Zanotte Shoes v.

NLRC

GR No. 100665

Feb. 13, 1995

Vitug

PRINCIPLES

Separation pay should not be awarded if there was no dismissal - The fact of the matter is that
petitioners have repeatedly indicated their willingness to accept private respondents but the latter have
steadfastly refused the offer. For being without any clear legal basis, the award of separation pay must thus
be set aside. There is nothing, however, that prevents petitioners from voluntarily giving private
respondents some amounts on ex gratia basis.

The test of existence of employee – employer relationship – (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control
the employee with respect to the result of the work to be done and to the means and methods by which the
work to be done and to the means and methods by which the work is to be accomplished. The requirement,
so herein posed as an issue, refers to the existence of the right to control and not necessarily to the actual
exercise of the right.

Facts:

1. Private respondents Joseph and Lolito Lluz, Noel Adarayan, Rogelio Sira, Virginia ang Genolito
Heresano and Carmelita De Dios filed a complaint for illegal dismissal and for various monetary
claims, including the recovery of damages and attorney’s fees, against petitioner Zanotte
Shoes/Leonardo Lorenzo.
2. In their supplemental position paper, the complainants subsequently confined themselves to the
illegal dismissal charge and abandoned the monetary claims. One of the original 8 complainants,
Virgilio Alcunaba, decided to resume his work with petitioners, thus leaving the rest to pursue the
case.
3. Private respondents averred that they started to work for petitioners on, respectively, the following
dates:
NAME DATE
1 Joseph Lluz March, 1985
2 Noel Adarayan Feb. 17, 1980
3 Rogelio Sira January, 1982
4 Lolito Lluz March, 1982
5 Virginia Heresano May, 1987
6 Genelito Heresano 20-Oct-87
 7 Carmelita de Dios January, 1975

And that they worked for a minimum of twelve hours daily, including Sundays and holidays when
needed; that they were paid on piece-work basis; that it “angered” petitioner Lorenzo when they
requested to be made members of the Social Security System (“SSS”); and that, when they demanded
an increase in their pay rates, they were prevented (starting 24 October 1988) from entering the work
premises.

4. Petitioners, in turn, claimed that their business operations were only seasonal, normally twice a
year, one in June (coinciding with the opening of school classes) and another in December (during
the Christmas holidays), when heavy job orders would come in. Private respondents, according to
petitioners, were engaged on purely contractual basis and paid the rates conformably with their
respective agreements.
5. On 16 October 1989, Labor Arbiter Villarente, Jr., rendered judgment in favor of the complainants,
claiming that there was an employer-employee relationship between the Joseph Lluz et,al and
Lorenzo and that the complainants are regular employees of Lorenzo. Lorenzo was ordered to pay
their respective separation pay based on their one-half month’s earnings per year of service, a
fraction of at least six months to be considered one whole year
6. An appeal was interposed by petitioners. The NLRC, on 24 April 1991, sustained the findings of the
Labor Arbiter and dismissed the appeal. On 30 May 1991, the NLRC denied petitioners’ motion for
reconsideration.

Issue:

1. Whether or not the award of separation pay was proper.

Ruling:

1. NO, the award of separation pay was not proper.

SC shares the opinion of the Solicitor General that the award of separation pay to private respondents
appears , to be unwarranted.

The Labor Arbiter, sustained by the NLRC, concluded that there was neither dismissal nor
abandonment. The Labor Arbiter said —

. . . At any rate, records show that even during the conciliation stage, respondents had repeatedly
indicated that they were willing to accept back all complainants aside from denying complainants
allegation. Hence, it is clear that there was no dismissal to talk about in the first place
which would have to be determined whether legal or not. We also take particular note of
complainants’ desire to be given separation pay instead of being ordered back to work. Considering all
these factors we hereby rule that there was neither dismissal nor abandonment but complainants are
simply out of job for reasons not attributable to either party.

The fact of the matter is that petitioners have repeatedly indicated their willingness to accept private
respondents but the latter have steadfastly refused the offer. For being without any clear legal basis, the
award of separation pay must thus be set aside. There is nothing, however, that prevents petitioners
from voluntarily giving private respondents some amounts on ex gratia basis.

