractor is considered as a mere agent of the principal, the real employer.
b) No. Prom-Gem has proven that it has an authorized capital stock of P1 million, a paid-in
capital, or capital available for operations, of P500,000.00 as of 1990, long term assets worth
P432,895.28 and current assets of P719,042.32, and other evidence that proves substantial
investment which relates to the work to be performed. On the other hand, the Articles of
Incorporation of SAPS shows that it has a paid-in capital of only P31,250. There is no other
evidence presented to show how much its working capital and assets are. Furthermore, there is
no showing of substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission, the Court held that [w]ith the
current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to
P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an
independent contractor. Applying the same rationale to the present case, it is clear that SAPS
having a paid-in capital of only P31,250 has no substantial capital.

Mandaue Galleon Trade Inc. v. Andales et al.

G.R. No. 159668 March 7, 2008
Facts:

The petitioners are business entities engaged in rattan furniture manufacturing.

Respondent filed a complaint with the LA for illegal dismissal and non-payment of 13th month
pay and service incentive leave pay.

Allegation: Complainants

They were hired as weavers, grinders, sanders and finishers by MGTI. The Finishing Department
were transferred to a contractor, the other departments were told that there was no work available
for them. They were dismissed without notice and just cause.

They further alleged that they are regular employees of MGTI.

Allegation: MGTI

There is no employer-employee relationship; MGTI claimed that they are workers of

independent contractors whose services are engaged temporarily and seasonally.

Decision: LA

LA rendered a decision holding that complainants are regular piece-rate employees of MGTI.

They independent contractors were not properly identified

There was no dismissal but only a claim for separation.

Appeal: Both parties -> NLRC

Decision: NLRC

Affirmed the LAs finding of employer-employee relationship. It held that labor-only contracting
and not job contracting was present.

However it did not agree with the LAs fins\ding that there was no dismissal. It held that the
complainants were constructively dismissed when they were temporarily transefered to
contractor to evade payment of separation pay.

MoR: Both parties

Denied

Certiorari: Petirioners -> CA

Decision: CA

Affirmed NLRC, alleged contractors are not independent contractors but labor-only contractors.

MoR: Petitioners ->CA

Decision: CA

Amended decision, reduced separation pay

Petition for Review: Petitioners

MoR: Respondent -> CA

Assailing decision of CA
Issue:
Whether or not the petitioners contractors are independent contractors
Ruling:

The petitioners claim that their contractors are independent contractors and therefore, a case of
permissible job contracting is without basis.

The work of the respondents were directly related to MGTIs principal business

MGTI failed to prove that its contractors had substantial capital

 The intention of law in prohibiting labor-only contracting is to prevent employers from

circumventing labor law intended to protect employees.

Spic N Span Services Corporation v. Paje et al.

G.R. No. 174084 August 25, 2010
Facts:
SNSs business is to supply manpower services to its client for a fee. Swift Foods Inc. and SNS have
a contract to promote Swift products.
Complainants work as Deli/Promo Girls of Swift products
Complainants filed complaints for illegal dismissal against SNS and Swift before the NLRC
The LA ordered the parties to submit their position papers
Allegations: Complainants
There were employees of Swift and SNS
Their services were terminated without cause and without due process
Allegations: Swift
Complainants were employees of SNS, not of Swift
It alleged that it entered into an independent labor contract with SNS for the promotion of its
products
Decision: LA
SNS is an agent of Swift, the LA ordered SNS and Swift to jointly and severally pay two of the
complainants their retirement pay and service incentive leave pay.
The claims of the other complainants (Paje et al) were dismissed
Appeal: Both Swift and Complainants -> NLRC
Decision: NLRC
Denied complainants appeal for lack of merit
Dismissed the complaint against Swift and ordered SNS to pay the two complainants (agreed on a
settlement, their cases were thus closed)
MoR: Complainants (Paje et al) -> NLRC
Dismissed
Certiorari: Respondents -> CA
Alleged grave abuse of discretion by NLRC
Decision: CA

Found petition meritorious.

It concluded that SNS was merely an agent of SNS; thus, the latter should not be exempt from
liability.
MoR: SNS and Swift -> CA
Denied
Petition for Review on Certiorari: SNS
Issue:
Whether or not the relationship between Swift and SNS is categorized as job contracting
Ruling:

The court affirmed the findings of the CA.

SNS is considered merely an agent of Swift which does not exempt the latter from liability.
There is, therefore, a case of illegal dismissal perpetrated by a principal and its illegal contractoragent, being categorized as labor-only contracting.
The test to determine a job contracting relationship is whether the independent contractor has
contracted to do the work according to his own methods and without being subject to the
principals control except only as to the results, he has substantial capital, and he has assured the
contractual employees entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social and welfare benefits.

ART. 110
DEVELOPMENT BANK OF THE PHILIPPINES
v. NATIONAL LABOR RELATIONS COMMISSION and LEONOR A ANG
G.R. No. 108031 March 1, 1995
CASE DOCTRINE: A declaration of bankruptcy or a judicial liquidation must be present before
the workers preference may be enforced.
Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent
provisions of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of
the assets of the debtor is avoided.
The right of first preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference
of credit in their favor, a preference in application.
FACTS:
(Petitioner Development Bank of the Philippines (DBP)is the mortgagee of TPWII business.
Respondent NLRC is a quasi-judicial agency attached to the Department of Labor and
Employment (DOLE) that is mandated to adjudicate labor and management disputes involving
both local and overseas workers through compulsory arbitration and alternative modes of
dispute resolution; Private Respondent Leonor A. Angis an employee terminated from TPWII)

March 21, 1977 private respondent Leonor A. Ang started employment as Executive Secretary
with Tropical Philippines Wood Industries, Inc. (TPWII), a corporation engaged in the
manufacture and sale of veneer, plywood and sawdust panel boards. In 1982 she was promoted
to the position of Personnel Officer.

September 1983 petitioner Development Bank of the Philippines, as mortgagee of TPWII,

foreclosed its plant facilities and equipment. TPWII still continued its business operations
interrupted only by brief shutdowns for the purpose of servicing its plant facilities and
equipment.

In January 1986 petitioner took possession of the foreclosed properties. From then on the
company ceased its operations. As a consequence private respondent was on 15 April 1986
verbally terminated from the service.

December 14, 1987 aggrieved by the termination of her employment, private respondent filed
with the Labor Arbiter a complaint for separation pay, 13th month pay, vacation and sick leave
pay, salaries and allowances against TPWII, its General Manager, and petitioner.

LABOR ARBITER: found TPWII primarily liable to private respondent but only for her
separation pay and vacation and sick leave pay because her claims for unpaid wages and 13th
month pay were later paid after the complaint was filed.

-The General Manager was absolved of any liability. But with respect to petitioner, DBP was
held subsidiarily liable in the event the company failed to satisfy the judgment. The Labor
Arbiter rationalized that the right of an employee to be paid benefits due him from the properties
of his employer is superior to the right of the latter's mortgage, citing this Court's resolution in
PNB v. Delta Motor Workers Union.

November 16, 1992 public respondent National Labor Relations Commission affirmed the
ruling of the Labor Arbiter. 3
ISSUE: Is declaration of bankruptcy or judicial liquidation required before the workers
preference may be invoked under Art. 110 of the Labor Code?
HELD:
YES it is necessary. Art. 110 should not be treated apart from other laws but applied in
conjunction with the pertinent provisions of the Civil Code and the Insolvency Law to the extent
that piece-meal distribution of the assets of the debtor is avoided. Thus, public respondent NLRC
gravely abused its discretion in affirming the decision of the Labor Arbiter.
In the case decision of Development Bank of the Philippines v. Santos the court held that:
. . . a declaration of bankruptcy or a judicial liquidation must be present before the worker's
preference may be enforced.
Art. 110, as amended (amended by R.A. 6715 effective 21 March 1989) expanded theconcept
of "worker preference"to cover not only unpaid wages but also other monetary claims to
which even claims of the Government must be deemed subordinate.
The right to preference given to workers under Art. 110 cannot exist in any effective way prior to
the time of its presentation in distribution proceedings. In the present case, there is as yet no
declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be premature to
enforce the worker's preference.
Petitioner DBP anchors its claim on amortgage credit. A mortgage directly and immediately
subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment
of the obligation for whose security it was constituted (Article 2176, Civil Code). It creates a
real right which is enforceable against the whole world. It is a lien on an identified immovable
property, which a preference is not.
A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code
on classification of credits. The preference given by Article 110, when not falling within Article
2241 (6) and Article 2242 (3), of the Civil Code and not attached to any specific property, is all
ordinary preferred credit although its impact is to move it from second priority to first priority
in the order of preference established by Article 2244 of the Civil Code.
Petition is GRANTED. The decision of NLRC is SET ASIDE.