2. YES, there was an employee-employer relationship between the respondents and

The work of private respondents is clearly related to, and in the pursuit of, the principal business
activity of petitioners. The indicia used for determining the existence of an employer-employee
relationship, all extant in the case at bench, include (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 result of the work to be done and to the means and methods
by which the work to be done and to the means and methods by which the work is to be
accomplished. The requirement, so herein posed as an issue, refers to the existence of the right to
control and not necessarily to the actual exercise of the right.
 Manila Golf & Country Club v. IAC
G.R. No. 64948
September 27, 1994
Narvasa

PRINCIPLES:
Caddies, in the present case, are not employees of Manila Gold & Country Club - As
long as it is, the list made in the appealed decision detailing the various matters of conduct, dress,
language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom
of choice whatsoever in the manner of carrying out their services. In the very nature of things,
caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing
their occupation within the premises and grounds of whatever club they do their work in. For all
that is made to appear, they work for the club to which they attach themselves on sufference but,
on the other hand, also without having to observe any working hours, free to leave anytime they
please, to stay away for as long they like. It is not pretended that if found remiss in the observance
of said rules, any discipline may be meted them beyond barring them from the premises which, it
may be supposed, the Club may do in any case even absent any breach of the rules, and without
violating any right to work on their part. All these considerations clash frontally with the concept
of employment.

Facts:
1. Three separate proceedings were all initiated by or on behalf of herein private respondent Remberto
Evio and his fellow caddies. These were originally filed with the Social Security Commission (SSC)
via petition of seventeen (17) persons who styled themselves "Caddies of Manila Golf and Country
Club-PTCCEA (Philippine Technical, Clerical, Commercial Employees Association) for coverage
and availment of benefits under the Social Security Act as amended.
2. The petition, docketed as SSC Case No. 5443, alleged in essence that although the petitioners were
employees of the Manila Golf and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.
3. In the case before the SSC, the respondent Club filed answer praying for the dismissal of the
petition, alleging in substance that the petitioners, caddies by occupation, were allowed into the
Club premises to render services as such to the individual members and guests playing the Club's
golf course and who themselves paid for such services; that as such caddies, the petitioners were
not subject to the direction and control of the Club as regards the manner in which they performed
their work; and hence, they were not the Club's employees.
4. Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for
social security coverage, avowedly coming to realize that indeed there was no employment
 relationship between them and the Club. The case continued, and was eventually adjudicated by
the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and
Raymundo Jomok.
5. The Commission dismissed the petition for lack of merit, saying that the caddy's fees were paid by
the golf players themselves and not by respondent club. While respondent club promulgates rules
and regulations on the assignment, deportment and conduct of caddies the same are designed to
impose personal discipline among the caddies but not to direct or conduct their actual work. And
that in fact, a golf player is at liberty to choose a caddy of his preference regardless of the respondent
club's group rotation system and has the discretion on whether or not to pay a caddy. Quoting the
SC, the Commission ruled that in the determination of the existence of an employer-employee
relationship, the "control test" shall be considered decisive.

6. An appeal against SSC’s decision in claiming that there was the caddies were not employees of
Manila Golf Country Club, was taken to the Intermediate appellate Court by the union representing
Llamar and Jomok. Months before the decision, Jomok dismissed his appeal at his own instance,
leaving Llamar the lone appellant.

7. Intermediate Appellate Court rendered a decision, reversing SSC’s findings after finding out that
the country club had control over the caddies in the following circumstances:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect
of the conduct that the caddy must observe, or avoid, when serving as such, any violation of any
which could subject him to disciplinary action, which may include suspending or cutting off his
access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number
which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

8. Manila Gold filed a petition for certiorari to SC.

Issue:
Whether or not persons rendering caddying services for members of golf clubs and their guests in
said clubs' courses or premises are the employees of such clubs and therefore within the compulsory
coverage of the Social Security System (SSS)

Ruling:
NO. The caddies are not employees of the club.