+NOTES ON CASE:
In the Development Bank of the Philippines v. Santos case:
In the event of insolvency, a principal objective should be to effect an equitable distribution of
the insolvents property among his creditors. To accomplish this there must first be some
proceeding where notice to all of the insolvent's creditors may be given and where the claims of
preferred creditors may be bindingly adjudicated. (De Barreto v. Villanueva, No. L-14938,
December 29, 1962, 6 SCRA 928).
The rationale therefore has been expressed in the recent case of DBP v. Secretary of Labor (G.R.
No. 79351, 28 November 1989):
A preference of credit bestows upon the preferred creditor an advantage of having his credit
satisfied first ahead of other claims which may be established against the debtor. Logically, it
becomes material only when the properties and assets of the debtors are insufficient to pay his
debts in full; for if the debtor is amply able to pay his various creditors in full, how can the
necessity exist to determine which of his creditors shall be paid first or whether they shall be
paid out of the proceeds of the sale (of) the debtor's specific property. Indubitably, the
preferential right of credit attains significance only after the properties of the debtor have been
inventoried and liquidated, and the claims held by his various creditors have been established
(Kuenzle & Sheriff (Ltd.) v. Villanueva, 41 Phil. 611 [1916]; Barretto v. Villanueva, G.R. No.
14938, 29 December 1962, 6 SCRA 928; Philippine Savings Bank v. Lantin, G.R. No. 33929, 2
September 1983, 124 SCRA 476).
Preference of Credit v. Lien (Development Bank of the Philippines v. NLRC)
Preference of Credit - applies only to claims which do not attach to specific properties.
Lien - creates a charge on a particular property.
**The right of first preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference
of credit in their favor, a preference in application.
It is a method adopted to determine and specify the order in which credits should be paid in the
final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor
In Republic v. Peralta:
Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees
for unpaid wages either upon all of the properties or upon any particular property owned by their
employer. Claims for unpaid wages do not therefore fall at all within the category of specially
preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent
that such claims for unpaid wages are already covered by Article 2241, number 6: "claims for
laborers: wages, on the goods manufactured or the work done;" or by Article 2242, number 3,
"claims of laborers and other workers engaged in the construction reconstruction or repair of

buildings, canals and other works, upon said buildings, canals and other works . . . . To the extent
that claims for unpaid wages fall outside the scope of Article 2241, number 6, and 22421 number
3, they would come within the ambit of the category of ordinary preferred credits under Article
2244.
On worker preference SC previous interpretation in Development Bank of the Philippines v.
Santos:
It (worker preference) will find application when, in proceedings such as insolvency, such unpaid
wages shall be paid in full before the "claims of the Government and other creditors" may be
paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their
claims ascertained and inventoried, and thereafter the preferences determined. In the course of
judicial proceedings which have for their object the subjection of the property of the debtor to the
payment of his debts or other lawful obligations. Thereby, an orderly determination of preference
of creditors' claims is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2,
1983, 124 SCRA 476); the adjudication made will be binding on all parties-in-interest since
those proceedings are proceedings in rem; and the legal scheme of classification, concurrence
and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved
in harmony.

32. ART. 113

SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN, and
HINRICH JOHANN SCHUMACHER v. MANUEL F. DIAZ
G.R. No. 185814 October 13, 2010
CASE DOCTRINE: Although management prerogative refers to the right to regulate all
aspects of employment, it cannot be understood to include the right to temporarily withhold
salary/ wages without the consent of the employee; Any withholding of an employees wages by
an employer may only be allowed in the form of wage deductions under the circumstances
provided in Art 113 of the Labor Code
FACTS:
(Petitioner SHS Perforated Materials, Inc.is a start-up corporation registered with the Philippine
Economic Zone Authority; Other Petitioners are both German nationals, Hartmannshenn
President ot SHS and Schumacher treasurer and one of the Board of Directors;Respondent
Manuel F. Diaz was a probationary Manager for Business Development of SHS)

Respondent Manuel F Diaz was on a probationary status from July 18, 2005-January 18, 2006,
with a monthly salary of P100,000.00.

In addition to his job responsibilities, Diaz was also instructed by Pres. Hartmanshenn to report
to SHS office and plant at least 2 days every work week to observe technical processes involved

in the manufacturing of perforated materials + learn about the products of the company which
Diaz was hired to market and sell.

Due to business exigencies abroad, Hartmanshenns instructions to Diaz were often either sent by
e-mail or relayed through telephone or mobile phone. Meetings were held between the two when
Hartmanshenn is in the Philippines. Respondent Diaz work was not closely supervised by the
President
PETITIONERS VERSION

Hartmanshenn expressed dissatisfaction over respondents poor performance alleging

respondents failure to make concrete business proposal or implement measures to improve SHS
office productivity. Further contends that: Respondent Diaz acknowledged these observations
and offered to resign from the company

November 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on November
22 and 24, 2005, notified respondent of his arrival through electronic mail messages and advised
him to get in touch with him. Respondent claimed that he never received the messages.

November 29, 2005, Hartmannshenn instructed Taguiang not to release respondents salary. Later
that afternoon, respondent called and inquired about his salary. Taguiang informed him that it
was being withheld and that he had to immediately communicate with Hartmannshenn. Again,
respondent denied having received such directive.

After accepting respondents resignation, Hartmannshenn demanded that respondent surrender

all company property and information in his possession. Respondent agreed to these "exit"
conditions through electronic mail. Instead of complying with the said conditions, however,
respondent sent another electronic mail message to Hartmannshenn and Schumacher on
December 1, 2005, appealing for the release of his salary.
RESPONDENTS CONTRARY VERSION OF THE FACTS

Respondent Diaz denied sending such messages of acknowledgment of his poor performance
but admitted that he had reported to the SHS office and plant only eight (8) times from July 18,
2005 to November 30, 2005.

Claimed that the meeting with Hartmannshenn took place in the evening of December 1, 2005, at
which meeting the latter insulted him and rudely demanded that he accept P25,000.00 instead of
his accrued wage and stop working for SHS, which demands he refused.

Later that same night, he sent Hartmannshenn and Schumacher an electronic mail message
appealing for the release of his salary.

Another demand letter for respondents accrued salary for November 16 to November 30, 2005,
13th month pay, moral and exemplary damages, and attorneys fees was sent on December 2,
2005.

November 30, 2005, respondent served on SHS a demand letter and a resignation letter citing
that SHS has committed illegal and unfair labor practices

December 9, 2005, respondent filed a Complaint against the petitioners for illegal dismissal;
non-payment of salaries/wages and 13th month pay with prayer for reinstatement and full
backwages; exemplary damages, and attorneys fees, costs of suit, and legal interest.
LABOR ARBITER DECISION: June 15, 2006,
(1) Respondent was constructively dismissed
(2) Ordered respondents immediate reinstatement without loss of seniority rights and benefits
and that he be declared as a regular employee.
Respondents probationary employment was deemed regularized because petitioners failed to
conduct a prior evaluation of his performance and to give notice two days prior to his termination
as required by the Probationary Contract of Employment and Article 281 of the Labor Code.
(3) The withholding of his salary was contrary to Article 116 of the Labor Code as it was not one
of the exceptions for allowable wage deduction by the employer under Article 113 of the Labor
Code
(4) Petitioners are jointly and severally liable to respondent for backwages including 13th month
pay as there was no showing in the salary vouchers presented that such was integrated in the
salary; for moral and exemplary damages for having in bad faith harassed respondent into
resigning; and for attorneys fees.
NLRC RULING December 29, 2006 Resolution
-Reversed the decision of the Labor Arbiter
(1) Withholding of respondents salary was a valid exercise of management prerogative. The
act was deemed justified as it was reasonable to demand an explanation for failure to report to
work and to account for his work accomplishments.
(2) Respondent could not have been regularized having voluntarily resigned prior to the
completion of the probationary period. 13th month pay was already integrated in Respondents
salary in accordance with his Probationary Contract of Employment and, therefore, no additional
amount should be due him.
January 25, 2007, Subsequent motion for reconsideration was denied
COURT OF APPEALS December 23, 2008
-The CA reversed the NLRC resolutionsbut ruled out actual reinstatement
(1) As a probationary employee entitled to security of tenure, respondent was illegally dismissed.
Diaz is awarded separation pay equivalent to at least one month pay, and his full backwages,
other privileges and benefits, or their monetary equivalent during the period of his dismissal up
to his supposed actual reinstatement by the Labor Arbiter on 15 June 2006.