As long as it is, the list made in the appealed decision detailing the various matters of conduct,
dress, language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom
of choice whatsoever in the manner of carrying out their services. In the very nature of things,
caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing
their occupation within the premises and grounds of whatever club they do their work in. For all
that is made to appear, they work for the club to which they attach themselves on sufference but,
on the other hand, also without having to observe any working hours, free to leave
anytime they please, to stay away for as long they like. It is not pretended that if found
remiss in the observance of said rules, any discipline may be meted them beyond
barring them from the premises which, it may be supposed, the Club may do in any
case even absent any breach of the rules, and without violating any right to work on
their part. All these considerations clash frontally with the concept of employment.

It can happen that a caddy who has rendered services to a player on one day may still find sufficient
time to work elsewhere. Under such circumstances, he may then leave the premises of petitioner
and go to such other place of work that he wishes. Or a caddy who is on call for a particular day may
deliberately absent himself if he has more profitable caddying, or another, engagement in some
other place. These are things beyond petitioner's control and for which it imposes no direct
sanctions on the caddies. . . .”
 BISIG NG MANGGAGAWA NG PHILIPPINE REFINING CO v.
PHILIPPINE REFINING CO.
G.R. No. L-27761
September 30, 1981
Abad Santos

PRINCIPLES:

“Regular base pay” does not include Christmas bonus and other fringe benefits - The phrase
"regular base pay" is clear, unequivocal and requires no interpretation. It means regular basic pay and
necessarily excludes money received in different concepts such as Christmas bonus and other fringe
benefits. In this connection it is necessary to remember that in the enforcement of previous collective
bargaining agreements containing the same provision of overtime pay at the rate of regular base pay plus
50 percent therefor", the overtime compensation was invariably based only on the regular basic pay,
exclusive of Christmas bonus and other fringe benefits. Appellant union knew all the while of such
interpretation and precisely attempted to negotiate for a provision in the subject collective bargaining
agreement that would include the Christmas bonus and other fringe benefits in the computation of the
overtime pay. Significantly, the appellee company did not agree to change the phrase "regular base pay" as
it could not consent to the inclusion of the fringe benefits in the computation of the overtime pay.

Facts:
1. Bisig ng Manggagawa ng Philippine Refining Company, Inc., as the representative union of the
rank and file employees of the Philippine Refining Co., Inc., filed with CFI Manila a petition for
declaratory relief. Bisig ng Manggagawa contended that the respondent company Philippine
Refining Co. was under obligation to include the employees' Christmas bonus and other fringe
benefits in the computation of their overtime pay as in their 1965 collective bargaining
agreement, All by virtue of the ruling of this Court in the case of NAWASA vs. NAWASA
Consolidated Unions, et all G.R. No. L-18938, August 31, 1964, 11 SCRA 766.

2. Philippine Refining Co.. Inc. filed its answer alleging, among others, that never did the parties
intend to include the employees' Christmas bonus and other fringe benefits in the computation
of the overtime pay and that the company precisely agreed to a rate of 50%, which is much
higher than the 25% required by the Eight-Hour Labor Law (Commonwealth Act No. 444, as
amended), on the condition that in computing the overtime pay only the "regular base pay"
would be considered. And that the NAWASA case is not applicable because Philippine Refining
Co is a private company, not gov’t owned, like NAWASA.

3. After pre-trial, CFI Manila limited the issues to the proper interpretation of the collective
bargaining agreement and to the applicability to the case of the NAWASA ruling.
4. During the trial, the following facts were established:

a.) That the collective bargaining agreements entered into between the parties before 1965 all
contained a provision similar to the aforequoted Sec. 6, Art. VI of the 1965 collective
bargaining agreement; that in the enforcement of said earlier agreements, the overtime
compensation of the employees was computed on the basis solely of their basic monthly
pay, i.e., excluding the employees' Christmas bonus and other fringe benefits.
b.) That in the negotiations which led to the execution of the 1965 collective bargaining
agreement, the matter of the proper interpretation of the phrase "regular base pay" was
discussed.
5. CFI Manila rendered a decision declaring that the term "regular base pay" in the collective
bargaining agreement refers only to "regular base pay" and does not include Christmas bonus
and other fringe benefits.
6. CFI also held that while the NAWASA ruling concerning the meaning of the phrase "regular
pay" of the Eight-Hour Labor Law could be applied to employees of private corporations like
the Philippine Refining Company, the same was, nevertheless, inapplicable to the case at bar
which involved the interpretation of the phrase "regular base pay which was different from
"regular pay". It declared that "regular base pay" referred only to the basic or monthly pay
exclusive of Christmas bonus and other fringe benefits.
7. Bisig ng Manggawa filed a Motion for Reconsideration but was denied.

Issues:

1. Whether or not the phrase "regular base pay" as used in the above-quoted provision of the 1965
CBA includes Christmas bonus and other fringe benefits.
2. Whether or not the stipulation in the CBA on overtime pay violates the Nawasa doctrine if the
answer to question No. I is in the negative.

Ruling:

1. N0, the phrase “regular base pay” does not include Christmas bonus and other fringe benefits.

The phrase "regular base pay" is clear, unequivocal and requires no interpretation. It means regular
basic pay and necessarily excludes money received in different concepts such as Christmas bonus
and other fringe benefits. In this connection it is necessary to remember that in the enforcement of
previous collective bargaining agreements containing the same provision of overtime pay at the rate
of regular base pay plus 50 percent therefor", the overtime compensation was invariably based only
on the regular basic pay, exclusive of Christmas bonus and other fringe benefits. Appellant union
knew all the while of such interpretation and precisely attempted to negotiate for a provision in the
subject collective bargaining agreement that would include the Christmas bonus and other fringe
benefits in the computation of the overtime pay. Significantly, the appellee company did not agree
to change the phrase "regular base pay" as it could not consent to the inclusion of the fringe benefits
in the computation of the overtime pay.

2. No, the NAWASA doctrine was not violated.

The legal provisions pertinent to the subject of overtime compensation are found in Secs. 3 and
4 of Commonwealth Act No. 444, as amended, which read as follows:

SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending
emergencies ...; but in all such cases, the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their regular wages or
salary, plus at least twenty-five per centum additional.
SEC. 4. No person, firm, or corporation, business establishment or place or center of labor shall
compel an employee or laborer to work during Sunday and legal holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular renumeration (Emphasis
supplied.)

Applying the aforequoted NAWASA ruling to the above provision of law, SC arrived at the
following conclusion: An employer covered by said law are under legal compulsion to grant their
employees overtime compensation in amounts not less than their basic pay and the fringe benefits
regularly and continuously received by them plus 25% thereof. This does not however mean that
agreements concerning overtime compensation should always provide for a computation based on
the employee's "regular wage or salary i.e. regular base pay plus fringe benefits regularly and
continuously received. For it is axiomatic that in multiplication, the product is directly related to
the multiplicand the multiplier, and that the multiplicand Is inversely related to the multiplier
conviniently, the same product may be obtained despite reduction of the multiplicand provided
that the multiplier is correspondingly increased. Conformably with the foregoing mathematical
axioms there is still compliance with the above-stated ruling despite the fact that the overtime
compensation is based only on the employee's "regular base pay" (the multiplicand) as long as the
rate of 25% (the multiplier) is increased by such amount as to produce a result (the product) which
is not less than the result to be obtained in computing 25% of the employee's "regular wage or
salary" ("regular base pay" plus fringe benefits regularly and continuously received). In fine, the
parties may agree for the payment of overtime compensation in an amount to be determined by
applying a formula other than the statutory formula of "regular wage or qqqs plus at least twenty-
five per centum additional" provided that the result in applying the contractual formula is not less
than the result in applying said statutory formula.
In the case at bar, it is admitted that the contractual formula of "regular base pay plus 50% thereof"
yields an overtime compensation which is higher than the result in applying the statutory formula
as elaborated in the Nawasa case. Consequently, its validity is upheld and the parties are enjoined
to accord due respect to it.