(2) Withholding respondents salary was NOT a valid exercise of management prerogative as
there is no such thing as a management prerogative to withhold wages temporarily.
ISSUES:
(1) Was respondent constructively dismissed?
(2) Was there a valid exercise of Management Prerogative by petitioners?
(3) Should Individual petitioners be held solidarily and personally liable with petitioner SHS for
payment of monetary award to respondent?
HELD:
(1) YES. Respondent was constructively dismissed and, therefore, illegally dismissed.
Although respondent was a probationary employee, he was still entitled to security of tenure.
Section 3 (2), Article 13, of the Constitution guarantees the right of all workers to security of
tenure. In using the expression "all workers," the Constitution puts no distinction between a
probationary and a permanent or regular employee. This means that probationary employees
cannot be dismissed except for cause or for failure to qualify as regular employees.
-There was evident unlawful withholding of his salary. For said reason, Diaz was forced to
resign.
- It is worthy to note that in his resignation letter, respondent cited petitioners "illegal and unfair
labor practice" as his cause for resignation. As correctly noted by the CA, respondent lost no
time in submitting his resignation letter and eventually filing a complaint for illegal dismissal
just a few days after his salary was withheld. These circumstances are inconsistent with
voluntary resignation and bolster the finding of constructive dismissal.
-In this case, the withholding of respondents salary does not fall under any of the
circumstances provided under Article 113. Neither was it established with certainty that
respondent did not work from November 16 to November 30, 2005.
(2) NO. This is not a valid exercise of management prerogative for although management
prerogative refers to "the right to regulate all aspects of employment," it cannot be understood to
include the right to temporarily withhold salary/wages without the consent of the employee.
To sanction such an interpretation would be contrary to Article 116 of the Labor Code and as
correctly pointed out by the Labor Arbiter, "absent a showing that the withholding of
complainants wages falls under the exceptions provided in Article 113, the withholding thereof
is thus unlawful."
- Respondent is, thus, entitled to reinstatement and other benefits withheld from time of his
resignation. Respondent, however, is not entitled to the additional amount for 13th month pay, as
it is clearly provided in respondents Probationary Contract of Employment that such is deemed
included in his salary. Due to strain in relationship between parties, however, reinstatement not
advisable.
(3) NO. Hartmanshenn and Schumacher cannot be held personally liable.

Petitioners withheld respondents salary in the sincere belief that respondent did not work for the
period in question and was, therefore, not entitled to it. There was no dishonest purpose or ill will
involved as they believed there was a justifiable reason to withhold his salary. Thus, although
they unlawfully withheld respondents salary, it cannot be concluded that such was made in bad
faith.
WHEREFORE, the assailed December 23, 2008 Decision of the Court of Appeals in CA-G.R.
SP No. 100015 is hereby AFFIRMED with MODIFICATION. The additional amount for 13th
month pay is deleted. Petitioners Winfried Hartmannshenn and Hinrich Johann Schumacher are
not solidarily liable with petitioner SHS Perforated Materials, Inc.
+NOTES:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any
person, directly or indirectly, to withhold any amount from the wages of a worker or induce him
to give up any part of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the workers consent.
Any withholding of an employees wages by an employer may only be allowed in the form of
wage deductions under the circumstances provided in Article 113 of the Labor Code, as set forth
below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor.
Management Prerogative right of an employer to regulate all aspects of employment, such as
the freedom to prescribe work assignment, working methods, processes to be followed,
regulation regarding transfer of employees, supervision of their work, lay-off and discipline, and
dismissal and recall of work.
Constructive Dismissal (Duldulao v. CA, 517 SCRA 191 (2007))
- If an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable
on the part of the employee that it would foreclose any choice by him except to forego his
continued employment.
- It exists when there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.
Doctrine of Strained Relations The payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable