CORPORAL, SR vs. NLRC and Lao Enteng (GR No.

129315)

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public
respondent National Labor Relations Commission (First Division), 1 in NLRC NCR Case No. 00-04-03163-
95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The aforecited October
17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S. Cañizares
dismissing the petitioners' complaint for illegal dismissal and declaring that petitioners are not regular
employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino,
Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two female petitioners,
Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop located at 651 P. Paterno
Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she
also worked as watcher and marketer of private respondent.

Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single
proprietorship owned and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente
Lao organized a corporation which was registered with the Securities and Exchange Commission as Lao
Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties of the New Look Barber Shop and
continued the business. All the petitioners were allowed to continue working with the new company until
April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber
Shop was located had been sold and that their services were no longer needed.2

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal,
illegal deduction, separation pay, non-payment of 13th month pay, and salary differentials. Only petitioner
Nas asked for payment of salary differentials as she alleged that she was paid a daily wage of P25.00
throughout her period of employment. The petitioners also sought the refund of the P1.00 that the
respondent company collected from each of them daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were
receiving fifty percent commission of the amount charged to customers. Thus, there was no employer-
employee relationship between them and petitioners. And assuming arguendo, that there was an employer-
employee relationship, still petitioners are not entitled to separation pay because the cessation of operations
of the barber shop was due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her
affidavit dated September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of
the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and
again that the partnership may fold up anytime because nobody in the family had the time to be at the
barber shop to look after their interest; that New Look Barber Shop had always been a joint venture
partnership and the operation and management of the barber shop was left entirely to petitioners; that her
father's contribution to the joint venture included the place of business, payment for utilities including
electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the barber shop
was allowed to remain open up to April 1995 by the children because they wanted to give the partners a
chance at making it work. Eventually, they were forced to close the barber shop because they continued to
lose money while petitioners earned from it. Trinidad also added that private respondents had no control
over petitioners who were free to come and go as they wished. Admittedly too by petitioners they received
fifty percent to sixty percent of the gross paid by customers. Trinidad explained that some of the petitioners
were allowed to register with the Social Security System as employees of Lao Enteng Company, Inc. only
as an act of accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal,
Elpidio Lacap and Teresita Flores were not among those registered with the Social Security System. Lastly,
Trinidad avers that without any employee-employer relationship petitioners claim for 13th month pay and
separation pay have no basis in fact and in law.3

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Cañizares, Jr. ordered the dismissal
of the complaint on the basis of his findings that the complainants and the respondents were engaged in a
joint venture and that there existed no employer-employee relation between them. The Labor Arbiter also
found that the barber shop was closed due to serious business losses or financial reverses and
consequently declared that the law does not compel the establishment to pay separation pay to whoever
were its employees.4

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of
merit, ratiocinating thus:

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway
test established by the Supreme Court. It is a common practice in the Barber Shop industry that barbers
supply their own scissors and razors and they split their earnings with the owner of the barber shop. The
only capital of the owner is the place of work whereas the barbers provide the skill and expertise in servicing
customers. The only control exercised by the owner of the barber shop is to ascertain the number of
customers serviced by the barber in order to determine the sharing of profits. The barbers maybe
characterized as independent contractors because they are under the control of the barber shop owner
only with respect to the result of the work, but not with respect to the details or manner of performance. The
barbers are engaged in an independent calling requiring special skills available to the public at large. 5

Its motion for reconsideration denied in the Resolution 6 dated March 5, 1997, petitioners filed the instant
petition assigning that the NLRC committed grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS

WERE EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE
INDEPENDENT CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT
AWARDING THEIR MONEY CLAIMS.7

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners
were independent contractors. They contend that they were employees of the respondent company and
cannot be considered as independent contractors because they did not carry on an independent business.
They did not cut hair, manicure, and do their work in their own manner and method. They insist they were
not free from the control and direction of private respondents in all matters, and their services were engaged
by the respondent company to attend to its customers in its barber shop. Petitioners also stated that,
individually or collectively, they do not have substantial capital nor investments in tools, equipments, work
premises and other materials necessary in the conduct of the barber shop. What the barbers owned were
merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail polishes, nippers
and cuticle removers. By no standard can these be considered "substantial capital" necessary to operate a
barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that
petitioners Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with the
Social Security System as regular employees of the respondent company. The SSS employment records
in common show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and
that of the respondent company was 03-8740074-7. All the foregoing entries in the SSS employment
records were painstakingly detailed by the petitioners in their position paper and in their memorandum
appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did
not even mention said employment records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded
respect and finality on appeal. We have long settled that this Court will not uphold erroneous conclusions
unsupported by substantial evidence.8 We must also stress that where the findings of the NLRC contradict
those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the
case and reexamine the questioned findings.9

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed
between petitioners and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded
that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that
the petitioners were independent contractors.

The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any
documentary evidence. It should be noted that aside from the self-serving affidavit of Trinidad Lao Ong,
there were no other evidentiary documents, nor written partnership agreements presented. We have ruled
that even the sharing of proceeds for every job of petitioners in the barber shop does not mean they were
not employees of the respondent company.10

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors
simply because they supplied their own working implements, shared in the earnings of the barber shop with
the owner and chose the manner of performing their work. They stressed that as far as the result of their
work was concerned the barber shop owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an
independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in
all matters connected with the performance of the work except as to the results thereof, and (b) has
substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of the business.11

Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that petitioners are not
"independent contractors". They did not carry on an independent business. Neither did they undertake
cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and method.
The services of the petitioners were engaged by the respondent company to attend to the needs of its
customers in its barber shop. More importantly, the petitioners, individually or collectively, did not have a
substantial capital or investment in the form of tools, equipment, work premises and other materials which
are necessary in the conduct of the business of the respondent company. What the petitioners owned were
only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By no standard can these
be considered substantial capital necessary to operate a barber shop. From the records, it can be gleaned
that petitioners were not given work assignments in any place other than at the work premises of the New
Look Barber Shop owned by the respondent company. Also, petitioners were required to observe rules and
regulations of the respondent company pertaining, among other things, observance of daily attendance, job
performance, and regularity of job output. The nature of work performed by were clearly directly related to
private respondent's business of operating barber shops. Respondent company did not dispute that it
owned and operated three (3) barber shops. Hence, petitioners were not independent contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following
elements must be present for an employer-employee relationship to exist: (1) the selection and engagement
of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to
control the worker's conduct, with the latter assuming primacy in the overall consideration. Records of the
case show that the late Vicente Lao engaged the services of the petitioners to work as barbers and
manicurists in the New Look Barber Shop, then a single proprietorship owned by him; that in January 1982,
his children organized a corporation which they registered with the Securities and Exchange Commission
as Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties
of the New Look Barber Shop and continued the business; that the respondent company retained the
services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in
petitioners' and private respondent's working arrangements.

Private respondent claims it had no control over petitioners.1âwphi1 The power to control refers to the
existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the employer
to actually supervise the performance of duties of the employee. It is enough that the employer has the
right to wield that power.12 As to the "control test", the following facts indubitably reveal that respondent
company wielded control over the work performance of petitioners, in that: (1) they worked in the barber
shop owned and operated by the respondents; (2) they were required to report daily and observe definite
hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time
working in the New Look Barber Shop for all the fifteen (15) years they have worked until April 15, 1995;
(4) that some have worked with respondents as early as in the 1960's; (5) that petitioner Patricia Nas was
instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly, respondent
company was clothed with the power to dismiss any or all of them for just and valid cause. Petitioners were
unarguably performing work necessary and desirable in the business of the respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-employer
relationship since the policy is now to encourage even the self-employed dressmakers, manicurists and
jeepney drivers to become SSS members, we could not agree with private respondents that petitioners
were registered with the Social Security System as their employees only as an accommodation. As we
have earlier mentioned private respondent showed no proof to their claim that petitioners were the ones
who solely paid all SSS contributions. It is unlikely that respondents would report certain persons as their
workers, pay their SSS premium as well as their wages if it were not true that they were indeed their
employees.13

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed
due to serious business losses and respondent company closed its barber shop because the building where
the barber shop was located was sold. An employer may adopt policies or changes or adjustments in its
operations to insure profit to itself or protect investment of its stockholders. In the exercise of such
management prerogative, the employer may merge or consolidate its business with another, or sell or
dispose all or substantially all of its assets and properties which may bring about the dismissal or termination
of its employees in the process.14

Prescinding from the above, we hold that the seven petitioners are employees of the private respondent
company; as such, they are to be accorded the benefits provided under the Labor Code, specifically Article
283 which mandates the grant of separation pay in case of closure or cessation of employer's business
which is equivalent to one (1) month pay for every year of service. 15 Likewise, they are entitled to the
protection of minimum wage statutes. Hence, the separation pay due them may be computed on the basis
of the minimum wage prevailing at the time their services were terminated by the respondent company.
The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the
13th Month Pay Law states that "all rank and file employees are now entitled to a 13th month pay regardless
of the amount of basic salary that they receive in a month. Such employees are entitled to the benefit
regardless of their designation or employment status, and irrespective of the method by which their wages
are paid, provided that they have worked for at least one (1) month during a calendar year" and so all the
seven (7) petitioners who were not paid their 13th month pay must be paid accordingly.16

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with
procedural process; P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary
differentials for petitioner Nas; attorney's fees), we find them without basis.

IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996
and Resolution dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to pay,
severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay equivalent to
one month pay for every year of service, to be computed at the then prevailing minimum wage at the time
of their actual termination which was April 15, 1995.
Costs against private respondents.

SO ORDERED.

Benigno vs. ABS-CBN (GR No.199166)

The existence of an employer-employee relationship is at the heart of this Petition for Review on Certiorari
filed pursuant to Rule 45 of the Rules of Court, primarily assailing the 29 June 2011 Decision[1] rendered
by the Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928 which ruled out said
relationship between the parties.

The Facts

Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television and radio
broadcasting corporation which, for its Regional Network Group in Naga City, employed respondent Amalia
Villafuerte (Villafuerte) as Manager. There is no dispute regarding the fact that, thru Villafuerte, ABS-CBN
engaged the services of petitioners Nelson Begino (Begino) and Gener Del Valle (Del Valle) sometime in
1996 as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and
Monina Avila-Llorin (Llorin) were likewise similarly engaged as reporters sometime in 1996 and 2002,
respectively. With their services engaged by respondents thru Talent Contracts which, though regularly
renewed over the years, provided terms ranging from three (3) months to one (1) year, petitioners were
given Project Assignment Forms which detailed, among other matters, the duration of a particular project
as well as the budget and the daily technical requirements thereof. In the aforesaid capacities, petitioners
were tasked with coverage of news items for subsequent daily airings in respondents’ TV Patrol Bicol
Program.[2]

While specifically providing that nothing therein shall be deemed or construed to establish an employer-
employee relationship between the parties, the aforesaid Talent Contracts included, among other matters,
provisions on the following matters: (a) the Talent’s creation and performance of work in accordance with
the ABS-CBN’s professional standards and compliance with its policies and guidelines covering intellectual
property creators, industry codes as well as the rules and regulations of the Kapisanan ng mga
Broadcasters sa Pilipinas (KBP) and other regulatory agencies; (b) the Talent’s non-engagement in similar
work for a person or entity directly or indirectly in competition with or adverse to the interests of ABS-CBN
and non-promotion of any product or service without prior written consent; and (c) the results-oriented
nature of the talent’s work which did not require them to observe normal or fixed working hours.[3] Subjected
to contractor’s tax, petitioners’ remunerations were denominated as Talent Fees which, as of last renewal,
were admitted to be pegged per airing day at P273.35 for Begino, P302.92 for Del Valle, P323.08 for
Sumayao and P315.39 for Llorin.[4]

Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the
complaint[5] docketed as Sub-RAB 05-04-00041-07 before the National Labor Relations Commission’s
(NLRC) Sub- Regional Arbitration Branch No. 5, Naga City. In support of their claims for regularization,
underpayment of overtime pay, holiday pay, 13th month pay, service incentive leave pay, damages and
attorney's fees, petitioners alleged that they performed functions necessary and desirable in ABS-CBN's
business. Mandated to wear company IDs and provided all the equipment they needed, petitioners averred
that they worked under the direct control and supervision of Villafuerte and, at the end of each day, were
informed about the news to be covered the following day, the routes they were to take and, whenever the
subject of their news coverage is quite distant, even the start of their workday. Due to the importance of the
news items they covered and the necessity of their completion for the success of the program, petitioners
claimed that, under pain of immediate termination, they were bound by the company’s policy on, among
others, attendance and punctuality.[6]

Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an annual
competency assessment alongside other ABS-CBN employees, as condition for their continued
employment. Although their work involved dealing with emergency situations at any time of the day or night,
petitioners claimed that they were not paid the labor standard benefits the law extends to regular
employees. To avoid paying what is due them, however, respondents purportedly resorted to the simple
expedient of using said Talent Contracts and/or Project Assignment Forms which denominated petitioners
as talents, despite the fact that they are not actors or TV hosts of special skills. As a result of this iniquitous
situation, petitioners asseverated that they merely earned an average of P7,000.00 to P8,000.00 per month,
or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-and-file employees.
Considering their repeated re-hiring by respondents for ostensible fixed periods, this situation had gone on
for years since TV Patrol Bicol has continuously aired from 1996 onwards.[7]

In refutation of the foregoing assertions, on the other hand, respondents argued that, although it
occasionally engages in production and generates programs thru various means, ABS-CBN is primarily
engaged in the business of broadcasting television and radio content. Not having the full manpower
complement to produce its own program, the company had allegedly resorted to engaging independent
contractors like actors, directors, artists, anchormen, reporters, scriptwriters and various production and
technical staff, who offered their services in relation to a particular program. Known in the industry as talents,
such independent contractors inform ABS- CBN of their availability and were required to accomplish Talent
Information Forms to facilitate their engagement for and appearance on designated project days. Given the
unpredictability of viewer preferences, respondents argued that the company cannot afford to provide
regular work for talents with whom it negotiates specific or determinable professional fees on a per project,
weekly or daily basis, usually depending on the budget allocation for a project.[8]

Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms, petitioners
were hired as talents, to act as reporters and/or cameramen for TV Patrol Bicol for designated periods and
rates. Fully aware that they were not considered or to consider themselves as employees of a particular
production or film outfit, petitioners were supposedly engaged on the basis of the skills, knowledge or
expertise they already possessed and, for said reason, required no further training from ABS-CBN.
Although petitioners were inevitably subjected to some degree of control, the same was allegedly limited to
the imposition of general guidelines on conduct and performance, simply for the purpose of upholding the
standards of the company and the strictures of the industry. Never subjected to any control or restrictions
over the means and methods by which they performed or discharged the tasks for which their services were
engaged, petitioners were, at most, briefed whenever necessary regarding the general requirements of the
project to be executed.[9]

Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a second
complaint against respondents, for regularization, payment of labor standard benefits, illegal dismissal and
unfair labor practice, which was docketed as Sub-RAB 05-08-00107-07. Upon respondents’ motion, this
complaint was dismissed for violation of the rules against forum shopping in view of the fact that the
determination of the issues in the second case hinged on the resolution of those raised in the first.[10] On
19 December 2007, however, Labor Arbiter Jesus Orlando Quiñones (Labor Arbiter Quiñones) resolved
Sub-RAB 05-04-00041-07 in favor of petitioners who, having rendered services necessary and related to
ABS-CBN’s business for more than a year, were determined to be its regular employees. With said
conclusion found to be buttressed by, among others, the exclusivity clause and prohibitions under
petitioners’ Talent Contracts and/or Project Assignment Forms which evinced respondents’ control over
them,[11] Labor Arbiter Quiñones disposed of the case in the following wise:

WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is hereby
rendered declaring complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO
and MA. CRISTINA V. SUMAYAO, as regular employees of respondent company, ABS-CBN
BROADCASTING CORPORATION.

Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay complainants,

subject to the prescriptive period provided under Article 291 of the Labor Code, however applicable, the
total amount of Php2,440,908.36, representing salaries/wage differentials, holiday pay, service incentive
leave pay and 13th month pay, to include 10% of the judgment award as attorney’s fees of the judgment
award (computation of the monetary awards are attached hereto as integral part of this decision).

Moreover, respondents are directed to admit back complainants to work under the same terms and
conditions prevailing prior to their separation or, at respondents' option, merely reinstated in the payroll.

Other than the above, all other claims and charges are ordered DISMISSED for lack of merit.[12]

Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC, during
the pendency of which petitioners filed a third complaint against the former, for illegal dismissal,
regularization, non- payment of salaries and 13th month pay, unfair labor practice, damages and attorney’s
fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08, the complaint was raffled to Labor
Arbiter Quiñones who issued an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents’ motion to dismiss on the grounds of res judicata and forum shopping.[13] Finding that
respondents’ control over petitioners was indeed manifest from the exclusivity clause and prohibitions in
the Talent Contracts and/or Project Assignment Forms, on the other hand, the NLRC rendered a Decision
dated 31 March 2010, affirming said Labor Arbiter’s appealed decision.[14] Undeterred by the NLRC’s 31
August 2010 denial of their motion for reconsideration,[15] respondents filed the Rule 65 petition for
certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to taking exceptions to the
findings of the assailed decision, faulted petitioners for violating the rule against forum shopping.[16]

On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the Labor Arbiter
and the NLRC. Ruling out the existence of forum shopping on the ground that petitioners' second and third
complaints were primarily anchored on their termination from employment after the filing of their first
complaint, the CA nevertheless discounted the existence of an employer-employee relation between the
parties upon the following findings and conclusions: (a) petitioners, were engaged by respondents as talents
for periods, work and the program specified in the Talent Contracts and/or Project Assignment Forms
concluded between them; (b) instead of fixed salaries, petitioners were paid talent fees depending on the
budget allocated for the program to which they were assigned; (c) being mainly concerned with the result,
respondents did not exercise control over the manner and method by which petitioner accomplished their
work and, at most, ensured that they complied with the standards of the company, the KBP and the industry;
and, (d) the existence of an employer-employee relationship is not necessarily established by the exclusivity
clause and prohibitions which are but terms and conditions on which the parties are allowed to freely
stipulate.[17]
Petitioners’ motion for reconsideration of the foregoing decision was denied in the CA's 3 October 2011
Resolution,[18] hence, this petition.

The Issues

Petitioners seek the reversal of the CA’s assailed Decision and Resolution on the affirmative of the following
issues:

1. Whether or not the CA seriously and reversibly erred in not dismissing respondents’ petition for certiorari
in view of the fact that they did file a Notice of Appeal at the NLRC level and did not, by themselves or
through their duly authorized representative, verify and certify the Memorandum of Appeal they filed thereat,
in accordance with the NLRC Rules of Procedure; and

2. Whether or not the CA seriously and reversibly erred in brushing aside the determination made by both
the Labor Arbiter and the NLRC of the existence of an employer-employee relationship between the parties,
despite established jurisprudence supporting the same.

The Court's Ruling

The Court finds the petition impressed with merit.

Petitioners preliminarily fault the CA for not dismissing respondents’ Rule 65 petition for certiorari in view
of the fact that the latter failed to file a Notice of Appeal from the Labor Arbiter’s decision and to verify and
certify the Memorandum of Appeal they filed before the NLRC. While concededly required under the NLRC
Rules of Procedure, however, these matters should have been properly raised during and addressed at the
appellate stage before the NLRC. Instead, the record shows that the NLRC took cognizance of respondents’
appeal and proceeded to resolve the same in favor of petitioners by affirming the Labor Arbiter’s decision.
Not having filed their own petition for certiorari to take exception to the liberal attitude the NLRC appears to
have adopted towards its own rules of procedure, petitioners were hardly in the proper position to raise the
same before the CA or, for that matter, before this Court at this late stage. Aside from the settled rule that
a party who has not appealed is not entitled to affirmative relief other than the ones granted in the
decision[19] rendered, liberal interpretation of procedural rules on appeal had, on occasion, been favored
in the interest of substantive justice.[20]

Although the existence of an employer-employee relationship is, on the other hand, a question of fact[21]
which is ordinarily not the proper subject of a Rule 45 petition for review on certiorari like the one at bar, the
conflicting findings between the labor tribunals and the CA justify a further consideration of the matter.[22]
To determine the existence of said relation, case law has consistently applied the four-fold test, to wit: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer's power to control the employee on the means and methods by which the work is
accomplished.[23] Of these criteria, the so-called “control test” is generally regarded as the most crucial
and determinative indicator of the presence or absence of an employer-employee relationship. Under this
test, an employer-employee relationship is said to exist where the person for whom the services are
performed reserves the right to control not only the end result but also the manner and means utilized to
achieve the same.[24]

In discounting the existence of said relationship between the parties, the CA ruled that Petitioners' services
were, first and foremost, engaged thru their Talent Contracts and/or Project Assignment Forms which
specified the work to be performed by them, the project to which they were assigned, the duration thereof
and their rates of pay according to the budget therefor allocated. Because they are imbued with public
interest, it cannot be gainsaid, however, that labor contracts are subject to the police power of the state and
are placed on a higher plane than ordinary contracts. The recognized supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is aimed at bringing life to the policy
enshrined in the Constitution to afford protection to labor.[25] Insofar as the nature of one’s employment is
concerned, Article 280 of the Labor Code of the Philippines also provides as follows:

ART. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
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, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists.

It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a) regular
employees or those who have been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer; (b) project employees or those whose employment has been
fixed for a specific project or undertaking, the completion or termination of which has been determined at
the time of the engagement of the employee; (c) seasonal employees or those who work or perform services
which are seasonal in nature, and the employment is for the duration of the season; and (d) casual
employees or those who are not regular, project, or seasonal employees.[26] To the foregoing classification
of employee, jurisprudence has added that of contractual or fixed term employee which, if not for the fixed
term, would fall under the category of regular employment in view of the nature of the employee’s
engagement, which is to perform activity usually necessary or desirable in the employer’s business.[27]

The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment
Forms and the terms and condition embodied therein, petitioners are regular employees of ABS-CBN. Time
and again, it has been ruled that the test to determine whether employment is regular or not is the
reasonable connection between the activity performed by the employee in relation to the business or trade
of the employer.[28] As cameramen/editors and reporters, petitioners were undoubtedly performing
functions necessary and essential to ABS-CBN’s business of broadcasting television and radio content. It
matters little that petitioners’ services were engaged for specified periods for TV Patrol Bicol and that they
were paid according to the budget allocated therefor. Aside from the fact that said program is a regular
weekday fare of the ABS-CBN’s Regional Network Group in Naga City, the record shows that, from their
initial engagement in the aforesaid capacities, petitioners were continuously re-hired by respondents over
the years. To the mind of the Court, respondents’ repeated hiring of petitioners for its long-running news
program positively indicates that the latter were ABS-CBN’s regular employees.

If the employee has been performing the job for at least one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated or continuing performance as sufficient evidence of the
necessity, if not indispensability of that activity in the business.[29] Indeed, an employment stops being co-
terminous with specific projects where the employee is continuously re-hired due to the demands of the
employer’s business.[30] When circumstances show, moreover, that contractually stipulated periods of
employment have been imposed to preclude the acquisition of tenurial security by the employee, this Court
has not hesitated in striking down such arrangements as contrary to public policy, morals, good customs or
public order.[31] The nature of the employment depends, after all, on the nature of the activities to be
performed by the employee, considering the nature of the employer’s business, the duration and scope to
be done, and, in some cases, even the length of time of the performance and its continued existence.[32]
In the same manner that the practice of having fixed-term contracts in the industry does not automatically
make all talent contracts valid and compliant with labor law, it has, consequently, been ruled that the
assertion that a talent contract exists does not necessarily prevent a regular employment status.[33]

As cameramen/editors and reporters, it also appears that petitioners were subject to the control and
supervision of respondents which, first and foremost, provided them with the equipments essential for the
discharge of their functions. Prepared at the instance of respondents, petitioners’ Talent Contracts tellingly
provided that ABS-CBN retained “all creative, administrative, financial and legal control” of the program to
which they were assigned. Aside from having the right to require petitioners “to attend and participate in all
promotional or merchandising campaigns, activities or events for the Program,” ABS-CBN required the
former to perform their functions “at such locations and Performance/Exhibition Schedules” it provided or,
subject to prior notice, as it chose determine, modify or change. Even if they were unable to comply with
said schedule, petitioners were required to give advance notice, subject to respondents’ approval.[34]
However obliquely worded, the Court finds the foregoing terms and conditions demonstrative of the control
respondents exercised not only over the results of petitioners’ work but also the means employed to achieve
the same.

In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause and
prohibitions in their Talent Contracts and/or Project Assignment Forms were likewise indicative of
respondents’ control over them. Brushing aside said finding, however, the CA applied the ruling in Sonza
v. ABS-CBN Broadcasting Corporation[35] where similar restrictions were considered not necessarily
determinative of the existence of an employer-employee relationship. Recognizing that independent
contractors can validly provide his exclusive services to the hiring party, said case enunciated that
guidelines for the achievement of mutually desired results are not tantamount to control. As correctly
pointed out by petitioners, however, parallels cannot be expediently drawn between this case and that of
Sonza case which involved a well-known television and radio personality who was legitimately considered
a talent and amply compensated as such. While possessed of skills for which they were modestly
recompensed by respondents, petitioners lay no claim to fame and/or unique talents for which talents like
actors and personalities are hired and generally compensated in the broadcast industry.

Later echoed in Dumpit-Murillo v. Court of Appeals,[36] this Court has rejected the application of the ruling
in the Sonza case to employees similarly situated as petitioners in ABS-CBN Broadcasting Corporation v.
Nazareno.[37] The following distinctions were significantly observed between employees like petitioners
and television or radio personalities like Sonza, to wit:

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status
was required from them because they were merely hired through petitioner’s personnel department just like
any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-
employee relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance
negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer and
when the worker, relative to the employer, does not furnish an independent business or professional
service, such work is a regular employment of such employee and not an independent contractor. The
Court will peruse beyond any such agreement to examine the facts that typify the parties’ actual
relationship.[38] (Emphasis omitted)

Rather than the project and/or independent contractors respondents claim them to be, it is evident from the
foregoing disquisition that petitioners are regular employees of ABS-CBN. This conclusion is borne out by
the ineluctable showing that petitioners perform functions necessary and essential to the business of ABS-
CBN which repeatedly employed them for a long-running news program of its Regional Network Group in
Naga City. In the course of said employment, petitioners were provided the equipments they needed, were
required to comply with the Company's policies which entailed prior approval and evaluation of their
performance. Viewed from the prism of these considerations, we find and so hold that the CA reversibly
erred when it overturned the NLRC's affirmance of the Labor Arbiter's finding that an employer-employee
relationship existed between the parties. Given the fact, however, that Sub-RAB-V-05-03-00039-08 had not
been consolidated with this case and appears, for all intents and purposes, to be pending still, the Court
finds that the reinstatement of petitioners ordered by said labor officer and tribunal should, as a relief
provided in case of illegal dismissal, be left for determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated 3
October 2011 in CA-G.R. SP No. 116928 are REVERSED and SET ASIDE. Except for the reinstatement
of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina Sumayao, the National Labor
and Relations· Commission's 31 March 2010 Decision is, accordingly, REINSTATED. SO ORDERED.
 OROZCO Vs. PDI (GR No. 155207)

The case before this Court raises a novel question never before decided in our jurisdiction – whether a
newspaper columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S.
Orozco assails the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002
and its Resolution2 dated September 11, 2002 denying her Motion for Reconsideration. The CA reversed
and set aside the Decision3 of the National Labor Relations Commission (NLRC), which in turn had affirmed
the Decision4 of the Labor Arbiter finding that Orozco was an employee of private respondent Philippine
Daily Inquirer (PDI) and was illegally dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section.
She religiously submitted her articles every week, except for a six-month stint in New York City when she,
nonetheless, sent several articles through mail. She received compensation of P250.00 – later increased
to P300.00 – for every column published.5

On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner claims that her
then editor, Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief,
wanted to stop publishing her column for no reason at all and advised petitioner to talk to Magsanoc herself.
Petitioner narrates that when she talked to Magsanoc, the latter informed her that it was PDI Chairperson
Eugenia Apostol who had asked to stop publication of her column, but that in a telephone conversation with
Apostol, the latter said that Magsanoc informed her (Apostol) that the Lifestyle section already had many
columnists.7

On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss
how to improve said section. They agreed to cut down the number of columnists by keeping only those
whose columns were well-written, with regular feedback and following. In their judgment, petitioner’s
column failed to improve, continued to be superficially and poorly written, and failed to meet the high
standards of the newspaper. Hence, they decided to terminate petitioner’s column. 8

Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal, backwages, moral
and exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner, the
dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent

company; ordering respondent company to reinstate her to her former or equivalent position, with
backwages.

Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.9

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and method by which
complainant’s work – that of a regular columnist – had to be accomplished. This control might not
be found in an instruction, verbal or oral, given to complainant defining the means and method she
should write her column. Rather, this control is manifested and certained (sic) in respondents’
admitted prerogative to reject any article submitted by complainant for publication.

By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of
writing to suit the editorial taste of her editor. Otherwise, off to the trash can went her articles.

Moreover, this control is already manifested in column title, "Feminist Reflection" allotted
complainant. Under this title, complainant’s writing was controlled and limited to a woman’s
perspective on matters of feminine interests. That respondent had no control over the subject
matter written by complainant is strongly belied by this observation. Even the length of
complainant’s articles were set by respondents.

Inevitably, respondents would have no control over when or where complainant wrote her articles
as she was a columnist who could produce an article in thirty (3) (sic) months or three (3) days,
depending on her mood or the amount of research required for an article but her actions were
controlled by her obligation to produce an article a week. If complainant did not have to report for
work eight (8) hours a day, six (6) days a week, it is because her task was mainly mental. Lastly,
the fact that her articles were (sic) published weekly for three (3) years show that she was
 respondents’ regular employee, not a once-in-a-blue-moon contributor who was not under any
pressure or obligation to produce regular articles and who wrote at his own whim and leisure. 10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division
dismissed the appeal thereby affirming the Labor Arbiter’s Decision. The NLRC initially noted that PDI failed
to perfect its appeal, under Article 223 of the Labor Code, due to non-filing of a cash or surety bond. The
NLRC said that the reason proffered by PDI for not filing the bond – that it was difficult or impossible to
determine the amount of the bond since the Labor Arbiter did not specify the amount of the judgment award
– was not persuasive. It said that all PDI had to do was compute based on the amount it was paying
petitioner, counting the number of weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s
decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings of fact and
law. It sustained the Labor Arbiter’s reasoning that respondent PDI exercised control over petitioner’s work.

PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision. However,
in a Resolution13 dated December 2, 1998, this Court referred the case to the Court of Appeals, pursuant
to our ruling in St. Martin Funeral Homes v. National Labor Relations Commission.14

The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed
petitioner’s Complaint. It held that the NLRC misappreciated the facts and rendered a ruling wanting in
substantial evidence. The CA said:

The Court does not agree with public respondent NLRC’s conclusion. First, private respondent
admitted that she was and [had] never been considered by petitioner PDI as its employee. Second,
it is not disputed that private respondent had no employment contract with petitioner PDI. In fact,
her engagement to contribute articles for publication was based on a verbal agreement between
her and the petitioner’s Lifestyle Section Editor. Moreover, it was evident that private respondent
was not required to report to the office eight (8) hours a day. Further, it is not disputed that she
stayed in New York for six (6) months without petitioner’s permission as to her leave of absence
nor was she given any disciplinary action for the same. These undisputed facts negate private
respondent’s claim that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the
guidelines given by petitioner PDI for private respondent to follow, e.g. in terms of space allocation
and length of article, is not the form of control envisioned by the guidelines set by the Supreme
Court. The length of the article is obviously limited so that all the articles to be featured in the paper
can be accommodated. As to the topic of the article to be published, it is but logical that private
respondent should not write morbid topics such as death because she is contributing to the lifestyle
section. Other than said given limitations, if the same could be considered limitations, the topics of
the articles submitted by private respondent were all her choices. Thus, the petitioner PDI in
deciding to publish private respondent’s articles only controls the result of the work and not the
means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an employer-
employee relationship to exist.15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then
filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the Labor
Arbiter to clarify the amount of the award due petitioner and, thereafter, ordered PDI to post the requisite
bond. Upon compliance therewith, the petition would be given due course. Labor Arbiter Amansec clarified
that the award under the Decision amounted to P15,350.00. Thus, PDI posted the requisite bond on
January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for PDI’s failure to
post a cash or surety bond in violation of Article 223 of the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005. 17 There, the Court held:

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to
the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional instances
wherein the Court relaxed the bond requirement as a condition for posting the appeal.

xxxx
 In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the
Labor Arbiter concerned did not contain a computation of the monetary award due the employees,
a circumstance which is likewise present in this case. In said case, the Court stated,

As a rule, compliance with the requirements for the perfection of an appeal within the
reglamentary (sic) period is mandatory and jurisdictional. However, in National Federation
of Labor Unions v. Ladrido as well as in several other cases, this Court relaxed the
requirement of the posting of an appeal bond within the reglementary period as a condition
for perfecting the appeal. This is in line with the principle that substantial justice is better
served by allowing the appeal to be resolved on the merits rather than dismissing it based
on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to
backwages, 13th month pay and service incentive leave pay without however including a
computation of the alleged amounts.

xxxx

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be
expected to post such appeal bond equivalent to the amount of the monetary award when the
amount thereof was not included in the decision of the labor arbiter." The computation of the amount
awarded to petitioner not having been clearly stated in the decision of the labor arbiter, private
respondents had no basis for determining the amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are
considered indispensable interdictions against needless delays and for orderly discharge of judicial
business, the law does admit of exceptions when warranted by the circumstances. Technicality
should not be allowed to stand in the way of equitably and completely resolving the rights and
obligations of the parties. But while this Court may relax the observance of reglementary periods
and technical rules to achieve substantial justice, it is not prepared to give due course to this petition
and make a pronouncement on the weighty issue obtaining in this case until the law has been duly
complied with and the requisite appeal bond duly paid by private respondents. 18

Records show that PDI has complied with the Court’s directive for the posting of the bond; 19 thus, that issue
has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the
affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact. 20 Factual findings of

quasi-judicial agencies like the NLRC are generally accorded respect and finality if supported by substantial
evidence.21

Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter and NLRC,
this Court must now make its own examination and evaluation of the facts of this case.

It is true that petitioner herself admitted that she "was not, and [had] never been considered respondent’s
employee because the terms of works were arbitrarily decided upon by the respondent." 22 However, the
employment status of a person is defined and prescribed by law and not by what the parties say it should
be.23

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-
employee relationship between parties.24 The four elements of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer’s power to control the employee’s conduct.25

Of these four elements, it is the power of control which is the most crucial 26 and most determinative
factor,27 so important, in fact, that the other elements may even be disregarded. 28 As this Court has
previously held:

the significant factor in determining the relationship of the parties is the presence or absence of
supervisory authority to control the method and the details of performance of the service being
rendered, and the degree to which the principal may intervene to exercise such control.29

In other words, the test is whether the employer controls or has reserved the right to control the employee,
not only as to the work done, but also as to the means and methods by which the same is accomplished. 30
Petitioner argues that several factors exist to prove that respondents exercised control over her and her
work, namely:

a. As to the Contents of her Column – The PETITIONER had to insure that the contents of her
column hewed closely to the objectives of its Lifestyle Section and the over-all principles that the
newspaper projects itself to stand for. As admitted, she wanted to write about death in relation to
All Souls Day but was advised not to.

b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines of the
newspaper for her articles to be published. These deadlines were usually that time period when
the Section Editor has to "close the pages" of the Lifestyle Section where the column in located.
"To close the pages" means to prepare them for printing and publication.

As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear. So
she submitted her articles two days before the designated day on which the column would come
out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’ obligations
to the readers with regard to timeliness and freshness of ideas.

c. As to Control of Space – The PETITIONER was told to submit only two or three pages of article
for the column, (sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle editor would
already chop off the article and publish the rest for the next week. This shows that PRIVATE
RESPONDENTS had control over the space that the PETITIONER was assigned to fill.

d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to look for
and read the works of their favorite regular writers and columnists. They are conditioned, based on
their daily purchase of the newspaper, to look for specific spaces in the newspapers for their favorite
write-ups/or opinions on matters relevant and significant issues aside from not being late or amiss
in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and significant issues
on time by the PRIVATE RESPONDENTS who have a say on whether the topics belong to those
considered as highly relevant and significant, through the Lifestyle Section Editor. The
PETITIONER had to discuss the topics first and submit the articles two days before publication
date to keep her column in the newspaper space regularly as expected or without miss by its
readers.31

Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor laws
contemplate such as to establish an employer-employee relationship between petitioner and respondent
PDI?

It is not.

Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former. Rules which serve as general guidelines towards the achievement of the mutually desired result
are not indicative of the power of control. 32 Thus, this Court has explained:

It should, however, be obvious that not every form of control that the hiring party reserves to himself
over the conduct of the party hired in relation to the services rendered may be accorded the effect
of establishing an employer-employee relationship between them in the legal or technical sense of
the term. A line must be drawn somewhere, if the recognized distinction between an employee and
an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service
that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in
his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the means used to
achieve it. x x x.33

The main determinant therefore is whether the rules set by the employer are meant to control not just the
results of the work but also the means and method to be used by the hired party in order to achieve such
results. Thus, in this case, we are to examine the factors enumerated by petitioner to see if these are merely
guidelines or if they indeed fulfill the requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how she executes her work. We do not
agree. A careful examination reveals that the factors enumerated by the petitioner are inherent conditions
in running a newspaper. In other words, the so-called control as to time, space, and discipline are dictated
by the very nature of the newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely read throughout
the country. As such, public interest dictates that every article appearing in the newspaper should
subscribe to the standards set by the Inquirer, with its thousands of readers in mind. It is not,
therefore, unusual for the Inquirer to control what would be published in the newspaper. What is
important is the fact that such control pertains only to the end result, i.e., the submitted articles.
The Inquirer has no control over [petitioner] as to the means or method used by her in the
preparation of her articles. The articles are done by [petitioner] herself without any intervention from
the Inquirer.34

Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce her
articles each week. Aside from the constraints presented by the space allocation of her column, there were
no restraints on her creativity; petitioner was free to write her column in the manner and style she was
accustomed to and to use whatever research method she deemed suitable for her purpose. The apparent
limitation that she had to write only on subjects that befitted the Lifestyle section did not translate to control,
but was simply a logical consequence of the fact that her column appeared in that section and therefore
had to cater to the preference of the readers of that section.

The perceived constraint on petitioner’s column was dictated by her own choice of her column’s
perspective. The column title "Feminist Reflections" was of her own choosing, as she herself admitted,
since she had been known as a feminist writer.35 Thus, respondent PDI, as well as her readers, could
reasonably expect her columns to speak from such perspective.

Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or limitation on
the subject matter – within the Lifestyle section – that she could write about. Respondent PDI did not dictate
how she wrote or what she wrote in her column. Neither did PDI’s guidelines dictate the kind of research,
time, and effort she put into each column. In fact, petitioner herself said that she received "no comments
on her articles…except for her to shorten them to fit into the box allotted to her column." Therefore, the
control that PDI exercised over petitioner was only as to the finished product of her efforts, i.e., the column
itself, by way of either shortening or outright rejection of the column.

The newspaper’s power to approve or reject publication of any specific article she wrote for her column
cannot be the control contemplated in the "control test," as it is but logical that one who commissions
another to do a piece of work should have the right to accept or reject the product. The important factor to
consider in the "control test" is still the element of control over how the work itself is done, not just the end
result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note
the common practice in the newspaper business of assigning its regular reporters to cover specific subjects,
geographical locations, government agencies, or areas of concern, more commonly referred to as "beats."
A reporter must produce stories within his or her particular beat and cannot switch to another beat without
permission from the editor. In most newspapers also, a reporter must inform the editor about the story that
he or she is working on for the day. The story or article must also be submitted to the editor at a specified
time. Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover another
beat, if the need arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded
from submitting her column ahead of time or from submitting columns to be published at a later time. More
importantly, respondents did not dictate upon petitioner the subject matter of her columns, but only imposed
the general guideline that the article should conform to the standards of the newspaper and the general
tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the manner
he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result
of his efforts and not the amount thereof, no employer-employee relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The economic realities
prevailing within the activity or between the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties.37 This is especially
appropriate when, as in this case, there is no written agreement or contract on which to base the
relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker
on his employer.38

Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate working
in various women’s organizations.39 Likewise, she herself admits that she also contributes articles to other
publications.40 Thus, it cannot be said that petitioner was dependent on respondent PDI for her continued
employment in respondent’s line of business.41

The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent
contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the
characterization of the relationship must be made based on the particular circumstances of each
case.42 There are several factors43 that may be considered by the courts, but as we already said, the right
to control is the dominant factor in determining whether one is an employee or an independent contractor. 44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and
independent business and undertakes to perform the job, work, or service on one’s own account and under
one’s own responsibility according to one’s own manner and method, free from the control and direction of
the principal in all matters connected with the performance of the work except as to the results thereof. 45

On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the Court found,
using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an
independent contractor. Sonza was hired by ABS-CBN due to his "unique skills, talent and celebrity status
not possessed by ordinary employees," a circumstance that, the Court said, was indicative, though not
conclusive, of an independent contractual relationship. Independent contractors often present themselves
to possess unique skills, expertise or talent to distinguish them from ordinary employees.47 The Court also
found that, as to payment of wages, Sonza’s talent fees were the result of negotiations between him and
ABS-CBN.48 As to the power of dismissal, the Court found that the terms of Sonza’s engagement were
dictated by the contract he entered into with ABS-CBN, and the same contract provided that either party
may terminate the contract in case of breach by the other of the terms thereof.49 However, the Court held
that the foregoing are not determinative of an employer-employee relationship. Instead, it is still the power
of control that is most important.

On the power of control, the Court found that in performing his work, Sonza only needed his skills and talent
– how he delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s
control.50 Thus:

We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s 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." ABS-CBN’s sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZA’s work.

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

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

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

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

A radio broadcast specialist who works under minimal supervision is an independent contractor.
SONZA’s work as television and radio program host required special skills and talent, which SONZA
admittedly possesses. The records do not show that ABS-CBN exercised any supervision and
control over how SONZA utilized his skills and talent in his shows. 51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill,
experience, and her unique viewpoint as a feminist advocate. How she utilized all these in writing her
column was not subject to dictation by respondent. As in Sonza, respondent PDI was not involved in the
actual performance that produced the finished product. It only reserved the right to shorten petitioner’s
articles based on the newspaper’s capacity to accommodate the same. This fact, we note, was not unique
to petitioner’s column. It is a reality in the newspaper business that space constraints often dictate the
length of articles and columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to
perform her work. Petitioner only needed her talent and skill to come up with a column every week. As such,
she had all the tools she needed to perform her work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.

SO ORDERED.
 SONZA vs ABS-CBN (GR No. 138051

The Case

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

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement

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

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

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

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and
₱317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th
and 25th days of the month.

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

Dear Mr. Lopez,

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

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

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

Thank you for your attention.

Very truly yours,

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

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

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

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

In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and directed the
parties to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to
confer jurisdiction over the instant case in this Office. And as to whether or not such claim would
entitle complainant to recover upon the causes of action asserted is a matter to be resolved only
after and as a result of a hearing. Thus, the respondent’s plea of lack of employer-employee
 relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that
there really is no employer-employee relationship between it and the complainant.

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

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

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

xxx

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

It must be noted that complainant was engaged by respondent by reason of his peculiar skills
and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free
to perform the services he undertook to render in accordance with his own style. The benefits
conferred to complainant under the May 1994 Agreement are certainly very much higher than those
generally given to employees. For one, complainant Sonza’s monthly talent fees amount to a
staggering ₱317,000. Moreover, his engagement as a talent was covered by a specific contract.
Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such
number of hours as may be necessary.

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

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

x x x (Emphasis supplied)7

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

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

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

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

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

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

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

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

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

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stocks…with FIVE
HUNDRED THOUSAND PESOS (₱500,000.00).

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

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable

travel benefit amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per
year.’

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

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

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

The Issue

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

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

The Court’s Ruling

We affirm the assailed decision.

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

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

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

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

Employee or Independent Contractor?

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

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

A. Selection and Engagement of Employee

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

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

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

B. Payment of Wages

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

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as
"SSS, Medicare, x x x and 13th month pay"20 which the law automatically incorporates into every employer-
employee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.22
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of
the ordinary that they indicate more an independent contractual relationship rather than an employer-
employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of
SONZA’s unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA
acting alone possessed enough bargaining power to demand and receive such huge talent fees for his
services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship.

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

C. Power of Dismissal

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

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

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

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

D. Power of Control

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MJMDC as Agent of SONZA

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

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

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

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

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979
finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in
the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law.
There is no legal presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive
issuance cannot exclude independent contractors from the class of service providers to the broadcast
industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction
No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

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

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

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

Section 3. Submission of Position Papers/Memorandum

xxx

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

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

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

Talents as Independent Contractors

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

The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-
employee relationship. To hold that every person who renders services to another for a fee is an employee
- to give meaning to the security of tenure clause - will lead to absurd results.

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

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan.
We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA’s claims are all based
on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present
case does not call for an application of the Labor Code provisions but an interpretation and implementation
of the May 1994 Agreement. In effect, SONZA’s cause of action is for breach of contract which is intrinsically
a civil dispute cognizable by the regular courts.58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999
in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.
 Villamaria vs. CA (GR No. 165881)

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the
Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the
Resolution3 of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn
affirmed the Decision4 of the Labor Arbiter dismissing the complaint filed by respondent Jerry V.
Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in
assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route.
By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he operated by
employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove the
jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and kept
the residue of his daily earnings as compensation for driving the vehicle. In August 1997, Villamaria verbally
agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would
remit to Villarama P550.00 a day for a period of four years; Bustamante would then become the owner of
the vehicle and continue to drive the same under Villamaria’s franchise. It was also agreed that Bustamante
would make a downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa

Pamamagitan ng Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660, Chassis No.
EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay the
boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his
arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the daily boundary-hulog
for a period of one week, the Kasunduan would cease to have legal effect and Bustamante would have to
return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from
Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to transport passengers only
and not for other purposes. He was also required to display an identification card in front of the windshield
of the vehicle; in case of failure to do so, any fine that may be imposed by government authorities would be
charged against his account. Bustamante further obliged himself to pay for the cost of replacing any parts
of the vehicle that would be lost or damaged due to his negligence. In case the vehicle sustained serious
damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante was
not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and
respectful towards the passengers. He was also obliged to notify Villamaria Motors in case the vehicle was
leased for two or more days and was required to attend any meetings which may be called from time to
time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the annual registration fees
of the vehicle and the premium for the vehicle’s comprehensive insurance. Bustamante promised to strictly
comply with the rules and regulations imposed by Villamaria for the upkeep and maintenance of the jeepney.

Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon,
he made daily remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante failed
to pay for the annual registration fees of the vehicle, but Villamaria allowed him to continue driving the
jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed
to pay their respective boundary-hulog. This prompted Villamaria to serve a "Paalala,"6 reminding them that
under the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned the drivers that the Kasunduan
would henceforth be strictly enforced and urged them to comply with their obligation to avoid litigation.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving
the vehicle.

On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife
Teresita. In his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996 under
the boundary system, where he was required to remit P450.00 a day. After one year of continuously working
for them, the spouses Villamaria presented the Kasunduan for his signature, with the assurance that he
(Bustamante) would own the jeepney by March 2001 after paying P550.00 in daily installments and that he
would thereafter continue driving the vehicle along the same route under the same franchise. He further
narrated that in July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney
needed to be replaced, and was assured that it would be done. However, he was later arrested and his
driver’s license was confiscated because apparently, the replacement engine that was installed was taken
from a stolen vehicle. Due to negotiations with the apprehending authorities, the jeepney was not
impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no longer
allowed to drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered
ordering the respondents, jointly and severally, the following:

1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed
of Sale in favor of the complainant relative to the PUJ with Plate No. PVU-660;

2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits
computed from July 24, 2000 up to the time of his actual reinstatement;

3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses
incurred by the complainant in the repair and maintenance of the subject jeep;

4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day
counted from August 7, 1997 up to June 2000 or a total of P91,200.00;

5. To pay moral and exemplary damages of not less than P200,000.00;

6. Attorney’s fee[s] of not less than 10% of the monetary award.

Other just and equitable reliefs under the premises are also being prayed for.9

In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that
Bustamante failed to pay the P10,000.00 downpayment and the vehicle’s annual registration fees. They
further alleged that Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a day,
which prompted them to issue the Paalaala. Instead of complying with his obligations, Bustamante stopped
making his remittances despite his daily trips and even brought the jeepney to the province without
permission. Worse, the jeepney figured in an accident and its license plate was confiscated; Bustamante
even abandoned the vehicle in a gasoline station in Sucat, Parañaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked
Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the vehicle was finally retrieved, the
tires were worn, the alternator was gone, and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation
v. NLRC,12 the spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan
executed on August 7, 1997 transformed the employer-employee relationship into that of vendor-vendee.
Hence, the spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They
prayed that the case be dismissed for lack of jurisdiction and patent lack of merit.

In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of
his employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan, 14 Magboo
v. Bernardo,15 and Citizen's League of Free Workers v. Abbas 16 are germane to the issue as they define
the nature of the owner/operator-driver relationship under the boundary system. He further reiterated that
it was the Villamaria spouses who presented the Kasunduan to him and that he conformed thereto only
upon their representation that he would own the vehicle after four years. Moreover, it appeared that the
Paalala was duly received by him, as he, together with other drivers, was made to affix his signature on a
blank piece of paper purporting to be an "attendance sheet."

On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of the spouses Villamaria and ordered
the complaint dismissed on the following ratiocination:

Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that
complainant violated the terms of their contract and afterwards abandoned the vehicle assigned to him. As
against the foregoing, [the] complaint’s (sic) mere allegations to the contrary cannot prevail.

Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees. 18

Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the
employer-employee relationship between him and Villamaria. While he did not receive fixed wages, he kept
only the excess of the boundary-hulog which he was required to remit daily to Villamaria under the
agreement. Bustamante maintained that he remained an employee because he was engaged to perform
activities which were necessary or desirable to Villamaria’s trade or business.

The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:

WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated
in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over the subject matter
of the controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria
was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint. Bustamante
filed a Motion for Reconsideration, which the NLRC resolved to deny on May 30, 2003.22

Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred

IN DISMISSING PETITIONER’S APPEAL "FOR REASON NOT STATED IN THE LABOR

ARBITER’S DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"

II

IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT

DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH
IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23

Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to
be that of employer-employee and as such, the Labor Arbiter had jurisdiction over his complaint. He further
alleged that it is common knowledge that operators of passenger jeepneys (including taxis) pay their drivers
not on a regular monthly basis but on commission or boundary basis, or even the boundary-hulog system.
Bustamante asserted that he was dismissed from employment without any lawful or just cause and without
due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee
relationship. He further pointed out that the Dinglasan case pertains to the boundary system and not the
boundary-hulog system, hence inapplicable in the instant case. He argued that upon the execution of the
Kasunduan, the juridical tie between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and sale of jeepneys and not in the business
of transporting passengers for consideration, Villamaria contended that the daily fees which Bustmante
paid were actually periodic installments for the the vehicle and were not the same fees as understood in
the boundary system. He added that the boundary-hulog plan was basically a scheme to help the driver-
buyer earn money and eventually pay for the unit in full, and for the owner to profit not from the daily
earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further asserted that the
apparently restrictive conditions in the Kasunduan did not mean that the means and method of driver-
buyer’s conduct was controlled, but were mere ways to preserve the vehicle for the benefit of both parties:
Villamaria would be able to collect the agreed purchase price, while Bustamante would be assured that the
vehicle would still be in good running condition even after four years. Moreover, the right of vendor to impose
certain conditions on the buyer should be respected until full ownership of the property is vested on the
latter. Villamaria insisted that the parallel circumstances obtaining in Singer Sewing Machine Company v.
Drilon24 has analogous application to the instant issue.

In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the
decision reads:

UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as
they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner:

1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante
separation pay computed from the time of his employment up to the time of termination based on
the prevailing minimum wage at the time of termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back
wages computed from the time of his dismissal up to March 2001 based on the prevailing minimum
wage at the time of his dismissal.

Without Costs.

SO ORDERED.26

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante’s complaint. Under the
Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employer-
employee. The CA ratiocinated that Villamaria’s exercise of control over Bustamante’s conduct in operating
the jeepney is inconsistent with the former’s claim that he was not engaged in the transportation business.
There was no evidence that petitioner was allowed to let some other person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean
that Villamaria could not exercise it. It explained that the existence of an employment relationship did not
depend on how the worker was paid but on the presence or absence of control over the means and method
of the employee’s work. In this case, Villamaria’s directives (to drive carefully, wear an identification card,
don decent attire, park the vehicle in his garage, and to inform him about provincial trips, etc.) was a means
to control the way in which Bustamante was to go about his work. In view of Villamaria’s supervision and
control as employer, the fact that the "boundary" represented installment payments of the purchase price
on the jeepney did not remove the parties’ employer-employee relationship.

While the appellate court recognized that a week’s default in paying the boundary-hulog constituted an
additional cause for terminating Bustamante’s employment, it held that the latter was illegally dismissed.
According to the CA, assuming that Bustamante failed to make the required payments as claimed by
Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for Bustamante to
abandon it. It also pointed out that Villamaria neither submitted any police report to support his claim that
the vehicle figured in a mishap nor presented the affidavit of the gas station guard to substantiate the claim
that Bustamante abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a
motion for reconsideration thereof. The CA denied the motion in a Resolution 27 dated November 2, 2004,
and Villamaria received a copy thereof on November 8, 2004.

Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of
the Rules of Court, alleging that the CA committed grave abuse of its discretion amounting to excess or
lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He claims that the CA erred
in ruling that the juridical relationship between him and respondent under the Kasunduan was a combination
of employer-employee and vendor-vendee relationships. The terms and conditions of the Kasunduan
clearly state that he and respondent Bustamante had entered into a conditional deed of sale over the
jeepney; as such, their employer-employee relationship had been transformed into that of vendor-vendee.
Petitioner insists that he had the right to reserve his title on the jeepney until after the purchase price thereof
had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal
via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil action of
certiorari under Rule 65. He argues that petitioner failed to establish that the CA committed grave abuse of
its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord with
law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a
boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines. Respondent
insists that his juridical relationship with petitioner is that of employer-employee because he was engaged
to perform activities which were necessary or desirable in the usual business of petitioner, his employer.

In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence,
it behooves the Court to resolve the merits of his petition.

We agree with respondent’s contention that the remedy of petitioner from the CA decision was to file a
petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of
certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for the
reconsideration within which to file the petition under Rule 45. 28 But instead of doing so, he filed a petition
for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running of the 15-
day reglementary period; consequently, the CA decision became final and executory upon the lapse of the
reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed. 29

It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is
proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial
College, Inc. v. Court of Appeals:30

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a
petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or
issues of law within fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall
become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to this
Court from the decision of the CA. It is a continuation of the appellate process over the original case. A
review is not a matter of right but is a matter of judicial discretion. The aggrieved party may, however, assail
the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from
notice of the decision of the CA or its resolution denying the motion for reconsideration of the same. This is
based on the premise that in issuing the assailed decision and resolution, the CA acted with grave abuse
of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and adequate remedy
in the ordinary course of law. A remedy is considered plain, speedy and adequate if it will promptly relieve
the petitioner from the injurious effect of the judgment and the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies
of appeal and certiorari are mutually exclusive and not alternative or successive. The aggrieved party is,
likewise, barred from filing a petition for certiorari if the remedy of appeal is lost through his negligence. A
petition for certiorari is an original action and does not interrupt the course of the principal case unless a
temporary restraining order or a writ of preliminary injunction has been issued against the public respondent
from further proceeding. A petition for certiorari must be based on jurisdictional grounds because, as long
as the respondent court acted within its jurisdiction, any error committed by it will amount to nothing more
than an error of judgment which may be corrected or reviewed only by appeal.31

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under
Rule 45, conformably with the principle that rules of procedure are to be construed liberally, provided that
the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of Court, and where
valid and compelling circumstances warrant that the petition be resolved on its merits. 32 In this case, the
petition was filed within the reglementary period and petitioner has raised an issue of substance: whether
the existence of a boundary-hulog agreement negates the employer-employee relationship between the
vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for
illegal dismissal in such case.

We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of
the government has jurisdiction over the same, are determined by the material allegations of the complaint
in relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer or demand for relief is not part of the
petition of the cause of action; nor does it enlarge the cause of action stated or change the legal effect of
what is alleged.34 In determining which body has jurisdiction over a case, the better policy is to consider not
only the status or relationship of the parties but also the nature of the action that is the subject of their
controversy.35

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only
over the following:

x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage,
rates of pay, hours of work, and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;

5. Cases arising from violation of Article 264 of this Code, including questions involving the legality
of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits,
all other claims, arising from employer-employee relationship, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining

agreements, and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said agreements.

In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional

requisite.36 The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee relationship which can only be resolved by reference to the
Labor Code, other labor statutes or their collective bargaining agreement.37 Not every dispute between an
employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where
the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the
regular courts.38 When the principal relief is to be granted under labor legislation or a collective bargaining
agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a
claim for damages might be asserted as an incident to such claim.39

We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan,
a dual juridical relationship was created between petitioner and respondent: that of employer-employee and
vendor-vendee. The Kasunduan did not extinguish the employer-employee relationship of the parties extant
before the execution of said deed.

As early as 1956, the Court ruled in National Labor Union v. Dinglasan 40 that the jeepney owner/operator-
driver relationship under the boundary system is that of employer-employee and not lessor-lessee. This
doctrine was affirmed, under similar factual settings, in Magboo v. Bernardo 41 and Lantaco, Sr. v.
Llamas,42 and was analogously applied to govern the relationships between auto-calesa owner/operator
and driver,43 bus owner/operator and conductor,44 and taxi owner/operator and driver.45

The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common

carrier to primarily govern the compensation of the driver, that is, the latter’s daily earnings are remitted to
the owner/operator less the excess of the boundary which represents the driver’s compensation. Under this
system, the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels
where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible
for the consequences of its use. The management of the business is still in the hands of the owner/operator,
who, being the holder of the certificate of public convenience, must see to it that the driver follows the route
prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the
business operations. The fact that the driver does not receive fixed wages but only the excess of the
"boundary" given to the owner/operator is not sufficient to change the relationship between them.
Indubitably, the driver performs activities which are usually necessary or desirable in the usual business or
trade of the owner/operator.46

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which
represented the boundary of petitioner as well as respondent’s partial payment (hulog) of the purchase
price of the jeepney.

Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily
remittances also had a dual purpose: that of petitioner’s boundary and respondent’s partial payment (hulog)
for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-settled rule is that an
obligation is not novated by an instrument that expressly recognizes the old one, changes only the terms
of payment, and adds other obligations not incompatible with the old provisions or where the new contract
merely supplements the previous one. 47 The two obligations of the respondent to remit to petitioner the
boundary-hulog can stand together.

In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind
that when the terms of the agreement are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of its stipulations shall prevail.48 The intention of the contracting parties should
be ascertained by looking at the words used to project their intention, that is, all the words, not just a
particular word or two or more words standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of them taken
jointly.49 The parts and clauses must be interpreted in relation to one another to give effect to the whole.
The legal effect of a contract is to be determined from the whole read together. 50

Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as
driver of the jeepney, thus:

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod:

1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan

ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa

paghahanapbuhay bilang pampasada o pangangalakal sa malinis at maayos na pamamaraan.

3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga

bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.

4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.

5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng

windshield upang sa pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay
awtorisado ng VILLAMARIA MOTORS o hindi.
 6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli
ang sasakyang ito na hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o
kapabayaan.

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan

ng nasira o nawala ito dahil sa kanyang kapabayaan.

8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN
NG IKALAWANG PANIG ang nasabing sasakyan.

9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG

UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa
VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng VILLAMARIA
MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na

ang nagmamaneho ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang
nagmamaneho ay laging nasa maayos ang kasuotan upang igalang ng mga pasahero.

11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng
magandang asal sa mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may
pasaherong pilosopo upang maiwasan ang anumang kaguluhan na maaaring kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG
PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang
mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad. Ang
halagang dapat bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito ay
nasa pangangasiwa ng VILLAMARIA MOTORS.

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY

HULOG sa loob ng isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG
UNANG PANIG.

14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive

insurance taon-taon at kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG
UNANG PANIG.

15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang

pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang
maipaabot ang anumang mungkahi sa ikasusulong ng samahan.

16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na

magkakaroon ng pagbabago o karagdagan sa mga darating na panahon at hindi magiging hadlang
sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng
Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi
kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo.

18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago
pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito.

19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw
sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang
maiwasan ang mga anumang suliranin.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang

sasakyan upang maiwasan ang aksidente.

21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA

MOTORS mabuti man or masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito
kung [kani-kanino] lamang upang maiwasan ang anumang usapin. Magsadya agad sa opisina ng
VILLAMARIA MOTORS.

22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at
buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at
gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa. 51

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract
to sell the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner would
thereafter become its owner. A contract is one of conditional sale, oftentimes referred to as contract to sell,
if the ownership or title over the

property sold is retained by the vendor, and is not passed to the vendee unless and until there is full payment
of the purchase price and/or upon faithful compliance with the other terms and conditions that may lawfully
be stipulated.52 Such payment or satisfaction of other preconditions, as the case may be, is a positive
suspensive condition, the failure of which is not a breach of contract, casual or serious, but simply an event
that would prevent the obligation of the vendor to convey title from acquiring binding force.53 Stated
differently, the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the
happening of a future and uncertain event so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never existed.54 The vendor may extrajudicially
terminate the operation of the contract, refuse conveyance, and retain the sums or installments already
received, where such rights are expressly provided for. 55

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material
possession was vested in respondent as its driver. In case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be of no force and effect and respondent would have
to return the jeepney to petitioner; the employer-employee relationship would likewise be terminated unless
petitioner would allow respondent to continue driving the jeepney on a boundary basis of P550.00 daily
despite the termination of their vendor-vendee relationship.

The juridical relationship of employer-employee between petitioner and respondent was not negated by the
foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondent’s conduct
as driver of the vehicle. As correctly ruled by the CA:

The exercise of control by private respondent over petitioner’s conduct in operating the jeepney he was
driving is inconsistent with private respondent’s claim that he is, or was, not engaged in the transportation
business; that, even if petitioner was allowed to let some other person drive the unit, it was not shown that
he did so; that the existence of an employment relation is not dependent on how the worker is paid but on
the presence or absence of control over the means and method of the work; that the amount earned in
excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal was
not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or
could not exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to
don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors about
the fact that the unit would be going out to the province for two days of more, or to drive the unit carefully,
etc. necessarily related to control over the means by which the petitioner was to go about his work; that the
ruling applicable here is not Singer Sewing Machine but National Labor Union since the latter case involved
jeepney owners/operators and jeepney drivers, and that the fact that the "boundary" here represented
installment payment of the purchase price on the jeepney did not withdraw the relationship from that of
employer-employee, in view of the overt presence of supervision and control by the employer. 56

Neither is such juridical relationship negated by petitioner’s claim that the terms and conditions in the
Kasunduan relative to respondent’s behavior and deportment as driver was for his and respondent’s benefit:
to insure that respondent would be able to pay the requisite daily installment of P550.00, and that the
vehicle would still be in good condition despite the lapse of four years. What is primordial is that petitioner
retained control over the conduct of the respondent as driver of the jeepney.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise
supervision and control over the respondent, by seeing to it that the route provided in his franchise, and the
rules and regulations of the Land Transportation Regulatory Board are duly complied with. Moreover, 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. 57

As respondent’s employer, it was the burden of petitioner to prove that respondent’s termination from
employment was for a lawful or just cause, or, at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled by the appellate
court:

It is basic of course that 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.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the
boundary hulog for one week or longer may be considered an additional cause for termination of
employment. The reason is because the Kasunduan would be of no force and effect in the event that the
purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case pertinently
stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa
loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang ibabalik
ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng
paghahabol pa.

Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an
employee is for a just cause. The failure of the employer to discharge this burden means that the dismissal
is not justified and that the employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner
failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit; that petitioner also
stopped remitting the "boundary hulog," prompting him (private respondent) to issue a "Paalala," which
petitioner however ignored; that petitioner even brought the unit to his (petitioner’s) province without
informing him (private respondent) about it; and that petitioner eventually abandoned the vehicle at a
gasoline station after figuring in an accident. But private respondent failed to substantiate these allegations
with solid, sufficient proof. Notably, private respondent’s allegation viz, that he retrieved the vehicle from
the gas station, where petitioner abandoned it, contradicted his statement in the Paalala that he would
enforce the provision (in the Kasunduan) to the effect that default in the remittance of the boundary hulog
for one week would result in the forfeiture of the unit. The Paalala reads as follows:

"Sa lahat ng mga kumukuha ng sasakyan

"Sa pamamagitan ng ‘BOUNDARY HULOG’

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na
nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong
ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing
Kasunduan kaya’t aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang
maiwasan natin ito.

"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte
kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo
pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa
ng kaso.

"Sumasainyo

"Attendance: 8/27/99

"(The Signatures appearing herein

include (sic) that of petitioner’s) (Sgd.)

OSCAR VILLAMARIA, JR."

If it were true that petitioner did not remit the boundary hulog for one week or more, why did private
respondent not forthwith take steps to recover the unit, and why did he have to wait for petitioner to abandon
it?1avvphil.net

On another point, private respondent did not submit any police report to support his claim that petitioner
really figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station to
substantiate his claim that petitioner abandoned the unit there.58

Petitioner’s claim that he opted not to terminate the employment of respondent because of magnanimity is
negated by his (petitioner’s) own evidence that he took the jeepney from the respondent only on July 24,
2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-
G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.
 Tenzas vs. Villegas Taxi (GR No. 199298)

This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the
Decision2 dated March 11, 2010 and Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in CA-
G.R. SP No. 111150, which affirmed with modification the Decision4 dated June 23, 2009 of the National
Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint for
illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and Andy Villegas
(Andy) (respondents). At that time, a similar case had already been filed by Isidro G. Endraca (Endraca)
against the same respondents. The two (2) cases were subsequently consolidated. 5

In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired and
dismissed by the respondents on the following dates:

Name Date of Hiring Date of Dismissal Salary

Bernard A. Tenazas 10/1997 07/03/07 Boundary System

Jaime M. Francisco 04/10/04 06/04/07 Boundary System

Isidro G. Endraca 04/2000 03/06/06 Boundary System7

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit assigned to
him was sideswiped by another vehicle, causing a dent on the left fender near the driver seat. The cost of
repair for the damage was estimated at ₱500.00. Upon reporting the incident to the company, he was
scolded by respondents Romualdo and Andy and was told to leave the garage for he is already fired. He
was even threatened with physical harm should he ever be seen in the company’s premises again. Despite
the warning, Tenazas reported for work on the following day but was told that he can no longer drive any of
the company’s units as he is already fired.8

Francisco, on the other hand, averred that his dismissal was brought about by the company’s unfounded
suspicion that he was organizing a labor union. He was instantaneously terminated, without the benefit of
procedural due process, on June 4, 2007.9

Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of the
required boundary for his taxi unit. He related that before he was dismissed, he brought his taxi unit to an
auto shop for an urgent repair. He was charged the amount of ₱700.00 for the repair services and the
replacement parts. As a result, he was not able to meet his boundary for the day. Upon returning to the
company garage and informing the management of the incident, his driver’s license was confiscated and
was told to settle the deficiency in his boundary first before his license will be returned to him. He was no
longer allowed to drive a taxi unit despite his persistent pleas.10

For their part, the respondents admitted that Tenazas and Endraca were employees of the company, the
former being a regular driver and the latter a spare driver. The respondents, however, denied that Francisco
was an employee of the company or that he was able to drive one of the company’s units at any point in
time.11

The respondents further alleged that Tenazas was never terminated by the company. They claimed that on
July 3, 2007, Tenazas went to the company garage to get his taxi unit but was informed that it is due for
overhaul because of some mechanical defects reported by the other driver who takes turns with him in
using the same. He was thus advised to wait for further notice from the company if his unit has already
been fixed. On July 8, 2007, however, upon being informed that his unit is ready for release, Tenazas failed
to report back to work for no apparent reason.12

As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001. They
allow him to drive a taxi unit whenever their regular driver will not be able to report for work. In July 2003,
however, Endraca stopped reporting for work without informing the company of his reason. Subsequently,
the respondents learned that a complaint for illegal dismissal was filed by Endraca against them. They
strongly maintained, however, that they could never have terminated Endraca in March 2006 since he
already stopped reporting for work as early as July 2003. Even then, they expressed willingness to
accommodate Endraca should he wish to work as a spare driver for the company again since he was never
really dismissed from employment anyway.13

On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional Evidence. 14 They
alleged that after diligent efforts, they were able to discover new pieces of evidence that will substantiate
the allegations in their position paper. Attached with the motion are the following: (a) Joint Affidavit of the
petitioners;15 (2) Affidavit of Good Faith of Aloney Rivera, a co-driver;16 (3) pictures of the petitioners
wearing company shirts;17 and (4) Tenazas’ Certification/Record of Social Security System (SSS)
contributions.18

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision, 19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents categorically denied the existence of an
employer-employee relationship. In this situation, the burden of proof shifts to the complainant to prove the
existence of a regular employment. Complainant Francisco failed to present evidence of regular
employment available to all regular employees, such as an employment contract, company ID, SSS,
withholding tax certificates, SSS membership and the like.

In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who stopped
reporting to queue for available taxi units which he could drive. In fact, respondents offered him in their
Position Paper on record, immediate reinstatement as extra taxi driver which offer he refused.

In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report for
work after the taxi was repaired. Respondents[,] in their Position Paper, on record likewise, offered him
immediate reinstatement, which offer he refused.

We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar.

The situations contemplated by law for entitlement to separation pay does [sic] not apply.

WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of
merit.

SO ORDERED.20

The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23, 2009,
the NLRC rendered a Decision,21 reversing the appealed decision of the LA, holding that the additional
pieces of evidence belatedly submitted by the petitioners sufficed to establish the existence of employer-
employee relationship and their illegal dismissal. It held, thus:

In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were illegally
dismissed, there being no showing, in the first place, that the respondent [sic] terminated their services. A
portion thereof reads:

"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal
investigations, no show cause memos, suspension memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally dismissed from employment.

It is possible that the complainants’ Motion to Admit Additional Evidence did not reach the Labor Arbiter’s
attention because he had drafted the challenged decision even before they submitted it, and thereafter, his
staff attended only to clerical matters, and failed to bring the motion in question to his attention. It is now up
to this Commission to consider the complainants’ additional evidence. Anyway, if this Commission must
consider evidence submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15,
2005), much more so must it consider evidence that was simply overlooked by the Labor Arbiter.

Among the additional pieces of evidence submitted by the complainants are the following: (1) joint affidavit
(records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney Rivera y Aldo; and
(3) three (3) pictures (records, p. 54) referred to by the complainant in their joint affidavit showing them
wearing t-shirts bearing the name and logo of the respondent’s company.

xxxx

WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas doing
business under the name and style Villegas Taxi Transport is hereby ordered to pay the complainants the
following (1) full backwages from the date of their dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for
Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality of this decision[;] (2) separation
pay equivalent to one month for every year of service; and (3) attorney’s fees equivalent to ten percent
(10%) of the total judgment awards.

SO ORDERED.22

On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same in its
Resolution23 dated September 23, 2009.

The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA rendered
a Decision,24 affirming with modification the Decision dated June 23, 2009 of the NLRC. The CA agreed
with the NLRC’s finding that Tenazas and Endraca were employees of the company, but ruled otherwise in
the case of Francisco for failing to establish his relationship with the company. It also deleted the award of
separation pay and ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the
decision read as follows:

At the outset, We declare that respondent Francisco failed to prove that an employer-employee relationship
exists between him and R. Transport. If there is no employer-employee relationship in the first place, the
duty of R. Transport to adhere to the labor standards provisions of the Labor Code with respect to Francisco
is questionable.

xxxx

Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental
circumstances of the instant case demand that something more should have been proffered. Had there
been other proofs of employment, such as Francisco’s inclusion in R.R.

Transport’s payroll, this Court would have affirmed the finding of employer-employee
relationship.1âwphi1 The NLRC, therefore, committed grievous error in ordering R. Transport to answer for
Francisco’s claims.

We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are both admitted to be
R. Transport’s employees. In its petition, R. Transport puts forth the theory that it did not terminate the
services of respondents but that the latter deliberately abandoned their work. We cannot subscribe to this
theory.

xxxx

Considering that the complaints for illegal dismissal were filed soon after the alleged dates of dismissal, it
cannot be inferred that respondents Tenazas and Endraca intended to abandon their employment. The
complainants for dismissal are, in themselves, pleas for the continuance of employment. They are
incompatible with the allegation of abandonment. x x x.

For R. Transport’s failure to discharge the burden of proving that the dismissal of respondents Tenazas and
Endraca was for a just cause, We are constrained to uphold the NLRC’s conclusion that their dismissal was
not justified and that they are entitled to back wages. Because they were illegally dismissed, private
respondents Tenazas and Endraca are entitled to reinstatement and back wages x x x.

xxxx

However, R. Transport is correct in its contention that separation pay should not be awarded because
reinstatement is still possible and has been offered. It is well[-]settled that separation pay is granted only in
instances where reinstatement is no longer feasible or appropriate, which is not the case here.

xxxx

WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC
LAC Case No. 07-002648-08, and its Resolution dated 23 September 2009 denying reconsideration thereof
are AFFIRMED with MODIFICATION in that the award of Jaime Francisco’s claims is DELETED. The
separation pay granted in favor of Bernard Tenazas and Isidro Endraca is, likewise, DELETED and their
reinstatement is ordered instead.

SO ORDERED.25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by the CA
in its Resolution26 dated June 28, 2010.

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July 15,
2010.

The Ruling of this Court

The petition lacks merit.

Pivotal to the resolution of the instant case is the determination of the existence of employer-employee
relationship and whether there was an illegal dismissal. Remarkably, the LA, NLRC and the CA had varying
assessment on the matters at hand. The LA believed that, with the admission of the respondents, there is
no longer any question regarding the status of both Tenazas and Endraca being employees of the company.
However, he ruled that the same conclusion does not hold with respect to Francisco whom the respondents
denied to have ever employed or known. With the respondents’ denial, the burden of proof shifts to
Francisco to establish his regular employment. Unfortunately, the LA found that Francisco failed to present
sufficient evidence to prove regular employment such as company ID, SSS membership, withholding tax
certificates or similar articles. Thus, he was not considered an employee of the company. Even then, the
LA held that Tenazas and Endraca could not have been illegally dismissed since there was no overt act of
dismissal committed by the respondents.27

On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees of the
company. The NLRC premised its conclusion on the additional pieces of evidence belatedly submitted by
the petitioners, which it supposed, have been overlooked by the LA owing to the time when it was received
by the said office. It opined that the said pieces of evidence are sufficient to establish the circumstances of
their illegal termination. In particular, it noted that in the affidavit of the petitioners, there were allegations
about the company’s practice of not issuing employment records and this was not rebutted by the
respondents. It underscored that in a situation where doubt exists between evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the employee. It awarded the
petitioners with: (1) full backwages from the date of their dismissal up to the finality of the decision; (2)
separation pay equivalent to one month of salary for every year of service; and (3) attorney’s fees.

On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that there was
indeed an illegal dismissal on the part of Tenazas and Endraca but not with respect to Francisco who failed
to present substantial evidence, proving that he was an employee of the respondents. The CA likewise
dismissed the respondents’ claim that Tenazas and Endraca abandoned their work, asseverating that
immediate filing of a complaint for illegal dismissal and persistent pleas for continuance of employment are
incompatible with abandonment. It also deleted the NLRC’s award of separation pay and instead ordered
that Tenazas and Endraca be reinstated.28

"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45
of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are completely devoid of support from the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts." 29 The Court finds that none of the mentioned circumstances
is present in this case.

In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to support
the conclusion that Francisco was an employee of the respondents and accordingly modified the NLRC
decision. It stressed that with the respondents’ denial of employer-employee relationship, it behooved
Francisco to present substantial evidence to prove that he is an employee before any question on the
legality of his supposed dismissal becomes appropriate for discussion. Francisco, however, did not offer
evidence to substantiate his claim of employment with the respondents. Short of the required quantum of
proof, the CA correctly ruled that the NLRC’s finding of illegal dismissal and the monetary awards which
necessarily follow such ruling lacked factual and legal basis and must therefore be deleted.

The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC, et
al.,30 where the Court reiterated:

[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule, is
confined only to issues of lack or excess of jurisdiction and grave abuse of discretion on the part of the
NLRC. The CA does not assess and weigh the sufficiency of evidence upon which the LA and the NLRC
based their conclusions. The issue is limited to the determination of whether or not the NLRC acted without
or in excess of its jurisdiction, or with grave abuse of discretion in rendering the resolution, except if the
findings of the NLRC are not supported by substantial evidence.31 (Citation omitted and emphasis ours)

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, "the
quantum of proof necessary is substantial evidence, or such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion."32 "[T]he burden of proof rests upon the
party who asserts the affirmative of an issue."33 Corollarily, as Francisco was claiming to be an employee
of the respondents, it is incumbent upon him to proffer evidence to prove the existence of said relationship.

"[I]n determining the presence or absence of an employer-employee relationship, the Court has consistently
looked for the following incidents, to wit: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee on the means
and methods by which the work is accomplished. The last element, the so-called control test, is the most
important element."34

There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists,
serve as evidence of employee status.35

In this case, however, Francisco failed to present any proof substantial enough to establish his relationship
with the respondents. He failed to present documentary evidence like attendance logbook, payroll, SSS
record or any personnel file that could somehow depict his status as an employee. Anent his claim that he
was not issued with employment records, he could have, at least, produced his social security records
which state his contributions, name and address of his employer, as his co-petitioner Tenazas did. He could
have also presented testimonial evidence showing the respondents’ exercise of control over the means and
methods by which he undertakes his work. This is imperative in light of the respondents’ denial of his
employment and the claim of another taxi operator, Emmanuel Villegas (Emmanuel), that he was his
employer. Specifically, in his Affidavit,36 Emmanuel alleged that Francisco was employed as a spare driver
in his taxi garage from January 2006 to December 2006, a fact that the latter failed to deny or question in
any of the pleadings attached to the records of this case. The utter lack of evidence is fatal to Francisco’s
case especially in cases like his present predicament when the law has been very lenient in not requiring
any particular form of evidence or manner of proving the presence of employer-employee relationship.

In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:

No particular form of evidence is required to prove the existence of an employer-employee relationship.

Any competent and relevant evidence to prove the relationship may be admitted. For, if only documentary
evidence would be required to show that relationship, no scheming employer would ever be brought before
the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored
considering that it should take much weightier proof to invalidate a written instrument. 38

Here, Francisco simply relied on his allegation that he was an employee of the company without any other
evidence supporting his claim. Unfortunately for him, a mere allegation in the position paper is not
tantamount to evidence.39 Bereft of any evidence, the CA correctly ruled that Francisco could not be
considered an employee of the respondents.

The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is also
well in accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases
Philippines,40 the Court reiterated, thus:

[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.1âwphi1 The two
reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible because
of strained relations between the employee and the employer, separation pay is granted. In effect, an
illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement
is no longer viable, and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up to the date of
actual reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to
one (1) month salary for every year of service should be awarded as an alternative. The payment of
separation pay is in addition to payment of backwages.41 (Emphasis supplied)

Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered in
lieu thereof. For instance, if reinstatement would only exacerbate the tension and strained relations between
the parties, or where the relationship between the employer and the employee has been unduly strained
by reason of their irreconcilable differences, it would be more prudent to order payment of separation pay
instead of reinstatement.42

This doctrine of strained relations, however, should not be used recklessly or applied loosely 43 nor be based
on impression alone. "It bears to stress that reinstatement is the rule and, for the exception of strained
relations to apply, it should be proved that it is likely that if reinstated, an atmosphere of antipathy and
antagonism would be generated as to adversely affect the efficiency and productivity of the employee
concerned."44

Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace
Builders v. Talde,45 the Court underscored:

Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence—

substantial evidence to show that the relationship between the employer and the employee is indeed
strained as a necessary consequence of the judicial controversy.46 (Citations omitted and emphasis ours)
After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation
pay to the petitioners. The NLRC decision did not state the facts which demonstrate that reinstatement is
no longer a feasible option that could have justified the alternative relief of granting separation pay instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered their
reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of separation
pay in their position paper.47 A bare claim of strained relations by reason of termination is insufficient to
warrant the granting of separation pay. Likewise, the filing of the complaint by the petitioners does not
necessarily translate to strained relations between the parties. As a rule, no strained relations should arise
from a valid and legal act asserting one’s right.48 Although litigation may also engender a certain degree of
hostility, the understandable strain in the parties’ relation would not necessarily rule out reinstatement which
would, otherwise, become the rule rather the exception in illegal dismissal cases.49 Thus, it was a prudent
call for the CA to delete the award of separation pay and order for reinstatement instead, in accordance
with the general rule stated in Article 27950 of the Labor Code.

Finally, the Court finds the computation of the petitioners' backwages at the rate of ₱800.00 daily reasonable
and just under the circumstances. The said rate is consistent with the ruling of this Court in Hyatt Taxi
Services, Inc. v. Catinoy,51 which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The
Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals in CA-G.R. SP
No. 111150 are AFFIRMED.

SO ORDERED.
 Hacienda Leddy vs. Villegas (GR No. 179654)

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 dated May 25, 2007 and Resolution2 dated August 10, 2007 of the Court of Appeals in CA-G.R.
SP No. 01923,3 which granted the Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure
filed by Villegas, and reversed the January 26, 2006 and March 31, 2006 Orders of the National Labor
Relations Commission (NLRC). These two Orders issued by the NLRC reversed the December 3, 2003
Decision of Executive Labor Arbiter Danilo Acosta.

The facts, as culled from the records, are as follows:

Villegas is an employee at the Hacienda Leddy as early as 1960, when it was still named Hacienda Teresa.
Later on named Hacienda Leddy owned by Ricardo Gamboa Sr., the same was succeeded by his son
Ricardo Gamboa, Jr. During his employment up to the time of his dismissal, Villegas performed sugar
farming job 8 hours a day, 6 days a week work, continuously for not less than 302 days a year, and for
which services he was paid ₱45.00 per day. He likewise worked in petitioner's coconut lumber business
where he was paid ₱34.00 a day for 8 hours work.

On June 9, 1993, Gamboa went toVillegas' house and told him that his services were no longer needed
without prior notice or valid reason. Hence, Villegas filed the instant complaint for illegal dismissal.

Gamboa, on the other hand, denied having dismissed Villegas but admitted in his earlier position paper
thatVillegas indeed worked with the said farm owned by his father, doing casual and odd jobs until the
latter's death in 1993.4 He was even given the benefit of occupying a small portion of the land where his
house was erected. He, however, maintained that Villegas ceased working at the farm as early as 1992,
contrary to his allegation that he was dismissed.5

However, later, Gamboaapparently retracted and instead insisted that the farm records reveal that the only
time Villegas rendered service for the hacienda was only in the year 1993,specifically February 9, 1993 and
February 11, 1993 when he was contracted by the farm to cut coconut lumber which were given to regular
workers for the repairs of their houses.6 Gamboa added that they informed Villegas that they need the
property, hence, they requested that he vacateit, but he refused. Thus, Gamboa surmised that Villegas filed
the instant complaint to gain leverage so he would not be evicted from the land he is occupying. He further
argued that during his employment, Villegas was paid in accordance with the rate mandated by law and
that his claim for illegal dismissal was merely a fabrication as he was the one who opted not to work. The
Labor Arbiter found thatthere was illegal dismissal.7 The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, respondent Ricardo Gamboa, Jr., is hereby ordered to pay
complainant Paquito Villegas the amount of One Hundred Forty Thousand Three Hundred Eight Pesos and
Eighty-Four/00 (₱140,308.84), representing his wage differential, backwages and separation pay, the
award to be deposited with this office within ten (10) days from receipt of this decision.

SO ORDERED.8

On appeal, on January 26, 2006, the NLRC set aside and vacated the Labor Arbiter's
decision.9 Complainant moved for reconsideration, but was denied.10

Thus, viapetition for certiorariunder Rule 65 of the Rules of Court, raising grave abuse of discretion as
ground, Villegas appealed before the Court of Appeals and sought the annulment of the Resolutions of the
NLRC.

In the disputed Decision11 dated May 25, 2007, the Court of Appeals granted the petition and annulled and
set aside the NLRC Decision dated January 26, 2006 and Resolution dated March 31, 2006. It further
reinstated the Labor Arbiter's Decision dated December 3, 2003.

Hence, this appeal anchored on the following grounds:

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON

SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF the EXECUTIVE LABOR ARBITER DECLARING
THAT RESPONDENT IS A REGULAR WORKER, THE FINDINGS NOT BEING IN
ACCORD WITH LAW;

II

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON

SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF THE EXECUTIVE LABOR ARBITER AND FAILED
 TO CONSIDER THE MOTIVE OF THE RESPONDENT IN FILING THE CASE AND THE
CREDIBILITY OF HIS WITNESS;

III

THAT ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A REGULAR

WORKER, THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE
DECISION OF THE NLRC AND AFFIRMING THE DECISION OF THE EXECUTIVE
LABOR ARBITER IN DIRECTING A STRAIGHT COMPUTATION FOR WAGE
DIFFERENTIALS, BACKWAGES AND SEPARATION PAY, THE FINDINGS NOT BEING
INACCORD WITH LAW.

Petitioner disputed that there exists an employer-employee relationship between him and Villegas. He
claimed that respondent was paid on a piece-rate basis without supervision.12 Petitioner added that since
his job was not necessary or desirable in the usual business or trade of the hacienda, he cannot be
considered as a regular employee. Petitioner insisted that it was Villegas who has stopped working in the
hacienda and that he was not dismissed.

We deny the petition.

The issue of Villegas' alleged illegal dismissal is anchored on the existence of an employer-employee
relationship between him and Gamboa; thus, essentially a question of fact. Generally, the Court does not
review errors that raise factual questions. However, when there is conflict among the factual findings of the
antecedent deciding bodies like the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity
jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-
examine the questioned findings."13

A perusal of the records would show that respondent, having been employed in the subject Hacienda while
the same was still being managed by petitioner's father until the latter's death in 1993, is undisputed as the
same was even admitted by Gamboa in his earlier pleadings.14 While refuting that Villegas was a regular
employee, petitioner however failed to categorically deny that Villegas was indeed employed in their
hacienda albeit he insisted that Villegas was merely a casual employee doing odd jobs.

The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden of proof is
upon the employer to show that the employee’s termination from service is for a just and valid cause. The
employer’s case succeeds or fails on the strength of its evidence and not the weakness of that adduced by
the employee, in keeping with the principle that the scales of justice should be tilted in favor of the latter in
case of doubt in the evidence presented by them. Often described as more than a mere scintilla, the
quantum of proof is substantial evidence which is understood as such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other equally reasonable minds might
conceivably opine otherwise.15

In the instant case, if we are to follow the length of time that Villegas had worked with the Gamboas, it
should be more than 20 years of service. Even Gamboa admitted that by act of generosity and compassion,
Villegas was given a privilege of erecting his house inside the hacienda during his employment. 16 While it
may indeed be an act of good will on the part of the Gamboas, still, such act is usually done by the employer
either out of gratitude for the employee’s service orfor the employer's convenience as the nature of the work
calls for it. Indeed, petitioner's length of service is an indication of the regularity of his employment. Even
assuming that he was doing odd jobs around the farm, such long period of doing said odd jobs is indicative
that the same was either necessary or desirable to petitioner's trade or business. Owing to the length
ofservice alone, he became a regular employee, by operation of law, one year after he was employed.

Article 280 of the Labor Code, describes a regular employee as one who is either (1) engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer; and (2) those
casual employees who have rendered at least one year of service, whether continuous or broken, with
respect to the activity in which he is employed.

In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission, 17 we held that
the testto determine whether employment is regular or not is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. If
the employee has been performing the job for at least one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient
evidence of the necessity, if not indispensability of that activity to the business. Clearly,with more than 20
years of service, Villegas, without doubt, passed this test to attain employment regularity.

While length of time may not be the controlling test to determine if Villegas is indeed a regular employee, it
is vital in establishing if he was hired to perform tasks which are necessary and indispensable to the usual
business or trade of the employer. If it was true that Villegas worked in the hacienda only in the year 1993,
specifically February 9,1993 and February 11, 1993, why would then hebe given the benefit toconstruct his
house in the hacienda? More significantly, petitioner admitted that Villegas had worked in the hacienda until
his father'sdemise. Clearly, even assuming that Villegas' employment was only for a specific duration, the
fact that he was repeatedly re-hired over a long periodof time shows that his job is necessary and
indispensable to the usual business or trade of the employer.

Gamboa likewise argued that Villegas was paid on a piece-rate basis.18 However, payment on a piece-
ratebasis does not negate regular employment. "The term ‘wage’ is broadly defined in Article 97 of the
Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations."19

We are likewise unconvinced thatit was Villegas who suddenly stopped working. Considering that hewas
employed with the Gamboas for more than 20 years and was even given a place to call his home, it does
not make sense why Villegas would suddenly stop working therein for no apparent reason. To justify a
finding of abandonment of work, there must be proof of a deliberate and unjustified refusal on the part of
an employee to resume his employment. The burden of proof is on the employer to show an unequivocal
intent on the part of the employee to discontinue employment. Mere absence is not sufficient. It must be
accompanied by manifest acts unerringly pointing to the fact that the employee simply does not want to
work anymore.20

Petitioner failed to discharge this burden. Other than the self-serving declarations in the affidavit of his
employee, petitioner did not adduce proof of overt acts of Villegas showing his intention to abandon his
work. Abandonment is a matter of intention;it cannot be inferred or presumed from equivocal acts. On the
contrary, the filing of the instant illegal dismissal complaint negates any intention on his part to sever their
employment relationship. The delay of morethan 1 year infiling the instant illegal dismissal case likewise is
non-issue considering that the complaint was filed within a reasonable period during the three-year period
provided under Article 291 of the Labor Code.21 As aptly observed by the appellate court, Villegas appeared
tobe without educational attainment. He could not have known that he has rights as a regular employee
that is protected by law.

The Labor Code draws a fine line between regular and casual employees to protect the interests of labor.
We ruled in Baguio Country Club Corporation v. NLRC22 that "its language evidently manifests the intent to
safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular
employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to
keep an employee on a casual status for as long as convenient." Thus, notwithstanding any agreements to
the contrary, what determines whether a certain employment is regular or casual is not the will and word of
the employer, to which the desperate worker often accedes, much less the procedure of hiring the employee
or the manner of paying his salary. It is the nature of the activities performed in relation to the particular
business or trades considering all circumstances, and in some cases the length of time of its performance
and itscontinued existence.23

All these having discussed, as a regular worker, Villegas is entitled to security of tenure under Article 279
ofthe Labor Code and can only be removed for cause. We found no valid cause attending to his dismissal
and found also that his dismissal was without due process.

Article 277(b) of the Labor Code provides that:

x x x Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under
Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated
a written notice containing a statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his representative if he so desires in
accordance with company rules and regulations promulgated pursuant to guidelines set by the Department
of Labor and Employment. x x x

The failure of the petitioner to comply with these procedural guidelines renders its dismissal of Villegas
illegal.1âwphi1 An illegally dismissed employee should be entitled to either reinstatement - if viable, or
separation pay if reinstatement is no longer viable, plus backwages in either instance. 24 Considering that
reinstatement is no longer feasible because of strained relations between the employee and the employer,
separation pay should be granted. The basis for computing separation pay is usually the length of the
employee's past service, while that for backwages is the actual period when the employee was unlawfully
prevented from working.25 It should be emphasized, however, that the finality of the illegal dismissal
decision becomes the reckoning point. In allowing separation pay, the final decision effectively declares
that the employment relationship ended so that separation pay and backwages are to be computed up to
that point. The decision also becomes a judgment for money from which another consequence flows - the
payment of interest in case of delay.26
WHEREFORE, premises considered, the Decision dated May 25, 2007 and Resolution dated August 10,
2007 of the Court of Appeals are hereby AFFIRMED. The Decision dated December 3, 2003 of the Labor
Arbiter in RAB Case No. 06-08-10480-94 is hereby REINSTATED. This case is hereby REMANDED to the
Labor Arbiter for the recomputation of respondent's separation pay and backwages with legal interest.

SO ORDERED.

Legend Hotel Manila vs. ROA (GR No. 153511)

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. On
August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor
practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays,
separation pay, service incentive leave pay, and 13111 month pay. He prayed for attorney's fees, moral
damages off P100,000.00 and exemplary damages for P100,000.00.1

Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant from
September 1992 with an initial rate of P400.00/night that was given to him after each night’s performance;
that his rate had increased to P750.00/night; and that during his employment, he could not choose the time
of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six times/week. He added that
the Legend Hotel’s restaurant manager had required him to conform with the venue’s motif; that he had
been subjected to the rules on employees’ representation checks and chits, a privilege granted to other
employees; that on July 9, 1999, the management had notified him that as a cost-cutting measure his
services as a pianist would no longer be required effective July 30, 1999; that he disputed the excuse,
insisting that Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss
of his employment made him bring his complaint.2

In its defense, petitioner denied the existence of an employer-employee relationship with respondent,
insisting that he had been only a talent engaged to provide live music at Legend Hotel’s Madison Coffee
Shop for three hours/day on two days each week; and stated that the economic crisis that had hit the
country constrained management to dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that
the parties had no employer-employee relationship.3 The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between the parties,
our finding is in the negative. The finding finds support in the service contract dated September 1, 1992
xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third
paragraph, page 4), the picture would not change because of the admission by complainant in his letter
dated October 8, 1996 (Annex "C") that what he was receiving was talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular
employees of the hotel who are paid by monthly xxx.

xxx

And thus, absent the power to control with respect to the means and methods by which his work was to be
accomplished, there is no employer-employee relationship between the parties xxx.

xxx

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31,
2001.5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC, 6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the question
to be asked is, are those elements present in this case?

The answer to this question is in the affirmative.

xxx

Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of
control that is more decisive.

In this regard, public respondent failed to take into consideration that in petitioner’s line of work, he was
supervised and controlled by respondent’s restaurant manager who at certain times would require him to
perform only tagalog songs or music, or wear barong tagalog to conform with Filipiniana motif of the place
and the time of his performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to six times a
week. Petitioner could not choose the time of his performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since the job of
the petitioner was in furtherance of the restaurant business of respondent hotel. Granting that petitioner
was initially a contractual employee, by the sheer length of service he had rendered for private respondents,
he had been converted into a regular employee xxx.

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses,
which is recognized by law under Article 283 of the Labor Code, xxx.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx. 7

Issues

In this appeal, petitioner contends that the CA erred:

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE

RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF
HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY
EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999
UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP
BETWEEN THE PARTIES.

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE INCENTIVE
LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES.

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO.
023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR
OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW
PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS
IMPROPER SINCE IT RAISED QUESTIONS OF FACT.

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS CLEARLY
IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A
PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES
OF GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC
OR THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR.

The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in
the CA was the proper recourse; and into two substantive issues, namely: (a) whether or not respondent
was an employee of petitioner; and (b) if respondent was petitioner’s employee, whether he was validly
terminated.

Ruling

The appeal fails.

Procedural Issue:

Certiorari was a proper recourse

Petitioner contends that respondent’s petition for certiorari was improper as a remedy against the NLRC
due to its raising mainly questions of fact and because it did not demonstrate that the NLRC was guilty of
grave abuse of discretion.

The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail
the decision of the NLRC may raise factual issues, and the CA may then review the decision of the NLRC
and pass upon such factual issues in the process.8 The power of the CA to review factual issues in the
exercise of its original jurisdiction to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg.
129, which pertinently provides that the CA "shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its
original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings."

Substantive Issue No. 1:

Employer-employee relationship existed between the parties

We next ascertain if the CA correctly found that an employer-employee relationship existed between the
parties.

The issue of whether or not an employer-employee relationship existed between petitioner and respondent
is essentially a question of fact.9 The factors that determine the issue include who has the power to select
the employee, who pays the employee’s wages, who has the power to dismiss the employee, and who
exercises control of the methods and results by which the work of the employee is accomplished.10 Although
no particular form of evidence is required to prove the existence of the relationship, and any competent and
relevant evidence to prove the relationship may be admitted, 11 a finding that the relationship exists must
nonetheless rest on substantial evidence, which is that amount of relevant evidence that a reasonable mind
might accept as adequate to justify a conclusion.12

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts.
However, where, like here, there is a conflict between the factual findings of the Labor Arbiter and the NLRC,
on the one hand, and those of the CA, on the other hand, it becomes proper for the Court, in the exercise
of its equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case
and re-examine the questioned findings.13

A review of the circumstances reveals that respondent was, indeed, petitioner’s employee. He was
undeniably employed as a pianist in petitioner’s Madison Coffee Shop/Tanglaw Restaurant from September
1992 until his services were terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the service contract
dated September 1, 1992 with respondent. This is true, notwithstanding petitioner’s insistence that
respondent had only offered his services to provide live music at petitioner’s Tanglaw Restaurant, and
despite petitioner’s position that what had really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by, among others, the express written
recommendation dated January 12, 1998 by Christine Velazco, petitioner’s restaurant manager, for the
increase of his remuneration.14

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that
defines and governs an employment relationship, whose terms are not restricted to those fixed in the written
contract, for other factors, like the nature of the work the employee has been called upon to perform, are
also considered. The law affords protection to an employee, and does not countenance any attempt to
subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes the
stipulation to deprive the employee of his security of tenure. The inequality that characterizes employer-
employee relations generally tips the scales in favor of the employer, such that the employee is often
scarcely provided real and better options.15

Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees
that were not included in the definition of wage under the Labor Code; and that such talent fees were but
the consideration for the service contract entered into between them.

The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights
a week. Such rate of remuneration was later increased to P750.00 upon restaurant manager Velazco’s
recommendation. There is no denying that the remuneration denominated as talent fees was fixed on the
basis of his talent and skill and the quality of the music he played during the hours of performance each
night, taking into account the prevailing rate for similar talents in the entertainment industry. 16
Respondent’s remuneration, albeit denominated as talent fees, was still considered as included in the term
wage in the sense and context of the Labor Code, regardless of how petitioner chose to designate the
remuneration. Anent this, Article 97(f) of the Labor Code clearly states:

xxx 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.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioner’s hotel.
Petitioner cannot use the service contract to rid itself of the consequences of its employment of respondent.
There is no denying that whatever amounts he received for his performance, howsoever designated by
petitioner, were his wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama, 17 every
employer is required to pay his employees by means of a payroll, which should show in each case, among
others, the employee’s rate of pay, deductions made from such pay, and the amounts actually paid to the
employee. Yet, petitioner did not present the payroll of its employees to bolster its insistence of respondent
not being its employee.

That respondent worked for less than eight hours/day was of no consequence and did not detract from the
CA’s finding on the existence of the employer-employee relationship. In providing that the " normal hours
of work of any employee shall not exceed eight (8) hours a day," Article 83 of the Labor Code only set a
maximum of number of hours as "normal hours of work" but did not prohibit work of less than eight hours.

Thirdly, the power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship.18 This is the so-called control test, and
is premised on whether the person for whom the services are performed reserves the right to control both
the end achieved and the manner and means used to achieve that end.19

Petitioner submits that it did not exercise the power of control over respondent and cites the following to
buttress its submission, namely: (a) respondent could beg off from his nightly performances in the restaurant
for other engagements; (b) he had the sole prerogative to play and perform any musical arrangements that
he wished; (c) although petitioner, through its manager, required him to play at certain times a particular
music or song, the music, songs, or arrangements, including the beat or tempo, were under his discretion,
control and direction; (d) the requirement for him to wear barong Tagalog to conform with the Filipiniana
motif of the venue whenever he performed was by no means evidence of control; (e) petitioner could not
require him to do any other work in the restaurant or to play the piano in any other places, areas, or
establishments, whether or not owned or operated by petitioner, during the three hour period from 7:00 pm
to 10:00 pm, three to six times a week; and (f) respondent could not be required to sing, dance or play
another musical instrument.

A review of the records shows, however, that respondent performed his work as a pianist under petitioner’s
supervision and control. Specifically, petitioner’s control of both the end achieved and the manner and
means used to achieve that end was demonstrated by the following, to wit:

a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to
10:00 pm, three to six times a week;

b. He could not choose the place of his performance;

c. The restaurant’s manager required him at certain times to perform only Tagalog songs or music,
or to wear barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees’ representation check and chits, a privilege granted
to other employees.

Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties
by the employee, for it sufficed that the employer has the right to wield that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its
Code of Discipline, and that the power to terminate the working relationship was mutually vested in the
parties, in that either party might terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance
of his service because of the present business or financial condition of petitioner 20 showed that the latter
had the power to dismiss him from employment. 21
Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated to prevent losses, the
conclusion that his termination was by reason of retrenchment due to an authorized cause under the Labor
Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor
Code. It is a management prerogative resorted to by employers to avoid or to minimize business losses.
On this matter, Article 283 of the Labor Code states:

Article 283. Closure of establishment and reduction of personnel. – The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
xxx. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to justify retrenchment and
to foil abuse, namely:

(a) The expected losses should be substantial and not merely de minimis in extent;

(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected
losses; and

(d) The alleged losses, if already incurred, and the expected imminent losses sought to be
forestalled must be proved by sufficient and convincing evidence.22

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting
standard of proof would render too easy the abuse of retrenchment as a ground for termination of services
of employees.23

Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon
the employer. Here, petitioner did not submit evidence of the losses to its business operations and the
economic havoc it would thereby imminently sustain. It only claimed that respondent’s termination was due
to its "present business/financial condition." This bare statement fell short of the norm to show a valid
retrenchment. Hence, we hold that there was no valid cause for the retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1âwphi1 The employer must prove, among others, that the losses are substantial and that
the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to present sufficient and
convincing evidence to prove that retrenchment was necessary, respondent’s termination due to
retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's
reinstatement to his former job no longer feasible. If that should be true, then petitioner should instead pay
to him separation pay at the rate of one. month pay for every year of service computed from September
1992 (when he commenced to work for the petitioners) until the finality of this decision, and full backwages
from the time his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of
Appeals promulgated on February 11, 2002, subject to the modification that should reinstatement be no
longer feasible, petitioner shall pay to respondent separation pay of one month for every year of service
computed from September 1992 until the finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.
 Bright Maritime Corporation vs. Fantonial (GR No. 165935)

This is a petition for review on certiorari1 of the Decision of the Court of Appeals in CA-G.R. SP No. 67571,
dated October 25, 2004, reversing and setting aside the Decision of the National Labor Relations
Commission (NLRC), and reinstating the Decision of the Labor Arbiter finding that respondent Ricardo B.
Fantonial was illegally dismissed, but the Court of Appeals modified the award of damages.

The facts are as follows:

On January 15, 2000, a Contract of Employment2 was executed by petitioner Bright Maritime Corporation
(BMC), a manning agent, and its president, petitioner Desiree P. Tenorio, for and in behalf of their principal,
Ranger Marine S.A., and respondent Ricardo B. Fantonial, which contract was verified and approved by
the Philippine Overseas Employment Administration (POEA) on January 17, 2000. The employment
contract provided that respondent shall be employed as boatswain of the foreign vessel M/V AUK for one
year, with a basic monthly salary of US$450, plus an allowance of US$220. The contract also provided for
a 90 hours per month of overtime with pay and a vacation leave with pay of US$45 per month.

Respondent was made to undergo a medical examination at the Christian Medical Clinic, which was
petitioner’s accredited medical clinic. Respondent was issued a Medical Certificate 3 dated January 17,
2000, which certificate had the phrase "FIT TO WORK" stamped on its lower and upper portion.

At about 3:30 p.m. of January 17, 2000, respondent, after having undergone the pre-departure orientation
seminar and being equipped with the necessary requirements and documents for travel, went to the Ninoy
Aquino International Airport upon instruction of petitioners. Petitioners told respondent that he would be
departing on that day, and that a liaison officer would be delivering his plane ticket to him. At about 4:00
p.m., petitioners’ liaison officer met respondent at the airport and told him that he could not leave on that
day due to some defects in his medical certificate. The liaison officer instructed respondent to return to the
Christian Medical Clinic.

Respondent went back to the Christian Medical Clinic the next day, and he was told by the examining
physician, Dr. Lyn dela Cruz-De Leon, that there was nothing wrong or irregular with his medical certificate.

Respondent went to petitioners’ office for an explanation, but he was merely told to wait for their call, as he
was being lined-up for a flight to the ship's next port of call. However, respondent never got a call from
petitioners.

On May 16, 2000, respondent filed a complaint against petitioners for illegal dismissal, payment of salaries
for the unexpired portion of the employment contract and for the award of moral, exemplary, and actual
damages as well as attorney’s fees before the Regional Arbitration Branch No. 7 of the NLRC in Cebu City.4

In their Position Paper,5 petitioners stated that to comply with the standard requirements that only those
who meet the standards of medical fitness have to be sent on board the vessel, respondent was referred
to their accredited medical clinic, the Christian Medical Clinic, for pre-employment medical examination on
January 17, 2000, the same day when respondent was supposed to fly to Germany to join the vessel.
Unfortunately, respondent was not declared fit to work on January 17, 2000 due to some medical problems.

Petitioners submitted the Affidavit6 of Dr. Lyn dela Cruz-De Leon, stating that the said doctor examined
respondent on January 17, 2000; that physical and laboratory results were all within normal limits except
for the finding, after chest x-ray, of Borderline Heart Size, and that respondent was positive to Hepatitis B
on screening; that respondent underwent ECG to check if he had any heart problem, and the result showed
left axis deviation. Dr. De Leon stated that she requested for a Hepatitis profile, which was done on January
18, 2000; that on January 20, 2000, the result of the Hepatitis profile showed non-infectious Hepatitis B.
Further, Dr. De Leon stated that respondent was declared fit to work only on January 21, 2000; however,
the date of the Medical Certificate was January 17, 2000, which was the date when she started to examine
the patient per standard operating procedure.

Petitioners argued that since respondent was declared fit to work only on January 21, 2000, he could not
join the vessel anymore as it had left the port in Germany. Respondent was advised to wait for the next
vacancy for boatswain, but he failed to report to petitioners’ office, and he gave them an incorrect telephone
number. During the mandatory conference/conciliation stage of this case, petitioners offered respondent to
join one of their vessels, but he refused.

Petitioners further argued that they cannot be held liable for illegal dismissal as the contract of employment
had not yet commenced based on Section 2 of the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean-Going Vessels (POEA Memorandum Circular No. 055-
96), which states:

SEC 2. COMMENCEMENT/DURATION OF CONTRACT

A. The employment contract between the employer and the seafarer shall commence upon actual departure
of the seafarer from the airport or seaport in the point of hire and with a POEA approved contract. It shall
be effective until the seafarer’s date of arrival at the point of hire upon termination of his employment
pursuant to Section 18 of this Contract.

Petitioners asserted that since respondent was not yet declared fit to work on January 17, 2000, he was
not able to leave on the scheduled date of his flight to Germany to join the vessel. With his non-departure,
the employment contract was not commenced; hence, there is no illegal dismissal to speak of. Petitioners
prayed for the dismissal of the complaint.

On September 25, 2000, Labor Arbiter Ernesto F. Carreon rendered a Decision 7 in favor of respondent. The
pertinent portion of the decision reads:

Unarguably, the complainant and respondents have already executed a contract of employment which was
duly approved by the POEA. There is nothing left for the validity and enforceability of the contract except
compliance with what are agreed upon therein and to all their consequences. Under the contract of
employment, the respondents are under obligation to employ the complainant on board M/V AUK for twelve
months with a monthly salary of 450 US$ and 220 US$ allowance. The respondents failed to present
plausible reason why they have to desist from complying with their obligation under the contract. The
allegation of the respondents that the complainant was unfit to work is ludicrous. Firstly, the respondents'
accredited medical clinic had issued a medical certificate showing that the complainant was fit to work.
Secondly, if the complainant was not fit to work, a contract of employment would not have been executed
and approved by the POEA.

We are not also swayed by the argument of the respondents that since the complainant did not actually
depart from Manila his contract of employment can be withdrawn because he has not yet commenced his
employment. The commencement of the employment is not one of those requirements in order to make the
contract of employment consummated and enforceable between the parties, but only as a gauge for the
payment of salary. In this case, while it is true that the complainant is not yet entitled to the payment of
wages because then his employment has not yet commenced, nevertheless, the same did not relieve the
respondents from fulfilling their obligation by unilaterally revoking the contract as the same amounted to
pre-termination of the contract without just or authorized cause perforce, we rule to be constitutive of illegal
dismissal.

Anent our finding of illegal dismissal, we condemn the respondent corporation to pay the complainant three
(3) months salary and the refund of his placement fee, including documentation and other actual expenses,
which we fixed at one month pay.

The granted claims are computed as follows:

US$670 x 4 months US$ 2,680.00

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Bright Maritime
Corporation to pay the complainant Ricardo Fantonial the peso equivalent at the time of actual payment of
US$ 2,680.00.

The other claims and the case against respondent Desiree P. Tenorio are dismissed for lack of merit. 8

Petitioners appealed the decision of the Labor Arbiter to the NLRC.

On May 31, 2001, the NLRC, Fourth Division, rendered a Decision 9 reversing the decision of the Labor
Arbiter. The dispositive portion of the NLRC decision reads:

WHEREFORE, premises considered, the decision of Labor Arbiter Ernesto F. Carreon, dated 25 September
2000, is SET ASIDE and a new one is entered DISMISSING the complaint of the complainant for lack of
merit.

SO ORDERED.10

The NLRC held that the affidavit of Dr. Lyn dela Cruz-De Leon proved that respondent was declared fit to
work only on January 21, 2000, when the vessel was no longer at the port of Germany. Hence, respondent’s
failure to depart on January 17, 2000 to join the vessel M/V AUK in Germany was due to respondent’s
health. The NLRC stated that as a recruitment agency, petitioner BMC has to protect its name and goodwill,
so that it must ensure that an applicant for employment abroad is both technically equipped and physically
fit because a labor contract affects public interest.

Moreover, the NLRC stated that the Labor Arbiter’s decision ordering petitioners to refund respondent’s
placement fee and other actual expenses, which was fixed at one month pay in the amount of US$670.00,
does not have any bases in law, because in the deployment of seafarers, the manning agency does not
ask the applicant for a placement fee. Hence, respondent is not entitled to the said amount.
Respondent filed a motion for reconsideration of the NLRC decision, which motion was denied in a
Resolution11 dated July 23, 2001.

Respondent filed a petition for certiorari before the Court of Appeals, alleging that the NLRC committed
grave abuse of discretion in rendering the Decision dated May 31, 2001and the Resolution dated July 23,
2001.

On March 12, 2002, respondent’s counsel filed a Manifestation with Motion for Substitution of Parties due
to the death of respondent on November 15, 2001, which motion was granted by the Court of Appeals.

On October 25, 2004, the Court of Appeals rendered a Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us REVERSING and
SETTING ASIDE the May 31, 2001 Decision and the July 23, 2001 Resolution of the NLRC, Fourth Division,
and REINSTATING the September 25, 2000 Decision of the Labor Arbiter with the modification that the
placement fee and other expenses equivalent to one (1) month salary is deleted and that the private
respondent Bright Maritime Corporation must also pay the amounts of ₱30,000.00 and ₱10,000.00 as moral
and exemplary damages, respectively, to the petitioner.12

The Court of Appeals held that the NLRC, Fourth Division, acted with grave abuse of discretion in reversing
the decision of the Labor Arbiter who found that respondent was illegally dismissed. It agreed with the Labor
Arbiter that the unilateral revocation of the employment contract by petitioners amounted to pre-termination
of the said contract without just or authorized cause.

The Court of Appeals held that the contract of employment between petitioners and respondent had already
been perfected and even approved by the POEA. There was no valid and justifiable reason for petitioners
to withhold the departure of respondent on January 17, 2000. It found petitioners’ argument that respondent
was not fit to work on the said date as preposterous, since the medical certificate issued by petitioners’
accredited medical clinic showed that respondent was already fit to work on the said date. The Court of
Appeals stated, thus:

Private respondent's contention, which was contained in the affidavit of Dr. Lyn dela Cruz-De Leon, that the
Hepatitis profile was done only on January 18, 2000 and was concluded on January 20, 2000, is of dubious
merit. For how could the said examining doctor place in the medical certificate dated January 17, 2000 the
words "CLASS-B NON-Infectious Hepatitis" (Rollo, p. 17) if she had not conducted the hepatitis profile?
Would the private respondent have us believe that its accredited physician would fabricate medical
findings?

It is obvious, therefore, that the petitioner had been fit to work on January 17, 2000 and he should have
been able to leave for Germany to meet with the vessel M/V AUK, had it not been for the unilateral act by
private respondent of preventing him from leaving. The private respondent was merely grasping at straws
in attacking the medical condition of the petitioner just so it can justify its act in preventing petitioner from
leaving for abroad.13

The Court of Appeals held that petitioners’ act of preventing respondent from leaving for Germany was
tainted with bad faith, and that petitioners were also liable to respondent for moral and exemplary damages.

Thereafter, petitioners filed this petition raising the following issues:

WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED A SERIOUS ERROR

AND GRAVE ABUSE OF DISCRETION WHEN IT HELD THE PETITIONERS LIABLE FOR
ILLEGALLY TERMINATING THE PRIVATE RESPONDENT FROM HIS EMPLOYMENT.

II

WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED SERIOUS ERROR

AND GRAVE ABUSE OF DISCRETION IN SETTING ASIDE THE OVERWHELMING EVIDENCE
SHOWING THAT THE PRIVATE RESPONDENT FAILED TO COMPLY WITH THE
REQUIREMENTS SET BY THE POEA RULES REGARDING FITNESS FOR WORK.

III

WHETHER OR NOT THE HONORABLE APPELLATE COURT SERIOUSLY ERRED AND

COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT AWARDED MONETARY BENEFITS
TO THE PRIVATE RESPONDENT DESPITE THE PROVISION OF THE POEA [STANDARD
EMPLOYMENT CONTRACT] TO THE CONTRARY.

IV
 WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED SERIOUS ERROR
WITH REGARD TO ITS FINDINGS OF FACTS, WHICH, IF NOT CORRECTED, WOULD
CERTAINLY CAUSE GRAVE OR IRREPARABLE DAMAGE OR INJURY TO THE
PETITIONERS.14

The general rule that petitions for review only allow the review of errors of law by this Court is not
ironclad.15 Where the issue is shrouded by a conflict of factual perceptions by the lower court or the lower
administrative body, such as the NLRC in this case, this Court is constrained to review the factual findings
of the Court of Appeals.16

Petitioners contend that the Court of Appeals erred in doubting the Affidavit of Dr. Lyn dela Cruz-De Leon,
which affidavit stated that the Hepatitis profile of respondent was done only on January 18, 2000 and was
concluded on January 20, 2000. Petitioners stated that they had no intention to fabricate or mislead the
appellate court and the Labor Arbiter, but they had to explain the circumstances that transpired in the
conduct of the medical examination. Petitioners reiterated that the medical examination was conducted on
January 17, 2000 and the result was released on January 20, 2000. As explained by Dr. Lyn dela Cruz-De
Leon, the date "January 17, 2000" was written on the medical examination certificate because it was the
day when respondent was referred and initially examined by her. The medical examination certificate was
dated January 17, 2000 not for any reason, but in accordance with a generally accepted medical practice,
which was not controverted by respondent.

Petitioners assert that respondent’s failure to join the vessel on January 17, 2000 should not be attributed
to it for it was a direct consequence of the delay in the release of the medical report. Respondent was not
yet declared fit to work at the time when he was supposed to be deployed on January 17, 2000, as instructed
by petitioners’ principal. Respondent’s fitness to work is a condition sine qua non for purposes of deploying
an overseas contract worker. Since respondent failed to qualify on the date designated by the principal for
his deployment, petitioners had to find a qualified replacement considering the nature of the shipping
business where delay in the departure of the vessel is synonymous to demurrage/damages on the part of
the principal and on the vessel’s charterer. Without a clean bill of health, the contract of employment cannot
be considered to have been perfected as it is wanting of an important requisite.

Based on the foregoing argument of petitioners, the first issue to be resolved is whether petitioners’ reason
for preventing respondent from leaving Manila and joining the vessel M/V AUK in Germany on January 17,
2000 is valid.

The Court rules in the negative.

The Court has carefully reviewed the records of the case, and agrees with the Court of Appeals that
respondent’s Medical Certificate17 dated January 17, 2000, stamped with the words "FIT TO WORK,"
proves that respondent was medically fit to leave Manila on January 17, 2000 to join the vessel M/V AUK
in Germany. The Affidavit of Dr. Lyn dela Cruz-De Leon that respondent was declared fit to work only on
January 21, 2000 cannot overcome the evidence in the Medical Certificate dated January 17, 2000, which
already stated that respondent had "Class-B Non-Infectious Hepatitis-B," and that he was fit to work. The
explanation given by Dr. Lyn dela Cruz-De Leon in her affidavit that the Medical Certificate was dated
January 17, 2000, since it carries the date when they started to examine the patient per standard operating
procedure, does not persuade as it goes against logic and the chronological recording of medical
procedures. The Medical Certificate submitted as documentary evidence18 is proof of its contents, including
the date thereof which states that respondent was already declared fit to work on January 17, 2000, the
date of his scheduled deployment.

Next, petitioners contend that respondent’s employment contract was not perfected pursuant to the POEA
Standard Employment Contract, which provides:

SEC 2. COMMENCEMENT/DURATION OF CONTRACT

A. The employment contract between the employer and the seafarer shall commence upon actual
departure of the seafarer from the airport or seaport in the point of hire and with a POEA approved contract.
It shall be effective until the seafarer’s date of arrival at the point of hire upon termination of his employment
pursuant to Section 18 of this Contract.19

Petitioners argue that, as ruled by the NLRC, since respondent did not actually depart from the Ninoy
Aquino International Airport in Manila, no employer-employee relationship existed between respondent and
petitioners’ principal, Ranger Marine S.A., hence, there is no illegal dismissal to speak of, so that the award
of damages must be set aside.

Petitioners assert that they did not conceal any information from respondent related to his contract of
employment, from his initial application until the release of the result of his medical examination. They even
tried to communicate with respondent for another shipboard assignment even after his failed deployment,
which ruled out bad faith. They pray that respondent’s complaint be dismissed for lack of merit.
Petitioners’ argument is partly meritorious.

An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree
upon its terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b)
object certain which is the subject matter of the contract, and (c) cause of the obligation.20 The object of the
contract was the rendition of service by respondent on board the vessel for which service he would be paid
the salary agreed upon.

Hence, in this case, the employment contract was perfected on January 15, 2000 when it was signed by
the parties, respondent and petitioners, who entered into the contract in behalf of their principal, Ranger
Marine S.A., thereby signifying their consent to the terms and conditions of employment embodied in the
contract, and the contract was approved by the POEA on January 17, 2000. However, the employment
contract did not commence, since petitioners did not allow respondent to leave on January 17, 2000 to
embark the vessel M/V AUK in Germany on the ground that he was not yet declared fit to work on the day
of departure, although his Medical Certificate dated January 17, 2000 proved that respondent was fit to
work.

In Santiago v. CF Sharp Crew Management, Inc.,21 the Court held that the employment contract did not
commence when the petitioner therein, a hired seaman, was not able to depart from the airport or seaport
in the point of hire; thus, no employer-employee relationship was created between the parties.

Nevertheless, 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.22 If the reverse happened, that is, the seafarer
failed or refused to be deployed as agreed upon, he would be liable for damages. 23

The Court agrees with the NLRC that a recruitment agency, like petitioner BMC, must ensure that an
applicant for employment abroad is technically equipped and physically fit because a labor contract affects
public interest. Nevertheless, in this case, petitioners failed to prove with substantial evidence that they had
a valid ground to prevent respondent from leaving on the scheduled date of his deployment. While the
POEA Standard Contract must be recognized and respected, neither the manning agent nor the employer
can simply prevent a seafarer from being deployed without a valid reason. 24

Petitioners’ act of preventing respondent from leaving and complying with his contract of employment
constitutes breach of contract for which petitioner BMC is liable for actual damages to respondent for the
loss of one-year salary as provided in the contract.25 The monthly salary stipulated in the contract is
US$670, inclusive of allowance.

The Court upholds the award of moral damages in the amount of ₱30,000.00, as the Court of Appeals
correctly found petitioners’ act was tainted with bad faith,26 considering that respondent’s Medical Certificate
stated that he was fit to work on the day of his scheduled departure, yet he was not allowed to leave
allegedly for medical reasons.1âwphi1

Further, the Court agrees with the Court of Appeals that petitioner BMC is liable to respondent for exemplary
damages,27 which are imposed by way of example or correction for the public good in view of petitioner’s
act of preventing respondent from being deployed on the ground that he was not yet declared fit to work on
the date of his departure, despite evidence to the contrary. Such act, if tolerated, would prejudice the
employment opportunities of our seafarers who are qualified to be deployed, but prevented to do so by a
manning agency for unjustified reasons. Exemplary damages are imposed not to enrich one party or
impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious
actions.28 In this case, petitioner should be held liable to respondent for exemplary damages in the amount
of ₱50,000.00,29 following the recent case of Claudio S. Yap v. Thenamaris Ship’s Management, et
al.,30 instead of ₱10,000.00

The Court also holds that respondent is entitled to attorney’s fees in the concept of damages and expenses
of litigation.31 Attorney's fees are recoverable when the defendant's act or omission has compelled the
plaintiff to incur expenses to protect his interest.32 Petitioners’ failure to deploy respondent based on an
unjustified ground forced respondent to file this case, warranting the award of attorney’s fees equivalent to
ten percent (10%) of the recoverable amount.33

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 67571,
dated October 25, 2004, is AFFIRMED with modification. Petitioner Bright Maritime Corporation is hereby
ORDERED to pay respondent Ricardo B. Fantonial actual damages in the amount of the peso equivalent
of US$8,040.00, representing his salary for one year under the contract; moral damages in the amount
Thirty Thousand Pesos (₱30,000.00); exemplary damages that is increased from Ten Thousand Pesos
(₱10,000.00) to Fifty Thousand Pesos (₱50,000.00), and attorney’s fees equivalent to ten percent (10%) of
the recoverable amount.

Costs against petitioners. SO ORDERED.

 PARAYDAY vs. SHOGUN SHIPPING CO (GR No. 204555)

This Petition for Review on Certiorari2 assails the May 11, 2012 Decision3 of the Court of Appeals (CA) in
CA-G.R. SP No. 112075, which set aside the August 28, 2009 Decision4 and October 27, 2009
Resolution5 of the National Labor Relations Commission (NLRC) declaring herein petitioners Pedrito R.
Parayday (Parayday) and Jaime Reboso (Reboso) to have been illegally dismissed from employment. In a
November 19, 2012 Resolution,6 the CA refused to reconsider its earlier Decision.

Antecedent Facts

This case stemmed from a complaint7 for illegal dismissal and regularization, underpayment of wages,
overtime pay, rest day pay, holiday pay, holiday premium, service incentive leave (SIL), thirteenth (13th)
month pay, and night shift differential pay, and claims for moral and exemplary damages, and attorney's
fees filed by Parayday and Reboso against respondent Shogun Shipping Co., Inc.8 (Shogun Ships), and
Vicente R. Cordero (Cordero) and Antonio "Nonie" C. Raymundo (Raymundo), President and Vice-
President, respectively, of Shogun Ships.

Petitioners Parayday and Reboso alleged that they were employed sometime in October 1996 and March
1997, respectively, as fitters/welders by Oceanview/VRC Lighterage Co., Inc., and VRC/Oceanview
Shipbuilders Co., Inc. (collectively referred to as "Oceanview"), corporations engaged in the business of
ship building. As fitters/welders, petitioners' duties and responsibilities included, among others, assembling,
welding, fitting, and installing materials or components using electrical welding equipment, and/or repairing
and securing parts and assemblies of Oceanview barges.9 In support of their allegation that they were
employees of Oceanview, petitioners presented a copy of Parayday's Oceanview Identification Card
(ID),10 and Certificate of Employment (COE) dated February 5, 2001.11

Sometime in 2003, Oceanview changed its corporate name to "Shogun Ships Inc.," herein respondent.
Shogun Ships maintained the same line of business, and retained in its employ Oceanview employees,
such as petitioners.

In the course of their employment with Oceanview and later with Shogun Ships, petitioners worked for
seven days every week, and were paid a daily salary of Three Hundred Fifty Pesos (P350.00) until their
separation from employment with Shogun Ships sometime in May 2008. Petitioners alleged that Shogun
Ships furnished to them handwritten payslips or Time Keeper's Reports which indicated their names, the
hours and days worked, and the amount of compensation received by them in a given
workweek.12 Petitioners further alleged that Shogun Ships failed to pay them their overtime pay, holiday
pay, and premium pay despite having rendered work during holidays, Sundays, and rest days. Shogun
Ships likewise did not pay petitioners their SIL and 13th month pay.

Sometime in May 2006, petitioners were assigned to Lamao, Limay, Bataan to do a welding job on one of
the barges of Shogun Ships, M/T Daniela Natividad. On May 11, 2006, an explosion occurred which caused
petitioners to sustain third degree burns on certain parts of their bodies. Petitioners were then hospitalized
from May 11, 2006 until June 6, 2006. Although medical expenses were borne by Shogun Ships, petitioners
were not paid their salaries while on hospital confinement. It was only on June 7, 2006, or after petitioners
were discharged from the hospital, that Shogun Ships resumed payment of their salaries until the first week
of August 2006. Thereafter, Shogun Ships discontinued providing petitioners financial assistance for
payment of their medical expenses.

Petitioners alleged that subsequently the management of Shogun Ships verbally dismissed them from
service effective May 1, 2008 due to lack of work as fitters/welders.

On its part, respondent denied outright that petitioners were engaged by Shogun Ships as regular
employees.1âшphi1 In support of its claim that no employer-employee relationship existed between
Shogun Ships and petitioners, respondent pointed out that Shogun Ships, which is a corporation engaged
in the business of domestic cargo shipping, was only incorporated sometime in November 2002,13 several
years after petitioners were engaged by Oceanview as its fitters/welders in 1996/1997. Anent petitioners'
allegation of change of corporate name of Oceanview to Shogun Ships, respondent maintained that there
was no such change of corporate name and that Oceanview was a separate and distinct entity from Shogun
Ships.

Respondent alleged that, at best, petitioners were helpers brought in by regular employees of Shogun Ships
on certain occasions when repairs were needed to be done on its barges. Respondent clarified that the
regular employees of Shogun Ships occasionally called in their friends and nearby neighbors, such as
petitioners, who were seeking temporary work as helpers until such time the needed repairs on the barges
were carried out or completed. Shogun Ships compensated them for services rendered since the work done
by these helpers were for the necessary repairs of its barges. Shogun Ships, however, did not engage them
on a regular basis since their work on the barges was merely temporary or occasional. Moreover, Shogun
Ships already had in its employ regular employees for its technical, mechanical, and electrical needs.
Concomitantly, helpers were free to seek employment elsewhere at any given time.

To lend credence to respondent's claim that petitioners were merely occasionally engaged by employees
of Shogun Ships with the view of helping petitioners earn additional income, respondent presented the
sworn statements and affidavits14 of Lito C. Panao and Virgilio Soriano, Jr., Shogun Ships' Vessel Materials
Coordinator and Warehouseman, respectively.

Sometime in 2008, the regular employees of Shogun Ships ceased calling helpers to work on the repairs
of the barges since they could already be completed without the helpers' assistance. It was during this time
that petitioners started demanding work from Shogun Ships, which the latter could not provide as there was
no work to be done on the barges.

Ruling of the Labor Arbiter

On April 27, 2009, Labor Arbiter Eduardo G. Magno promulgated a Decision,15 the dispositive portion of
which states:

WHEREFORE, Respondent Shogun Ships Co., Inc. is hereby ordered to reinstate complainants Pedrito R.
Parayday and Jaime Reboso to their former position without loss of seniority rights with full backwages from
time of dismissal until fully reinstated.

The computation of backwages from date of dismissal until date of this decision is as follows:

PEDRITO R. PARAYDAY - P108,150.00 and

JAIME REBOSO - P108,150.00

The claims for underpayment of wages and benefit are hereby denied for lack of factual basis.

The claim for damages and attorney's fees are likewise denied for lack of factual basis.

SO ORDERED.16

The Labor Arbiter held that petitioners were regular employees of Shogun Ships considering that they: (1)
performed tasks necessary and desirable to its business; and (2) rendered more than one year of service
at the time of their dismissal from employment. On the issue of illegal dismissal, the Labor Arbiter ruled in
favor of petitioners and held that respondent failed to prove that petitioners were dismissed for just or
authorized cause and that they were afforded procedural due process. In computing the amount of
petitioners' backwages, the Labor Arbiter took into consideration petitioners' years of service not only with
Shogun Ships, but also with its predecessor, Oceanview.

Ruling of the National Labor Relations Commission

In its appeal17 to the NLRC, respondent averred that the Labor Arbiter committed serious error amounting
to grave abuse of discretion in finding that petitioners were regular employees of Shogun Ships, and that
petitioners were illegally dismissed from employment. Respondent mainly contended that using the four-
fold test, petitioners cannot be considered as employees of Shogun Ships. Respondent also argued that
the Labor Arbiter erred in ruling that Shogun Ships is one and the same entity as Oceanview, since Shogun
Ships, unlike Oceanview which is engaged in ship building, is engaged in the business of domestic cargo
shipping. Respondent added that the petitioners' functions as fitters/welders cannot be regarded as
necessary and desirable to the business of cargo shipping as its barges are not consistently in a state of
disrepair. As petitioners are not employees of Shogun Ships, respondent insisted that no dismissal ever
took place, much more any illegal dismissal.

In its August 28, 2009 Decision,18 the NLRC dismissed the appeal and affirmed the findings of the Labor
Arbiter that petitioners were regular employees of Shogun Ships and that they were illegally dismissed from
employment. The dispositive of the Decision states, as follows:

WHEREFORE, premises considered, the appeal from the Decision dated April 27, 2009 is
hereby DISMISSED for lack of merit.

SO ORDERED.19

The NLRC took note of petitioners' allegations that after the May 11, 2006 explosion, they continued to
render their services to Shogun Ships and even reported back for work in August 2006, which respondent
did not categorically deny in its pleadings. Thus, even when their date of engagement with Shogun Ships
was counted from the date of the incident, it would appear that petitioners have already rendered more than
one year of service with Shogun Ships when they were purportedly dismissed from employment on May 1,
2008. On this premise, the NLRC held that the repeated and continuing need of petitioners' services as
fitters/welders was sufficient evidence of the necessity if not indispensability of their functions, thus making
them regular employees of Shogun Ships.

The NLRC also did not lend credence to the affidavits of Lito C. Panao and Virgilio Soriano, Jr. for the
reason that they were biased witnesses.

On the issue of illegal dismissal, the NLRC affirmed the findings of the Labor Arbiter and held that
respondent failed to prove that petitioners were dismissed for just or authorized cause.

Ruling of the Court of Appeals

Aggrieved, respondent filed a Petition for Certiorari20 (with Prayer for the Issuance of a Writ of Preliminary
Injunction and/or Temporary Restraining Order) before the CA ascribing upon the NLRC grave abuse of
discretion amounting to lack or in excess of jurisdiction when it held that petitioners were employees of
Shogun Ships and that they were illegally dismissed from employment.

In their Comment21 to respondent's Petition for Certiorari, petitioners averred that the application of the
four-fold test proved that they were employees of Shogun Ships. Petitioners also contended that their
employment arrangement with Shogun Ships, i.e., on a "per need" basis, was formulated to prevent them
from acquiring regular employment status. Petitioners also harped on the supposed insufficiency of
documentary evidence furnished by respondent which merely consisted of a copy of Shogun Ships'
Certificate of Incorporation. Petitioners also claimed reinstatement and payment of their backwages and
other monetary claims, including damages and attorney's fees.

In compliance with its July 8, 2010 Resolution,22 the parties filed their respective memoranda23 with the
CA.

On May 11, 2012, the CA rendered its assailed Decision24 granting respondent's Petition for Certiorari and
setting aside the August 28, 2009 Decision and October 27, 2009 Resolution of the NLRC. The dispositive
portion of the May 11, 2012 Decision reads as follows:

WHEREFORE, the petition is GRANTED. [sic] Setting aside the NLRC's Decision elated August 28, 2009
and Resolution dated October 27, 2009, the complaint for illegal dismissal and other money claims is
consequently dismissed.

SO ORDERED.25

The CA concluded that petitioners failed to adduce substantial evidence to prove the existence of an
employer-employee relationship between them and Shogun Ships. Considering the same, the CA held that
there was no dismissal to speak of, much more any illegal dismissal.

While it took note of petitioners' Time Keeper's Reports which supposedly indicated that they have been
reporting for work for seven days a week, the CA gave them no credence considering petitioners' failure to
establish their genuineness and due execution. The CA also found that the records of the case were bereft
of evidence which would prove that petitioners were continuously employed by Shogun Ships.

Additionally, the CA held that petitioners failed to prove that Oceanview were one and the same entity as
Shogun Ships. The appellate court explained in this wise, viz.:

We have to stress, at this point, that a corporation has a personality separate and distinct from those of its
stockholders and other corporations to which it may be connected. We cannot assume that the above-
named companies are one and the same. Neither are we prepared to "pierce the veil of corporate fiction"
as said doctrine comes into play "only during the trial of the case after the court has already acquired
jurisdiction over the corporation," matters which are not present here. Worse, to apply such doctrine, it is
important that the obtaining facts be properly pleaded and proved, i.e., after conducting a hearing during a
full-blown trial, a matter which equally is not true here. Besides, the piercing of the corporate veil has to be
done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is misused or
when necessary in the interest of justice.26 (Citations omitted)

Petitioners filed a motion for reconsideration27 but the CA denied the same in its November 19, 2012
Resolution.28 Hence, the instant Petition.

Issues

Petitioners raised the following issues for resolution:

THE [CA] SERIOUSLY ERRED IN FINDING THE TIME KEEPER'S REPOTS SUBMITTED
BY THE PETITIONERS AS INSUFFICIENT EVIDENCE OF ESTABLISHING THEIR
CONTINUOUS EMPLOYMENT WITH THE RESPONDENTS ON THE GROUND THAT
THEIR GENUINENESS AND DUE EXECUTION WERE NOT ESTABLISHED.
 II

THE [CA] SERIOUSLY ERRED IN RELYING ON THE BARE ASSERTION OF THE

RESPONDENTS THAT PETITIONERS WERE MERELY "OCCASIONALLY CALLED IN"
TO SERVE AS HELPERS.

III

THE [CA] SERIOUSLY ERRED IN AVOIDING TO PIERCE THE CORPORATE VEIL,

ALLEGING A FULL[-]BLOWN TRIAL HAS TO BE HAD, NOTWITHSTANDING THAT IT
WAS PROPERLY PLEADED AND PROVED BY THE PETITIONERS.

IV

THE [CA] ERRED IN ENTERTAINING AND GRANTING RESPONDENTS' PETITION FOR

CERTIORARI UNDER RULE 65.

[V]

THE [CA] SERIOUSLY ERRED IN IGNORING THE NOTICE OF CHANGE OF COUNSEL

WHEN IT RECOGNIZED THE COUNSEL WHO HAS NO AUTHORITY FROM
PETITIONERS.

For brevity and clarity, the issues of the instant case may be simplified as follows: (1) whether petitioners
were regular employees of Shogun Ships; and (2) whether petitioners were validly dismissed from
employment.

Our Ruling

The Court grants the Petition.

Preliminary Matters
The issue of whether or not an employer-
employee relationship existed between
petitioners and Shogun Ships is essentially
a question of fact.

At the outset, as to whether or not petitioners were regular employees of Shogun Ships, or whether or not
an employer-employee relationship existed between petitioners and Shogun Ships, are essentially
questions of fact29 which, as a rule, cannot be entertained in a Petition for Review on Certiorari filed under
Rule 45 of the Rules of Court. Consistent therewith is the doctrine that this Court is not a trier of facts, and
this is strictly adhered to in labor cases.30 However, where, like in the instant case, there is a conflict
between the factual findings of the Labor Arbiter and the NLRC, on one hand, and those of the CA, on the
other hand, it becomes proper for this Court, in the exercise of its equity jurisdiction, to review the facts and
re-examine the records of the case.31 Thus, this Court shall take cognizance of and resolve the factual
issues involved in this case.

Shogun Ships and Oceanview are two

separate and distinct entities.

As a preliminary to a determination of the first issue, i.e., whether petitioners were regular employees of
Shogun Ships, petitioners contend that they were employed by Oceanview as far back as 1996/1997.
Sometime in 2003, Oceanview supposedly changed its corporate name to Shogun Ships, herein
respondent. Petitioners would thus make it appear that Oceanview and Shogun Ships are one and the
same entity, which conveniently makes them employees of Shogun Ships since 1996/1997, or for a period
of 11 years until they were dismissed from employment on May 1, 2008. Along the same lines, the Labor
Arbiter, in his Decision, categorically held that Oceanview is the predecessor of Shogun Ships.

Notably, the contention of petitioners would support the conclusion that an employer-employee relationship
indeed existed between petitioners and Shogun Ships based on the following premises: (1) that petitioners
were engaged as fitters/welders by Shogun Ships through Oceanview; and (2) that petitioners were
rendering their services to Oceanview, now Shogun Ships, as early as 1996/1997 or for a period of 11 years
until their dismissal from employment on May 1, 2008.

In its Decision, the CA held that it cannot assume that Oceanview and Shogun Ships are one and the same
since the two corporations have personalities that are separate and distinct from each other and, as such,
must be taken distinctly and separately from one another. Moreover, the CA refused to apply the doctrine
of piercing the veil of corporate fiction in the absence of a full-blown trial where facts pertaining thereto are
properly pleaded and proved, and for lack of jurisdiction over Oceanview.
Petitioners, in asking this Court to treat Oceanview and Shogun Ships as one entity, insisted that the
obtaining facts which would justify the application of piercing the veil of corporate fiction, i.e., that
Oceanview changed its corporate name to Shogun Ships, have been properly pleaded and proved by
petitioners during the proceedings before the Labor Arbiter and the NLRC.

The records, however, are bereft of evidence which would show that Shogun Ships was formerly known as
Oceanview or that Oceanview changed its corporate name to Shogun Ships.

Other than their bare allegations, petitioners could have presented before the labor tribunals Oceanview's
amended Articles of Incorporation indicating that it changed its name to Shogun Ships, which petitioners,
however, failed to do in this case. Nor did petitioners present any evidence which would show Oceanview's
corporate affiliation with Shogun Ships, i.e., that Oceanview was indeed the predecessor of Shogun Ships.
What is clear is that Shogun Ships was only incorporated in 2002, several years after petitioners were
supposedly engaged by Oceanview in 1996/1997.

Considering the foregoing premises, this Court is inclined to agree with the respondent and the CA that
Shogun Ships and Oceanview are indeed two separate and distinct corporate entities. This Court will thus
apply the general doctrine of separate juridical personality – that a corporation has a legal personality
separate and distinct from that of its stockholders and other corporations to which it may be connected.32

Moreover, it is a well-established rule in labor proceedings that the Labor Arbiter, or this Court for that
matter, cannot acquire jurisdiction over the person of the respondent until he/she is validly served with
summons, or that he/she voluntarily appears in court.33 In this connection, this Com1 already ruled
in Kukan International Corporation v. Reyes34 that compliance with the modes of acquiring jurisdiction over
the person of the defendant or respondent cannot be dispensed with in applying the doctrine of piercing the
veil of corporate fiction, thus:

The principle of piercing the veil of corporate fiction, and the resulting treatment of two related corporations
as one and the same juridical person with respect to a given transaction, is basically applied only to
determine established liability; it is not available to confer on the court a jurisdiction it has not acquired, in
the first place, over a party not impleaded in a case. Elsewise put, a corporation not impleaded in a suit
cannot be subject to the court's process of piercing the veil of its corporate fiction. In that situation, the court
has not acquired jurisdiction over the corporation and, hence, any proceedings taken against that
corporation and its property would infringe on its right to due process. x x x35 (Emphasis supplied, citation
omitted)

Moreover, this Court also held that "the doctrine of piercing the veil of corporate entity can only be raised
during a full-blown trial over a cause of action duly commenced involving parties duly brought under the
authority of the court by way of service of summons or what passes as such service."36

Otherwise stated, the above doctrine will only come into play once the court has already acquired
jurisdiction over the corporation. Only then would it be allowed to present evidence for or against piercing
the veil of corporate fiction. Thus, if the Labor Arbiter or the NLRC in this case have not acquired jurisdiction
over the corporation, it would be improper for this Court to pierce the corporate veil as this would offend the
corporation's right to due process.37 In this case, it bears noting that Ocean view was never impleaded as
a party respondent and was never validly served with summons. Nor was Oceanview represented by any
authorized representative during the proceedings before the Labor Arbiter or the NLRC. It was merely
dragged to the case by mere reference of its name in petitioners' Sama-Samang Sinumpaang Salaysay.38

Accordingly, this Court agrees with the CA that there was no full-blown trial as to the propriety of applying
the said doctrine for the reason that Oceanview was never validly impleaded as a party respondent in the
instant illegal dismissal case. Considering that this Court has not acquired jurisdiction over Oceanview,
precisely because it was not properly impleaded herein as a party respondent, application of the said
doctrine would be unwarranted.

On the issue of the existence of an

employer-employee relationship

The proper resolution of this case necessarily hinges upon the existence of an employer-employee
relationship. Necessarily, therefore, before a determination of legality or illegality of petitioners' dismissal
can be had, the existence of an employment relationship between petitioners and Shogun Ships must be
first established. Sy v. Court of Appeals39 is instructive, viz.:

Three issues are to be resolved: (l) Whether or not an employer-employee relationship existed between
petitioners and respondent Sahot; (2) Whether or not there was valid dismissal; and (3) Whether or not
respondent Sabot is entitled to separation pay.

Crucial to the resolution of this case is the determination of the first issue. Before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established. (Citation omitted)
This Court, in Palomado v. National Labor Relations Commission,40 also held in this wise:

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

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

It is thus first incumbent upon this Court to resolve whether petitioners were indeed employees of Shogun
Ships. Without such fact of an employment relationship being established, as in this case where respondent
has denied outright such fact, then it would be futile on the part of this Court to determine the legality or
illegality of petitioners' dismissal.

Test in determining the existence of an

employer-employee relationship

Both the Labor Arbiter and the NLRC ruled that petitioners were employees of Shogun Ships considering
that their tasks as fitters/welders were necessary and desirable to its business of cargo shipping, and that
both petitioners have been rendering their services to Shogun Ships for more than one year. In concluding
that no employer-employee relationship existed between petitioners and Shogun Ships, the CA, on its part,
applied the four-fold test in this wise:

In determining the existence of an employer-employee relationship, the Supreme Court has invariably
adhered to the four-fold test, viz.: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, or the so called
"control test," considered to be the most important element.

In this case, private respondents miserably failed to adduce substantial evidence to prove the existence of
any of the aforementioned elements.41

To be clear, in determining the existence of an employer-employee relationship, this Court has time and
again applied the "four-fold test" which has the following elements, to wit: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power to discipline and dismiss; and (d) the employer's
power to control the employee with respect to the means and methods by which the work is to be
accomplished.42

By holding that petitioners were employees of Shogun Ships pursuant to their functions and years of service
with it, the Labor Arbiter and the NLRC appeared to have invariably applied Article 295 (formerly Article
280) of the Labor Code, as amended, which states:

Art. 295 (280). Regular and Casual employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
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, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists. (Emphasis supplied)

From the foregoing recitals, Article 295 of the Labor Code merely distinguishes between certain kinds of
employees, particularly, regular and casual employees, for purposes of determining their rights to certain
benefits, such as to join or form a union, or to security of tenure.43

Moreover, an employer-employee relationship may cover peripheral or core activities of the employer's
business. Thus, while a worker's task is not directly related, or necessary and desirable to the business of
the employer, this does not mean, however, that no employer-employee relationship exists between the
worker and the employer. Accordingly, the determination of the existence of an employer-employee
relationship is defined by law according to the facts of each case, regardless of the nature of the activities
involved.44

Article 295 should, therefore, not be used as a criterion to determine the existence of an employer-employee
relationship. More importantly, the same provision does not apply where the existence of an employment
relationship is in dispute.45 The CA was therefore correct in applying the four-fold test in determining
petitioners' employment status with Shogun Ships.

Petitioners are regular employees of

Shogun Ships.
"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 [as mentioned above], before a case for illegal dismissal can
prosper, an employer employee relationship must first be established."46

In this jurisdiction, each party must prove his affirmative allegation. Since petitioners' case against
respondents was premised on the existence of an employment relationship between them and Shogun
Ships, petitioners must prove by their own evidence that such an employer-employee relationship indeed
existed.47 While it has been held that no particular form of evidence is required to prove such relationship,
or that any competent and relevant evidence to prove the relationship may be admitted,48 this Court
believes that a finding of such relationship must still rest on substantial evidence,49 or "such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion."50 This is in accordance
with the oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, the
quantum of proof necessary is substantial evidence.51

In proving their employment relationship with Shogun Ships, petitioners presented the following
documentary evidence: (1) photocopy of Parayday's Oceanview ID;52 (2) photocopy of Parayday's COE
dated February 5, 2001 issued by "Oceanview Shipbuilding Co., Inc.";53 and (3) photocopy of handwritten
payslips or Time Keeper's Reports.54

Significantly, Parayday's Oceanview ID and COE provides no evidentiary value that petitioners were indeed
employees of Shogun Ships. A perusal thereof clearly shows that the same was issued by Oceanview, and
not Shogun Ships. The documents presented do not even make reference to Shogun Ships. As Shogun
Ships has a distinct juridical personality from Oceanview, as discussed above, the Court is not inclined to
conclude that said documents came from, or were issued by Shogun Ships. Save for herein petitioner
Reboso, the ID and COE, at best, only demonstrate the employment relationship of petitioner Parayday
with Oceanview, which, significantly, ceased in February 2001.

The CA did not also consider the Time Keeper's Reports as one of such proofs that petitioners were
employees of Shogun Ships since the genuineness and due execution of the said reports were unverifiable.

We agree. While the reports may show petitioners' inclusion in the employer's payroll which may serve as
a badge of regular employment, we are inclined to agree with the respondent that these reports were
uncorroborated and could have been easily concocted or fabricated to suit the personal interest and
purpose of petitioners. Notably, neither of the petitioners attested to the genuineness of the document, nor
that the same were executed or signed in their presence. Petitioners did not even disclose the maker of the
records, or that the signature appearing thereon is genuine.55

In Uichico v. National Labor Relations Commission,56 this Court held that:

It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of
procedure in the adjudication of cases. However, this procedural rule should not be construed as a license
to disregard certain fundamental evidentiary rules. While the rules of evidence prevailing in the courts of
law or equity are not controlling in proceedings before the NLRC, the evidence presented before it must at
least have a modicum of admissibility for it to be given some probative value. x x x (Citations omitted)

Even if the records were admissible, they would not suffice to show petitioners' employment status with
Shogun Ships. The reports presented by petitioners made no reference to Shogun Ships or Oceanview, or
to any employer for that matter. These documents do not even indicate the years during which they were
issued to petitioners. As correctly held by the CA, these reports cannot be considered as sufficient evidence
to show that petitioners were engaged by Shogun Ships since 1996/1997.

Considering the foregoing premises, this Court is constrained to reexamine the facts of the instant case
based on the allegations and sworn statements presented by the parties.

In its Decision, the CA found that petitioners failed to establish their employment relationship with Shogun
Ships.

This Court disagrees.

The application of the four-fold test in this case shows that an employer-employee relationship did exist
between petitioners and Shogun Ships.

While this Court cannot give credence to petitioners' allegations that they were engaged by Shogun Ships
through Oceanview as early as 1996/1997 for reasons already stated above, it is worth noting that
respondent have not categorically denied that sometime in May 2006, petitioners were engaged, or at the
least, were permitted by herein respondent to work on repairs on one of the barges of Shogun Ships, M/T
Daniela Natividad. Respondent did not also deny that petitioners worked for Shogun Ships until they were
supposedly verbally dismissed from employment on May 1, 2008. Notably, respondent even admitted that
petitioners were called in to do repairs on the barges of Shogun Ships.
Significantly, respondent have not denied that petitioners were duly compensated for any work done by
them on the barges. Respondent even categorically admitted that Shogun Ships provided petitioners
financial assistance when they were hospitalized from May 11, 2006 until June 6, 2006. Respondent also
have not disproved the allegation of petitioners that Shogun Ships continued to pay petitioners' salaries
after they were discharged from hospitalization on June 7, 2006.

Respondent also have not categorically denied that petitioners were verbally dismissed on May 1, 2008, as
in fact, respondent's allegations, i.e., that petitioners' "work to repair was only done when there is work
available for them. Once the repair was done, petitioners were paid for work done, and it ends
there"57 corroborated petitioners' claims that cessation of their services was determined by Shogun Ships.

All told, the fact that the aforesaid allegations of petitioners were not controverted by herein respondent
lends credence to petitioners' assertions that Shogun Ships: (1) engaged them as its employees; (2) paid
their salaries for services rendered; and (3) had ultimate discretion to dismiss their services after the needed
repairs on the barges were carried out. It is worth noting that Rule 8, Section 11, of the Rules of Court,
which supplements the NLRC Rules of Procedure,58 provides that allegations which are not specifically
denied are deemed admitted.59

As regards Shogun Ship's power of control over petitioners, respondent contended that Shogun Ships did
not direct the manner and method in which petitioners do their work. It bears emphasis, however, that the
control test calls merely for the existence of the right to control the manner of doing the work and not the
actual exercise of the right.60 Thus, in Dy Keh Beng v. International Labor and Marine Union of the
Philippines,61 this Court held that an employer's power of control, particularly over personnel working under
the employer, is deemed inferred, more so when said personnel are working at the employer's
establishment:

Petitioner contends that the private respondents "did not meet the control test in the light of the x x x
definition of the terms employer and employee, because there was no evidence to show that petitioner had
the right to direct the manner and method of respondent's work." Moreover, it is argued that petitioner's
evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only
when there was work.

While this Court upholds the control test under which an employer-employee relationship exists "where the
person for whom the services are performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end," it finds no merit with petitioner's arguments as stated
above. It should be borne in mind that the control test calls merely for the existence of the right to control
the manner of doing the work, not the actual exercise of the right. Considering the finding by the Hearing
Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known
as kaing," it is natural to expect that those working under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the
making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets
is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the
men he employed.

Clearly, considering that petitioners were working on the barges alongside regular employees of Shogun
Ships and that they were taking orders from its engineers as to the required specifications on how the
barges of Shogun Ships should be repaired, which respondent herein failed to deny, it may be thus logically
inferred that Shogun Ships, to some degree, exercised control or had the right to control the work of
petitioners.

We now go to the next issue: Did petitioners attain regular employment status?

Respondent maintains that petitioners cannot be placed in the same category as regular employees of
Shogun Ships considering that they were merely called in occasionally by its regular employees, or on a
"as per need" basis, and that their engagement as welders was dependent on the availability of the work
needed on the repairs of the barges. In support of these allegations, respondent presented the sworn
statements of Mr. Panao and Mr. Soriano, Jr., regular employees of Shogun Ships. Moreover, respondent
insisted that petitioners' functions as fitters/welders cannot be regarded as those which are necessary and
desirable to the business of cargo shipping.

While both the Labor Arbiter and the NLRC, on one hand, held that petitioners were regular employees of
Shogun Ships, the CA ruled, on the other hand, that petitioners could not have attained regular employment
status as they failed to prove that they were continuously employed by Shogun Ships.

Article 295 of the Labor Code "provides for two (2) types of regular employees, namely: (a) those who are
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer (first category); and (b) those who have rendered at least one year of service, whether continuous
or broken, with respect to the activity in which they are employed (second category)."62
The regular employment status of a person is defined and prescribed by law and not by what the parties
say it should be.63 Thus, while respondent was of the belief that rendering occasional work for Shogun
Ships prevented the parties from creating an employment relationship, much more for petitioners from
attaining regular employment status, provision of law, however, dictates that they were regular employees
of Shogun Ships.

First, the records of the case are bereft of evidence that petitioners were duly informed of the nature and
status of their engagement with Shogun Ships. Notably, in the absence of a clear agreement or contract,
whether written or otherwise, which would clearly show that petitioners were properly informed of their
employment status with Shogun Ships, petitioners enjoy the presumption of regular employment in their
favor.64

Second, petitioners were performing activities which are usually necessary or desirable in the business or
trade of Shogun Ships. This connection can be determined by considering the nature of the work performed
by petitioners and its relation to the scheme of the particular business or trade of Shogun Ships in its
entirety.65 As Shogun Ships is engaged in the business of domestic cargo shipping, it is essential, if at all
necessary, that Shogun Ships must continuously conduct vital repairs for the proper maintenance of its
barges. The desirability of petitioners functions is bolstered by the fact that Shogun Ships itself precisely
retained in its employ regular employees whose duties and responsibilities included, among others,
performing necessary repair and maintenance work on the barges.

Third, irrespective of whether petitioners' duties or functions are usually necessary and desirable in the
usual trade or business of Shogun Ships, the fact alone that petitioners were allowed to work for it for a
period of more than one (1) year, albeit intermittently since May 2006 until they were dismissed from
employment on May 1, 2008, was indicative of the regularity and necessity of welding activities to its
business. As such, their employment is deemed to be regular with respect to such activities and while such
activities exist.

In sum, we hold that petitioners have proven by substantial evidence – which only entails evidence to
support a conclusion, "even if other minds, equally reasonable, might conceivably opine otherwise"66 that
they were regular employees of Shogun Ships. In any event, it is well-settled in this jurisdiction that in any
controversy between a laborer and his master, doubts reasonably arising from the evidence are resolved
in favor of the laborer.67

Petitioners were illegally dismissed from

employment.

Having gained regular status, petitioners could only be dismissed for just or authorized cause after they
had been accorded due process. Thus, the query: Were they dismissed in accordance with law?

It is an established principle that the dismissal of an employee is justified where there was a just cause and
the employee was afforded due process prior to dismissal. The burden of proof to establish these twin
requirements is on the employer, who must present clear, accurate, consistent, and convincing evidence to
that effect.68

Here, respondent was unable to discharge the burden of proof required to establish petitioners' dismissal
from employment was legal and valid. The records also failed to show that respondent afforded petitioners
due process prior to their dismissal, as in fact, they were merely verbally dismissed, and were thus not
served notices informing them of the grounds for which their dismissal was sought. Clearly, petitioners'
dismissal was not carried out in accordance with law and was, therefore, illegal.

In view therefore of petitioners' illegal dismissal, reinstatement and payment of backwages must necessarily
be made. Petitioners' backwages must be computed from the time they were unjustly dismissed from
employment on May 1, 2008 up to actual reinstatement.

Petitioners' claims of underpayment of

wages and benefits, damages and
attorney's fees, and solidary liability of
individual respondents Cordero and
Raymundo.

This Court is aware that the Labor Arbiter, in his April 27, 2009 Decision, which was affirmed by the NLRC,
denied petitioners' claims for underpayment of wages and benefits. Petitioners' claims for damages and
attorney's fees were similarly denied for lack of merit. A perusal of the Labor Arbiter's Decision would also
show that liability as to payment of petitioners' full backwages and award for reinstatement rested solely on
Shogun Ships, to the exclusion of herein individual respondents Cordero and Raymundo. The pertinent
portion of the April 27, 2009 Decision of the Labor Arbiter reads, as follows:
Accordingly, respondent company has to reiterate [sic] complainants to their former position without loss of
their seniority rights with full backwages from time of dismissal until fully reinstated.

On the money claims, we deny the claims of underpayment of wages and benefits for lack of factual basis
thereof. Likewise[,] the claim for damages and attorney's fees are likewise denied for lack of factual basis.69

Notably, notwithstanding the above findings, the records would bear that petitioners did not appeal from the
April 27, 2009 Decision of the Labor Arbiter. It was only before this Court that herein petitioners resurrected
their claims for underpayment of wages and benefits, including damages and attorney's fees.70

Article 223 of the Labor Code, which sets forth the rules on appeal from the Labor Arbiter's decision,
provides:

ART. 229 (223) Appeal. - Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders. x x x

Meanwhile, Section 21, Rule V of the 2011 NLRC Rules of Procedure, as amended, provides:

SECTION 21. FINALITY OF THE DECISION OR ORDER AND ISSUANCE OF CERTIFICATE OF

FINALITY. – (a) Finality of the Decision or Order of the Labor Arbiter. – If no appeal is filed with the Regional
Arbitration Branch of origin within the time provided under Article 223 (now 229) of the Labor Code, as
amended, and Section 1, Rule VI of these Rules, the decision or order of the Labor Arbiter shall become
final and executory after ten (10) calendar days from receipt thereof by the counsel or authorized
representative or the parties if not assisted by counsel or representative. (As amended by En Banc
Resolution No. 11-12, Series of 2012)

In Industrial Management International Development Corporation (INIMACO) v. National Labor Relations

Commission,71 this Court held that:

It is an elementary principle of procedure that the resolution of the court in a given issue as embodied in
the dispositive part of a decision or order is the controlling factor as to settlement of rights of the parties.
Once a decision or order becomes final and executory, it is removed from the power or jurisdiction of the
court which rendered it to further alter or amend it. x x x (Citations omitted)

Thus, parties who do not appeal from a judgment can no longer seek modification or reversal of the
same.1âшphi1 Considering that petitioners failed to question the findings of the Labor Arbiter, as even
affirmed by the NLRC, that they are not entitled to their monetary claims consisting of underpayment of
salaries and benefits, and claims for damages and attorney's fees, including Shogun Ship's exclusive
liability for payment of petitioners' backwages, said findings have therefore long become final and can no
longer be impugned in this action.72

Since the April 27, 2009 Decision of the Labor Arbiter, insofar as the unappealed portion of the said Decision
is concerned, is already final and executory against the petitioners, respondents have already acquired
vested rights by virtue of said judgment. "[J]ust as the losing party has the privilege to file an appeal within
the prescribed period, so does the winner also have the correlative right to enjoy the finality of the
decision."73

Other matters

Petitioners impute fault on the CA for serving to Atty. Napoleon Banzuela, petitioners' former counsel, its
May 11, 2012 Decision, and not to petitioners' counsel on record, The Law Firm of Velandrez and
Associates, despite receipt of the Notice of Change in the Composition of the Law Office on January 26,
2012.74 On this point, this Court finds that the CA committed no error when it served to Atty. Banzuela its
May 11, 2012 Decision since it was only on July 17, 2012 that the Court of Appeals received Atty. Banzuela's
Motion to Withdraw as Counsel75 of petitioners.

In the matter of petitioners' motion to cite respondent for direct contempt of court for supposedly
misrepresenting facts and using insulting language against petitioners, we find the same unmeritorious.
While it is well-established that contemptuous statements made in pleadings filed with the court constitute
direct contempt,76 a perusal of respondent's Comment (to petitioners' Petition) would show that no such
contemptuous language was utilized. Moreover, this Court finds that respondent has not employed deceitful
acts which would serve as basis for the charge of direct contempt.

WHEREFORE, the instant Petition is GRANTED. The May 11, 2012 Decision and November 19, 2012
Resolution of the Court of Appeals in CA G.R. SP No. 112075 are REVERSED and SET ASIDE. The August
28, 2009 Decision and October 27, 2009 Resolution of the NLRC, which declared petitioners Pedrito R.
Parayday and Jaime Reboso to have been illegally dismissed from employment,
are REINSTATED and AFFIRMED.
The case is REMANDED to the Labor Arbiter for the purpose of re-computation of petitioners' full
backwages.

SO ORDERED.

YIELS HOG DEALER vs. MACASIO

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2 and
the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision
annulled and set aside the May 26, 2010 decision4 of the National Labor Relations Commission
(NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision
dismissed respondent John G. Macasio's monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business
under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month
pay. He also claimed payment for moral and exemplary damages and attorney’s fees. Macasio also claimed
payment for service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995.
Macasio claimed that David exercised effective control and supervision over his work, pointing out that
David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner by which he was
to perform his work; (2) daily paid his salary of ₱700.00, which was increased from ₱600.00 in 2007,
₱500.00 in 2006 and ₱400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that
David owned the hogs delivered for chopping, as well as the work tools and implements; the latter also
rented the workplace. Macasio further claimed that David employs about twenty-five (25) butchers and
delivery drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten
employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the
Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually
starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the volume
of the delivered hogs; (2) received the fixed amount of ₱700.00 per engagement, regardless of the actual
number of hours that he spent chopping the delivered hogs; and (3) was not engaged to report for work
and, accordingly, did not receive any fee when no hogs were delivered.

Macasio disputed David’s allegations.11 He argued that, first, David did not start his business only in 2005.
He pointed to the Certificate of Employment12 that David issued in his favor which placed the date of his
employment, albeit erroneously, in January 2000. Second, he reported for work every day which the payroll
or time record could have easily proved had David submitted them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the latter
on "pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasio’s
request, only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang
Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasio’s co-butchers), to
corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit. The LA gave
credence to David’s claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following
facts to support this finding: (1) Macasio received the fixed amount of ₱700.00 for every work done,
regardless of the number of hours that he spent in completing the task and of the volume or number of hogs
that he had to chop per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00
p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00 fixed wage far exceeds the then prevailing
daily minimum wage of ₱382.00. The LA added that the nature of David’s business as hog dealer supports
this "pakyaw" or task basis arrangement.

The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime,
holiday, SIL and 13th month pay.

The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not
require Macasio to observe an eight hour work schedule to earn the fixed ₱700.00 wage; and that Macasio
had been performing a non-time work, pointing out that Macasio was paid a fixed amount for the completion
of the assigned task, irrespective of the time consumed in its performance. Since Macasio was paid by
result and not in terms of the time that he spent in the workplace, Macasio is not covered by the Labor
Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations
Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari. 21

The CA’s Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and reversed the
NLRC’s ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless
found Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino Santos
Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage of
holiday, SIL and 13th month pay only if he is likewise a "field personnel." As defined by the Labor Code, a
"field personnel" is one who performs the work away from the office or place of work and whose regular
work hours cannot be determined with reasonable certainty. In Macasio’s case, the elements that
characterize a "field personnel" are evidently lacking as he had been working as a butcher at David’s "Yiels
Hog Dealer" business in Sta. Mesa, Manila under David’s supervision and control, and for a fixed working
schedule that starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years, with 10%
attorney’s fees on the total monetary award. The CA, however, denied Macasio’s claim for moral and
exemplary damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration 24 in the CA’s January 31,
2011 resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a "pakyaw" or task basis. Hence, the
latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions
before the lower tribunals27 and adds that he never had any control over the manner by which Macasio
performed his work and he simply looked on to the "end-result." He also contends that he never compelled
Macasio to report for work and that under their arrangement, Macasio was at liberty to choose whether to
report for work or not as other butchers could carry out his tasks. He points out that Solano and Antonio
had, in fact, attested to their (David and Macasio’s) established "pakyawan" arrangement that rendered a
written contract unnecessary. In as much as Macasio is a task basis employee – who is paid the fixed
amount of ₱700.00 per engagement regardless of the time consumed in the performance – David argues
that Macasio is not entitled to the benefits he claims. Also, he posits that because he engaged Macasio on
"pakyaw" or task basis then no employer-employee relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially
when, as in this case, they are supported by substantial evidence. Hence, David posits that the CA erred
in reversing the labor tribunals’ findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a "field personnel" as David would have this
Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to David’s
position, the ₱700.00 fee that he was paid for each day that he reported for work does not indicate a
"pakyaw" or task basis employment as this amount was paid daily, regardless of the number or pieces of
hogs that he had to chop. Rather, it indicates a daily-wage method of payment and affirms his regular
employment status. He points out that David did not allege or present any evidence as regards the quota
or number of hogs that he had to chop as basis for the "pakyaw" or task basis payment; neither did David
present the time record or payroll to prove that he worked for less than eight hours each day. Moreover,
David did not present any contract to prove that his employment was on task basis. As David failed to prove
the alleged task basis or "pakyawan" agreement, Macasio concludes that he was David’s employee.
Procedurally, Macasio points out that David’s submissions in the present petition raise purely factual issues
that are not proper for a petition for review on certiorari. These issues – whether he (Macasio) was paid by
result or on "pakyaw" basis; whether he was a "field personnel"; whether an employer-employee
relationship existed between him and David; and whether David exercised control and supervision over his
work – are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the CA’s
factual findings bind this Court, absent a showing that such findings are not supported by the evidence or
the CA’s judgment was based on a misapprehension of facts. He adds that the issue of whether an
employer-employee relationship existed between him and David had already been settled by the LA 29 and
the NLRC30 (as well as by the CA per Macasio’s manifestation before this Court dated November 15,
2012),31 in his favor, in the separate illegal case that he filed against David.

The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday,
SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65
petition before the CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion
in ruling that Macasio is entitled to these labor standards benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65 proceeding,
this Court’s power of review is limited to resolving matters pertaining to any perceived legal errors that the
CA may have committed in issuing the assailed decision. This is in contrast with the review for jurisdictional
errors, which we undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision, we examine the CA decision based on how it determined the presence or absence of grave abuse
of discretion in the NLRC decision before it and not on the basis of whether the NLRC decision on the
merits of the case was correct.32 In other words, we have to be keenly aware that the CA undertook a Rule
65 review, not a review on appeal, of the NLRC decision challenged before it. 33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised against
the assailed CA decision.34

In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and 13th
month pay. This one is a question of law. The determination of this question of law however is intertwined
with the largely factual issue of whether Macasio falls within the rule on entitlement to these claims or within
the exception. In either case, the resolution of this factual issue presupposes another factual matter, that
is, the presence of an employer-employee relationship between David and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter
on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with the
lack of employment relationship. Impliedly, David asserts that their "pakyawan" or task basis arrangement
negates the existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or
independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx 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[.]"35 In relation to Article 97(6), Article 10136 of the Labor
Code speaks of workers paid by results or those whose pay is calculated in terms of the quantity or quality
of their work output which includes "pakyaw" work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates
employer-employee relationship, David would want the Court to engage on a factual appellate review of
the entire case to determine the presence or existence of that relationship. This approach however is not
authorized under a Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-employee
but because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL,
holiday and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case
Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the existence of an employer-
employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee relationship is in
fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision
rendered by the CA under 65, the narrow scope of inquiry is whether the CA correctly determined the
presence or absence of grave abuse of discretion on the part of the NLRC. In concrete question form, "did
the NLRC gravely abuse its discretion in denying Macasio’s claims simply because he is paid on a non-
time basis?"

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship
exists baseless. Employing the control test,38 we find that such a relationship exist in the present case.

Even a factual review shows that Macasio is David’s employee

To determine the existence of an employer-employee relationship, four elements generally need to be

considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee’s conduct. These elements or indicators
comprise the so-called "four-fold" test of employment relationship. Macasio’s relationship with David
satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of
the employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that
"nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their
"Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel
David bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin
siya sa aming trabaho."

Second, David paid Macasio’s wages.Both David and Macasio categorically stated in their respective
pleadings before the lower tribunals and even before this Court that the former had been paying the latter
₱700.00 each day after the latter had finished the day’s task. Solano and Antonio also confirmed this fact
of wage payment in their "Pinagsamang Sinumpaang Salaysay." 41 This satisfies the element of "payment
of wages."

Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control Macasio’s
work schedule, David could regulate Macasio’s work and could even refuse to give him any assignment,
thereby effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work as to the means and
methods of performing it. In addition to setting the day and time when Macasio should report for work, the
established facts show that David rents the place where Macasio had been performing his tasks. Moreover,
Macasio would leave the workplace only after he had finished chopping all of the hog meats given to him
for the day’s task. Also, David would still engage Macasio’s services and have him report for work even
during the days when only few hogs were delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could naturally be expected to
observe certain rules and requirements and David would necessarily exercise some degree of control as
the chopping of the hog meats would be subject to his specifications. Also, since Macasio performed his
tasks at David’s workplace, David could easily exercise control and supervision over the former.
Accordingly, whether or not David actually exercised this right or power to control is beside the point as the
law simply requires the existence of this power to control 4243 or, as in this case, the existence of the right
and opportunity to control and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-
employee relationship existing between David and Macasio.

Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio was
engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that factual
findings of labor tribunals when supported by the established facts and in accord with the laws, especially
when affirmed by the CA, is binding on this Court.

A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage

payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on
the task itself, in the sense that payment is reckoned in terms of completion of the work, not in terms of the
number of time spent in the completion of work.45 Once the work or task is completed, the worker receives
a fixed amount as wage, without regard to the standard measurements of time generally used in pay
computation.

In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter,
regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned to
him for chopping, Macasio would receive the fixed amount of ₱700.00 once he had completed his task.
Clearly, these circumstances show a "pakyaw" or task basis engagement that all three tribunals uniformly
found.

In sum, the existence of employment relationship between the parties is determined by applying the "four-
fold" test; engagement on "pakyaw" or task basis does not determine the parties’ relationship as it is simply
a method of pay computation. Accordingly, Macasio is David’s employee, albeit engaged on "pakyaw" or
task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is
entitled to holiday, 13th month, and SIL pay.

On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule
IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No.
851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations
Implementing PD No. 851. Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from
the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on Section 1,
Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos Transit. 46 These
labor law provisions, when read together with the Serrano ruling, exempt those engaged on "pakyaw" or
task basis only if they qualify as "field personnel."

In other words, what we have before us is largely a question of law regarding the correct interpretation of
these labor code provisions and the implementing rules; although, to conclude that the worker is exempted
or covered depends on the facts and in this sense, is a question of fact: first, whether Macasio is a "field
personnel"; and second, whether those engaged on "pakyaw" or task basis, but who are not "field
personnel," are exempted from the coverage of holiday, SIL and 13th month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under
Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that it was grave
abuse of discretion on the part of the NLRC to deny Macasio’s monetary claims simply because he is paid
on a non-time basis without determining whether he is a field personnel or not.

To resolve these issues, we need tore-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code
- provisions governing working conditions and rest periods.

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

xxxx

"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. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL
pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers who
are paid by results" on the other hand, are not covered by the Title I provisions. The wordings of Article82
of the Labor Code additionally categorize workers "paid by results" and "field personnel" as separate and
distinct types of employees who are exempted from the Title I provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR 47 reads:

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]

xxxx

SECTION 1. Coverage. – This Rule shall apply to all employees except:

xxxx

(e)Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who are paid
a fixed amount for performing work irrespective of the time consumed in the performance thereof.
[emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR 48 pertinently
provides:

Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall
be entitled to a yearly service incentive leave of five days with pay.

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

xxxx

Section 1. Coverage. – This rule shall apply to all employees except:

xxxx

(e) 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 a fixed
amount for performing work irrespective of the time consumed in the performance thereof. [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be
excluded from their coverage, an employee must be one of those that these provisions expressly exempt,
strictly in accordance with the exemption. Under the IRR, exemption from the coverage of holiday and SIL
pay refer to "field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis[.]" Note that unlike Article 82 of the
Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged on task basis" as a
separate and distinct category from employees classified as "field personnel." Rather, these employees are
altogether merged into one classification of exempted employees.

Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those
who are engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what
the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this
rule may be conceded to be within the discretion granted to the LA and NLRC as the quasi-judicial bodies
with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who are
engaged on task or contract basis" in the rule has already been interpreted to mean as follows:

[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly,
petitioner's teaching personnel cannot be deemed field personnel which refers "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.
[Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled
to the service incentive leave benefit cannot therefore be sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and
SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and limits the general
exclusion of "workers paid by results" found in Article 82 from the coverage of holiday and SIL pay. This is
the only reasonable interpretation since the determination of excluded workers who are paid by results from
the coverage of Title I is "determined by the Secretary of Labor in appropriate regulations."

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules,
Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other
employees whose performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose
actual hours of work in the field cannot be determined with reasonable certainty."

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely
commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms that they follow.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of
granting Macasio’s petition.

In Serrano, the Court, applying the rule on ejusdem generis 50 declared that "employees engaged on task
or contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they
fall under the classification of field personnel."51 The Court explained that the phrase "including those who
are engaged on task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book III
of the IRR should not be understood as a separate classification of employees to which SIL shall not be
granted. Rather, as with its preceding phrase - "other employees whose performance is unsupervised by
the employer" - the phrase "including those who are engaged on task or contract basis" serves to amplify
the interpretation of the Labor Code definition of "field personnel" as those "whose actual hours of work in
the field cannot be determined with reasonable certainty."

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor
Code provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code
based simply and solely on the mode of payment of an employee. The NLRC’s utter disregard of this
consistent jurisprudential ruling is a clear act of grave abuse of discretion. 52 In other words, by dismissing
Macasio’s complaint without considering whether Macasio was a "field personnel" or not, the NLRC
proceeded based on a significantly incomplete consideration of the case. This action clearly smacks of
grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken
counsel from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding
the payment of holiday pay since the rule exempting "field personnel" from the grant of holiday pay is
identically worded with the rule exempting "field personnel" from the grant of SIL pay. To be clear, the phrase
"employees engaged on task or contract basis "found in the IRR on both SIL pay and holiday pay should
be read together with the exemption of "field personnel."

In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL
pay, the presence (or absence) of employer supervision as regards the worker’s time and performance is
the key: if the worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled
to a holiday pay and SIL pay unless exempted from the exceptions specifically provided under Article 94
(holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task
basis also falls within the meaning of "field personnel" under the law, then he is not entitled to these
monetary benefits.

Macasio does not fall under the classification of "field personnel"

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall
under the definition of "field personnel." The CA’s finding in this regard is supported by the established facts
of this case: first, Macasio regularly performed his duties at David’s principal place of business; second, his
actual hours of work could be determined with reasonable certainty; and, third, David supervised his time
and performance of duties. Since Macasio cannot be considered a "field personnel," then he is not
exempted from the grant of holiday, SIL pay even as he was engaged on "pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRC’s ruling
dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the
NLRC gravely abused its discretion in denying this benefit to Macasio.1âwphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be
one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing
P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section
3(e), "employers of those who are paid on xxx task basis, and those who are paid a fixed amount for
performing a specific work, irrespective of the time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any reference to
"field personnel." This could only mean that insofar as payment of the 13th month pay is concerned, the
law did not intend to qualify the exemption from its coverage with the requirement that the task worker be
a "field personnel" at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the
payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated
November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No.
116003.

SO ORDERED.
REGALA vs. MANILA HOTEL CORPORATION (GR No. 204684)

This Petition for Review on Certiorari1 assails the May 22, 2012 Decision2 of the Court of Appeals (CA) in
CA-G.R. SP No. 120748, which set aside the March 24, 2011 Decision3 and May 31, 2011 Resolution4 of
the National Labor Relations Commission (NLRC) declaring herein petitioner Allan Regala (Regala) a
regular employee of respondent Manila Hotel Corporation (MHC) who was constructively dismissed from
employment. In a November 19, 2012 Resolution,5 the CA refused to reconsider its earlier Decision.

Antecedent Facts

This case stemmed from a complaint for constructive dismissal and regularization, non-payment of paternity
leave pay, and claims for backwages filed by Regala against MHC, and Emilio Yap (Yap), Teresita Gabut
(Gabut), and Marcelo Ele (Ele), President, Food and Beverage Manager, and Vice President for Legal,
Personnel and Security Administration, respectively, of MHC.

Regala was hired by MHC sometime in February 20006 as one of its waiters assigned to the Food and
Beverage Department.7 He was later assigned as cook helper at MHC's Chocolate Room/Cookies Kitchen
during the period from October 18, 2004 to June 26, 2006.8 In the course of his employment as waiter/cook
helper, Regala worked for six (6) days every week,9 and was paid a daily salary of P382.00 until sometime
in December 2009.10 MHC also remitted contributions in Regala's behalf to the Social Security System
(SSS) and Philippine Health Insurance Corporation (PhilHealth).11

As waiter, Regala's duties and responsibilities included preparing the mise en place, taking of orders, and
serving food and beverages to hotel guests at tables and inside MHC's dining establishments. In the course
of his engagement with MHC, Regala was directed to report to a Captain Waiter, and assigned to work for
its Cowrie Grill, Pool Bar, Mini Bar, Kitchen Ginza, Tap Room, Champagne Room, Room Service, Mabuhay
Palace, Banquet Services, and Pastry and House Keeping.12 From October 2008 to May 2009, Regala
was made to attend and participate in hotel trainings for Basic Food Safety Strategies,13 Food Safety
Awareness,14 and Customer Service Awareness.15

Regala alleged that he was not recognized as a regular rank-and-file employee despite having rendered
services to MHC for several years. Regala also claimed that MHC constructively dismissed him from
employment when it allegedly reduced his regular work days to two (2) days from the normal five (5)-day
work week starting December 2, 2009, which resulted in the diminution of his take home salary.16

On its part, MHC denied outright that Regala is its regular employee, and claimed that he is a mere freelance
or "extra waiter" engaged by MHC on a short term basis. It explained that it employs extra waiters at fixed
and/or determinable periods particularly when there are temporary spikes in the volume of its business. It
is during these specific periods when management is forced to supplement the hotel's regular staff of
waiters with temporary fixed-term employees, such as Regala, in order to meet increases in business
activities in its food and beverage functions, special events and banquets. In engaging extra or temporary
waiters, MHC relies on loose referrals from its employees and on a list of waiters who have expressed
interest in part-time or temporary engagements.17 It further explained that its system of hiring freelance
waiters on an informal and temporary basis is a common practice in the hotel and restaurant industry and
that it is through this industry practice that these extra waiters, including Regala, are able to offer their
services to other hotels, restaurants, and food catering companies despite their existing engagement with
MHC.18

MHC then presented a sample fixed-term service contract,19 and copies of Regala's Department Outlet
Services Contracts for Extra Waiters/Cocktail Attendants (Service Agreements)20 covering the periods of
his supposed temporary engagement with MHC, or from March 1, 2010 to March 3, 2010. MHC contended
that prior to engaging the services of extra waiters, applicant waiters, such as Regala, and MHC execute
fixed-term service contracts and agree on a specific duration of engagement depending on the requirement
of the hotel in a given period. The Service Agreements and the fixed-term service contracts similarly state
the following terms, to wit:

This is to confirm your engagement to render Extra Waiter/Cocktail Attendant with Manila
Hotel strictly under the following terms only:

DATE (Duration): _________________

DEPARTMENT/OUTLET __________

TIME:

RATE PER HOUR:________________

FUNCTION (If applicable)__________

 It is understood that the above rate is inclusive of emergency cost of living allowance and
that this Service/Function Contract is only for the above-indicated outlet/department or
function and which Terminates or Co-terminus with the completion of the function, work or
services for which you have been engaged.

For all intents and purposes, you are not considered employees of the Company. You shall,
however, abide and be bound by rules and regulations issued.

MANILA HOTEL

By:

Personnel Department21

On this premise, MHC argued that there can be no illegal dismissal to speak of since the expiration of the
period under Regala's Service Agreements simply caused the natural cessation of his fixed-term
employment with MHC.22

Ruling of the Labor Arbiter

On September 8, 2010, the Labor Arbiter promulgated a Decision23 dismissing the complaint for lack of
merit, the dispositive portion of which states:

WHEREFORE, premises considered, judgement is hereby rendered DISMISSING the instant complaint for
lack of merit.

SO ORDERED.24

The LA held that Regala is a fixed-term employee of MHC and that he voluntarily executed the Service
Agreements with MHC with a full understanding that his engagement with it was only for a fixed period.
Meanwhile, Regala failed to present evidence which would prove that he was forced or coerced into
executing the said Service Agreements, that his consent was vitiated by any unlawful means when he
signed the same, or that MHC exerted moral dominance over him at the time he was engaged by it as a
waiter for a fixed period.

On the issue of constructive dismissal, the LA held that Regala's claim of constructive dismissal must fail
considering that he continued reporting for work at MHC at the time he instituted the instant complaint for
illegal or constructive dismissal.

The LA also denied Regala's claims for payment of paternity leave pay and backwages and exonerated
MHC, Yap, Gabut, and Ele from any liability.

Ruling of the National Labor Relations Commission

In his appeal25 to the NLRC, Regala averred that the LA erred in finding that he was a fixed-term employee
of MHC and that he was not constructively dismissed from employment. Petitioner mainly contended that,
using the four-fold test, he is a regular employee of MHC. Petitioner added that his duties and functions as
a waiter are necessary and desirable to the food and beverage business of MHC, and that his continued
employment since February 2000 is sufficient evidence of the necessity and indispensability of his services
to its business. Petitioner further argued that MHC's practice of making him sign fixed-term service contracts
from time to time is a scheme devised by it to preclude him from attaining regular employment status.
Petitioner also claimed that MHC outsourced the services of a contractor which supplied the "extra waiters."
This purportedly affected Regala's working hours.

Being a regular employee of MHC, Regala argued that MHC's act of unreasonably reducing his work days
is tantamount to constructive dismissal.

In its March 24, 2011 Decision,26 the NLRC reversed the Decision of the LA and held that Regala is a
regular employee of MHC.

In so ruling, the NLRC noted that MHC failed to furnish a copy of Regala's written contract executed at the
time of his engagement on February 2000, which would show that he was engaged for a fixed period or
duration. In the absence of a clear agreement or contract, the NLRC held that Regala enjoys the
presumption of regular employment in his favor. The NLRC also emphasized that Regala's position as
waiter required him to perform activities which are usually necessary and desirable to the usual trade and
business of MHC.

Being a regular employee of MHC, the NLRC found that Regala was constructively dismissed from
employment when MHC reduced his take-home pay as a consequence of the hotel's changes in his work
schedule which reduced his work days from five (5) days a week to two (2) days a week. The NLRC thus
ordered Regala's reinstatement to his former position without loss of seniority rights, and payment of full
backwages computed from December 2, 2009 up to his actual reinstatement, less the amount of wages he
actually received beginning December 2, 2009, and from March 1 to 3, 2010.

The dispositive of the Decision states, as follows:

WHEREFORE, the Labor Arbiter's Decision dated September 8, 2010 is hereby REVERSED and SET
ASIDE. Respondent MHC Corporation is ordered to reinstate the complainant to his former position without
loss of seniority rights and to pay his full backwages computed from December 2, 2009 up to his actual
reinstatement, but deducting therefrom the wages he received for two (2) days a week beginning December
2, 2009 and his wages for March 1-3, 2010, and is tentatively computed up to March 30, 2011 in the amount
of P170,618.54 x x x x

SO ORDERED.27

MHC filed a Motion for Reconsideration28 which was, however, denied in the May 31, 2011 Resolution29 of
the NLRC.

Ruling of the Court of Appeals

Aggrieved, MHC filed a Petition for Certiorari30 (with Application for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction) before the CA ascribing upon the NLRC grave
abuse of discretion when it held that Regala is a regular employee of MHC and that he was constructively
dismissed from employment.

MHC averred that its practice of hiring additional waiters on a fixed or short term contractual basis is a valid
exercise of its management prerogative in order for it to meet client demands as a result of unforeseen
spikes in the volume of its business.31 It further argued that the fact Regala was engaged to perform
activities which are usually necessary or desirable to its business does not preclude the fixing of
employment for a specified duration or period.32

In his Comment/Opposition33 to respondents' Petition for Certiorari, Regala averred that his fixed-term
contract of employment basically rendered his work at the pleasure of MHC which was intended to prevent
security of tenure from accruing in his favor.34

On May 22, 2012, the CA rendered its assailed Decision35 granting MHC's Petition for Certiorari and
setting aside the March 24, 2011 Decision and May 31, 2011 Resolution of the NLRC. The dispositive
portion of the May 22, 2012 Decision reads, as follows:

WHEREFORE, the instant petition is GRANTED. Setting aside NLRC's assailed Decision dated March 24,
2011, and Resolution dated May 31, 2011, the complaint below is dismissed for being devoid of merit.

SO ORDERED.36

The CA concluded that Regala showed no proof that MHC forced or coerced him to execute his fixed-term
employment contracts, nor did he establish that MHC was "engaged in hiring workers for work for such
periods [which were] deliberately crafted to prevent the regularization of employees x x x x."37 As Regala
validly entered into fixed-term employment agreements with MHC, his displacement each time the said
fixed-term employment expired did not result in illegal dismissal.

Petitioner filed a Motion for Reconsideration38 but the CA denied the same in its November 19, 2012
Resolution.39 Hence, the instant Petition.

It is worth noting at this point that MHC filed before this Court its March 10, 2016 Motion for Leave of Court
to File and Admit Attached Manifestation40 and the Manifestation41 on March 31, 2016. Annexed to the
March 10, 2016 Manifestation were photocopies of Regala's Daily Time Records (DTR)42 covering the
period from March 4, 2009 to March 4, 2016, and his Regular Payroll Journals (Payroll Journals)43 for the
period from January 25,2009 to February 25, 2016.

Issues

Regala raised the following issues for resolution:

THE HONORABLE [CA] ERRED IN DISMISSING THE CASE FOR REGULARIZATION

AND CONSTRUCTIVE DISMISSAL FILED BY PETITIONER.

THE HONORABLE [CA] ERRED IN RESOLVING THAT PETITIONER IS A FIXED-TERM

EMPLOYEE OF THE RESPONDENT [MHC].44

It is undisputed that Regala is an employee of MHC. The crux of the controversy lies in petitioner's
employment status.
Simply stated, the issues before this Court are the following: 1) whether Regala is a regular employee of
MHC; and 2) whether he was constructively dismissed from employment.

Our Ruling

The Court grants the Petition.

Preliminary Matters

The belated submission of additional documentary evidence by MHC cannot be permitted.

In a March 10, 2016 Manifestation filed before this Court, MHC, for the first time, submitted photocopies of
Regala's DTRs covering the period from March 4, 2009 to March 4, 2016, and his Payroll Journals for the
period from January 25, 2009 to February 25, 2016.

While it admitted that it inadvertently failed to attach the documents to its April 24, 2013 Comment to
Regala's Petition for Review, it requested this Court to admit the same as part of the records of this
case.45 Petitioner argued that an examination of the DTRs and Payroll Journals reveals that Regala
continuously report for work in MHC since January 11, 2010, or at the time he filed the instant complaint for
constructive dismissal. In this regard, MHC brings to fore the following propositions, viz.: (1) there is no
dismissal to speak of, let alone one that is illegal or constructive, as there was no actual severance of
employment from January 11, 2010, the date Regala filed the instant complaint, to date, or at least until the
time the March 10, 2016 Manifestation was filed before this Court, or on March 31, 2016; and (2) Regala is
not entitled to his claim for payment of backwages as he has been continuously receiving his salaries since
January 2009.46

In sum, MHC is requesting this Court to receive belatedly submitted evidence and consider its new theory
that no actual dismissal took place.

This we shall not tolerate.

This Court does not make findings of facts particularly on evidence submitted for the first time on appeal. It
is well settled in this jurisdiction that "[p]oints of law, theories, issues and arguments not brought to the
attention of the lower court x x x need not be considered by a reviewing court, as they cannot be raised for
the first time at that late stage. Basic considerations of fairness and due process impel this rule."47 In the
present case, MHC did not even provide any justifiable reason why it had failed to present Regala's DTRs
and Payroll Journals during the proceedings held before the LA or the NLRC. It bears noting that the DTRs
and Payroll Journals have been in MHC's possession since January 2009, and yet it was only after more
than seven (7) years therefrom that it presented the same to this Court on appeal for its appreciation. Not
only does the unjustified belated submission of these records make a mockery of this Court's judicial
processes, but this also casts doubt on their credibility, more so when they are not even newly discovered
evidence.

In its attempt to persuade this Court to allow the reception of additional evidence, MHC cites CMTC
International Marketing Corporation v. Bhagis International Trading Corporation (CMTC International
Marketing Corporation).48 Its reliance, however, on the said case is misplaced as the factual milieu therein
is not on all fours with the case at bench. CMTC International Marketing Corporation involves, on one hand,
the belated filing of the appellant's brief before the trial court. The case before this Court, on the other hand,
underlines the belated submission to it of evidence and argument of new issues on appeal.

This being the case, MHC's plea that its evidence be admitted in the interest of justice does not deserve
any consideration.

We cannot also allow MHC, at this point of the proceedings, to take an inconsistent position - that no actual
dismissal transpired. To be clear, the hotel had argued before the labor tribunals that there is no basis to
support the claim that Regala was illegally dismissed from employment as the expiration of the term under
his Service Agreements simply caused the natural cessation of his fixed-term employment with
MHC.49 Contrarily, it now asserts in its March 10, 2016 Manifestation that "there was never any severance
or break in [Regala's] employment with the Hotel."50

In other words, while MHC earlier argued that Regala's dismissal was valid, it now posits in a mere
Manifestation filed before this Court that no actual dismissal transpired.

This Court cannot simply permit MHC to raise a new issue, take an inconsistent position, or change its
theory on appeal as these would offend the basic rules of fair play, justice and due process.

We have held in Maxicare PCIB Cigna Healthcare v. Contreras51 that:

As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the
lower court, will not be permitted to change theory on appeal. Points of law, theories, issues and arguments
not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a
reviewing court as these cannot be raised for the first time at such late stage. It would be unfair to the
adverse party who would have no opportunity to present further evidence material to the new theory, which
it could have done had it been aware of it at the time of the hearing before the trial court. x x x52

This Court cannot tolerate this procedural scheme adopted by MHC. To hold otherwise will result in a great
injustice to Regala as he no longer has the opportunity to present counter evidence to overcome and refute
MHC's evidence on new issues raised by it at this very late stage of the proceedings.

The issue of Regala's employment status is essentially a question of fact.

Whether Regala is a regular or fixed-term employee of MHC, or whether he was constructively dismissed
from employment, are essentially questions of fact, which, as a rule, cannot be entertained in a Petition for
Review on Certiorari filed under Rule 45 of the Rules of Court. Consistent therewith is the doctrine that this
Court is not a trier of facts, and this is strictly adhered to in labor cases.53 However, where, like in the
instant case, there is a conflict between the factual findings of the LA and the CA, on one hand, and those
of the NLRC, on the other, it becomes proper for this Court, in the exercise of its equity jurisdiction, to review
the facts and re-examine the records of the case.54 Thus, this Court shall take cognizance of and resolve
the factual issues involved in this case.

Regala is a regular employee of MHC.

MHC does not deny that Regala was employed as one of its waiters. 55 It maintains, however, that Regala
was only engaged for a fixed duration or period, and, therefore, the severance of his employment upon the
expiration of the duration or term specified in his Service Agreements cannot be made as a basis for any
claim of illegal or constructive dismissal.56 The CA, on its part, gave credence to MHC's assertions and
held that "Regala is one of its fixed-term employees whose contracts with [MHC] were validly entered into
and whose displacement each time said fixed-term employment expired did not result in illegal dismissal."57

We disagree.

Presumption of regularity in favor of Regala.

At the outset, MHC has not categorically denied in its pleadings before the labor tribunals that Regala was
employed by it as early as February 2000. On this point, the records of the case are bereft of evidence that
Regala was duly informed of the nature and status of his engagement with the hotel. Notably, in the absence
of a clear agreement or contract, whether written or otherwise, which would clearly show that Regala was
properly informed of his employment status with MHC, Regala enjoys the presumption of regular
employment in his favor.58

Regala is performing activities which are necessary and desirable, if not indispensable, in the business of
MHC. Moreover, Regala has been working for MHC for several years since February 2000.

The employment status of a person is defined and prescribed by law and not by what the parties say it
should be.59 In this regard, Article 295 of the Labor Code "provides for two types of regular employees,
namely: (a) those who are engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer (first category); and (b) those who have rendered at least one year
of service, whether continuous or broken, with respect to the activity in which they are employed (second
category)."60 While MHC insists that Regala was engaged under a fixed-term employment agreement, the
circumstances and evidence on record, and provision of law, however, dictate that Regala is its regular
employee.

First, Regala is performing activities which are usually necessary or desirable in the business or trade of
MHC. This connection can be determined by considering the nature of the work performed by Regala and
its relation to the nature of the particular business or trade of MHC in its entirety.61 Being part of the hotel
and food industry, MHC, as a service-oriented business enterprise, depends largely on its manpower
complement to carry out or perform services relating to food and beverage operations, event planning and
hospitality. As such, it is essential, if at all necessary, that it retains in its employ waiting staff, such as
Regala, specifically tasked to attend to its guests at its various dining establishments.

Notably, the desirability of his functions is bolstered by the fact that MHC retains in its employ regular staff
of waiters charged with like duties or functions as those of Regala's.

Second, the fact alone that Regala was allowed to work for MHC on several occasions for several years
under various Service Agreements is indicative of the regularity and necessity of his functions to its
business. Moreover, it bears to emphasize that MHC has admitted, albeit implicitly, that it renewed Regala's
Service Agreements on various occasions, i.e., during temporary spikes in the volume of its business since
February 2000. Thus, the continuing need for his services for the past several years is also sufficient
evidence of the indispensability of his duties as waiter to MHC's business. 62 Additionally, Regala has
already been working with the hotel for many years when he was supposedly constructively dismissed from
employment on December 2, 2009.
In any event, it is worth noting that MHC failed to deny that Regala's work as waiter is necessary and
desirable to its business.

The foregoing notwithstanding, the CA ratiocinated that the fact that the nature of Regala's work is
necessary and indispensable to its business did not impair the validity of the Service Agreements which
specifically stipulated that his employment was only for a specific term or duration.63

This Court is aware that there is nothing contradictory between the nature of an employee's duties and the
setting of a definitive period of his or her employment. We have held in St. Theresa's School of Novalich.es
Foundation vs. National Labor Relations Commission64 that "[i]t does not necessarily follow that where the
duties of the employee consist of activities usually necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing on a period of time for the performance of such activities."
However, this Court also held that if it is apparent from the circumstances of the case "that periods have
been imposed to preclude acquisition of tenurial security by the employee," such fixed term contracts are
disregarded for being contrary to law and public policy.65 Thus, to our mind, while the principle enunciated
by the CA is true, it is accurate only if the same is premised on the finding the the fixed-term employment
agreement entered into between the employer and the employee complies with the requirements of a valid
fixed-term employment arrangement provided for under the labor laws.

The Service Agreements and fixed-term service contracts executed between MHC and Regala are invalid
and are not true fixed-term employment contracts.

As proof of Regala's fixed-term employment status, MHC depended heavily on Regala's Service
Agreements66 covering the periods of his supposed temporary engagement with MHC, or from March 1,
2010 to March 3, 2010. It then asserted that the Service Agreements entered into by and between MHC
and Regala are valid for the following reasons: (1) the terms thereof are clear and bereft of ambiguity; (2)
the duration or terms of Regala's employment as indicated in the Service Agreements were determined and
made known to him before each engagement; and (3) the Service Agreements were freely entered into by
both parties.

A fixed-term employment, while not expressly mentioned in the Labor Code, has been recognized by this
Court as a type of employment "embodied in a contract specifying that the services of the employee shall
be engaged only for a definite period, the termination of which occurs upon the expiration of said period
irrespective of the existence of just cause and regardless of the activity the employee is called upon to
perform."67 Along the same lines, it has been held that "[t]he fixed-term character of employment
essentially refers to the period agreed upon between the employer and the employee."68 Accordingly, "the
decisive determinant in term employment should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the commencement and termination of their
employment relationship.69 Specification of the date of termination is significant because an employee's
employment shall cease upon termination date without need of notice.70

In other words, a fixed-term employment contract which otherwise fails to specify the date of
effectivity and the date of expiration of an employee's engagement cannot, by virtue of jurisprudential
pronouncement, be regarded as such despite its nomenclature or classification given by the parties. The
employment contract may provide for or describe some other classification or type of employment
depending on the circumstances, but it is not, properly speaking, a fixed-term employment contract.

The case of Poseidon Fishing v. National Labor Relations Commission71 is instructive:

Moreover, unlike in the Brent case where the period of the contract was fixed and clearly stated, note that
in the case at bar, the terms of employment of private respondent as provided in the Kasunduan was not
only vague, it also failed to provide an actual or specific date or period for the contract. As adroitly observed
by the Labor Arbiter:

There is nothing in the contract that says complainant, who happened to be the captain of said vessel, is a
casual, seasonal or a project worker. The date July 1 to 31, 1998 under the heading "Pagdating" had been
placed there merely to indicate the possible date of arrival of the vessel and is not an indication of the status
of employment of the crew of the vessel.

Actually, the exception under Article 280 of the Labor Code in which the respondents have taken refuge to
justify its position docs not apply in the instant case. The proviso, "Except where the employment has been
fixed for a specific project or undertaking the completion or determination of which has been determined at
the time of the engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season." (Article 280 Labor Code), is inapplicable
because the very contract adduced by respondents is unclear and uncertain. The kasunduan does not
specify the duration that complainant had been hired x x x.72 (Emphasis and underscoring supplied.)

Considering the above premises, we find that the three Service Agreements presented by MHC cannot be
regarded as true fixed-term employment contracts. A perusal thereof shows that the term of Regala's
engagement with the hotel merely indicate the dates March 1, 2010, March 2, 2010, and March 3, 2010 -
all of which pertain only to specified effectivity dates of Regala's engagement as waiter of MHC. The Service
Agreements do not, however, unequivocally specify the periods of their expiration.

Notably, even the very terms of the Service Agreements purportedly proving Regala's fixed-term
employment status are uncertain, if not altogether evasive of Regala's actual period of employment with
MHC, which, in this case, commenced as early as February 2000. It bears noting that the Service
Agreements furnished by MHC do not even account for Regala's employment for the previous years,
especially at the time of Regala's hiring in February 2000. On this point, it is incredulous, to say the least,
that the hotel merely hired Regala under a fixed-term agreement since February 2000.

All things considered, the Service Agreements presented by MHC deserves scant consideration from this
Court. Mere presentation thereof does not prove that Regala had been a mere fixed-term employee. The
Court cannot simply rely on the vague provisions of the Service Agreements as proof of his fixed-term
employment status. To do so would erroneously warrant their enforcement despite their apparent failure to
express the term/s of Regala's engagement as waiter since February 2000.

The Service Agreements and/or fixed-term service contracts do not meet the criteria for valid contracts of
employment with a fixed period.

Even if this Court gives credence to the Service Agreements, it can be deduced with certainty from the
circumstances of the case that they do not meet the criteria of valid fixed-term employment contracts.

MHC contends that the Service Agreements, including the fixed-term service contracts, which Regala was
required to sign from time to time were freely entered into by him, that the terms thereof were determined
and made known to Regala at the time of his engagement, and that there was no showing that he was
forced, coerced, or manipulated into signing the same.73 In the same vein, the CA held in its May 22, 2012
Decision that "an examination of the employment contracts between the parties shows no indication that
[Regala] was forced or coerced to execute the same.74

The foregoing contentions deserve no merit.

While this Court has recognized the validity of fixed-term employment contracts, it has consistently held
that they are the exception rather than the general rule.75 A fixed-term employment is valid only under
certain circumstances. We thus laid down in Brent School, Inc. v. Zamora76 parameters or criteria under
which a "term employment" cannot be said to be in circumvention of the law on security of tenure, namely:

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or

2) It satisfactorily appears that the employer and the employee dealt with each other on more or
less equal terms with no moral dominance exercised by the former or the latter.77

In GMA Network, Inc. v. Pabriga,78 we held that "[t]hese indications, which must be read together, make
the Brent doctrine applicable only in a few special cases wherein the employer and employee are more or
less in equal footing in entering into the contract." The reason for this precept is premised on the following
principles - "when a prospective employee, on account of special skills or market forces, is in a position to
make demands upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties' freedom of contract are thus required for the protection
of the employee."79

As to the first guideline, the Service Agreements signed by Regalado not even prove that he knowingly
agreed to be hired by MHC for a fixed-term way back in February 2000. At best, they only account for
Regala's supposed fixed-term status from March 1 to 3, 2009.

It is worth noting at this point that MHC persistently asserted that Regala agreed upon a fixed-term
employment while making reference to his fixed term service contracts. Concomitantly, it failed to disprove
the allegations of Regala that he was made to sign various fixed-term service contracts prepared by MHC
before he can be given work assignments.80 Indeed, MHC's failure to furnish copies thereof gives rise to
the presumption that their presentation is prejudicial to its cause.81

At any rate, the sample fixed-term service contract82 presented by MHC, including the Service Agreements
of Regala, readily show that they were entirely prepared by its Personnel Department. On this premise, it
appears that the Service Agreements and/or the fixed-term service contracts are contracts of adhesion
whose terms must be strictly construed against its unilateral crafter, MHC.83

A contract of adhesion is one wherein a party, such as MHC in this case, prepares the stipulations in the
contract, and the other party, like Regala, merely affixes his signature or his "adhesion" thereto. It is an
agreement in which the parties bargaining are not on equal footing, the weaker party's participation being
reduced to the alternative 'to take it or leave it.'84 Clearly, the Service Agreements and fixed-term service
contracts were contracts of adhesion, which evidently gave Regala no realistic chance to negotiate the
terms and conditions of his employment, or at best, bargain for his job at MHC. Hence, it cannot be gainsaid
that Regala signed the Service Agreements and the fixed-term service contracts willingly and with full
knowledge of their impact.

As to the second guideline, this Court is inclined to believe that Regala can hardly be on equal terms with
MHC insofar as negotiating the terms and conditions of his employment is concerned. To be clear, a fixed-
term employment agreement should result from bona fide negotiations between the employer and the
employee. As such, they must have dealt with each other on an arm's length basis where neither of the
parties have undue ascendancy and influence over the other. As a waiter, a rank-and-file employee, Regala
can hardly stand on equal terms with MHC. Moreover, no particulars in the Service Agreements or the fixed-
term service contract regarding the terms and conditions of employment indicate that Regala and MHC
were on equal footing in negotiating them. The case of Rowell Industrial Corporation v. Court of
Appeals85 is instructive on this point:

With regard to the second guideline, this Court agrees with the Court of Appeals that petitioner RIC and
respondent Taripe cannot be said to have dealt with each other on more or less equal terms with no moral
dominance exercised by the fanner over the latter. As a power press operator, a rank and file employee, he
can hardly be on equal terms with petitioner RIC. As the Court of Appeals said, almost always, employees
agree to any terms of an employment contract just to get employed considering that it is difficult to find work
given their ordinary qualifications.86 [Citation omitted]

Considering that the foregoing criteria were not met, the Service Agreements and the fixed-term service
contracts which MHC had Regala execute should be struck down for being illegal.

In an attempt to convince the Court of the validity of Regala's Service Agreements, MHC contended that its
system of hiring freelance waiters on an informal and temporary basis is a common practice in the hotel
and restaurant industry if only to address the unforeseen rises or spikes in the volume of business.

We are not persuaded.

The practice of utilizing fixed-term contracts in the industry does not mean that such contracts, as a matter
of course, are valid and compliant with labor laws.87 Moreover, the rise and fall of customer demands are
presumed in all businesses or commercial industries, more so in the industry where MHC has been a part
of for several years. At this point in time, it would be incredulous to believe that it cannot yet anticipate
business fluctuations to the point that it has to employ ruses and subterfuges to deny workers from attaining
regular employment status. Indeed, one's employment should not be left entirely to the whims of the
employer for at stake is not only the employee's position or tenure, but also his means of livelihood.
In Innodata Philippines, Inc. v. Quejada-Lopez,88 we held that:

By their very nature, businesses exist and thrive depending on the continued patronage of their clients.
Thus, to some degree, they are subject to the whims of clients who may decide to discontinue patronizing
their products or services for a variety of reasons. Being inherent in any enterprise, this entrepreneurial risk
may not be used as an excuse to circumvent labor laws; otherwise, no worker could ever attain regular
employment status.89

In sum, Regala attained regular employment status long before he executed the Service Agreements
considering that at the time he signed them in March 2010, he has already been in the employ of MHC for
more than nine (9) years. Moreover, as discussed above, the nature of Regala's work is necessary and
desirable, if not indispensable, in the business in which MHC is engaged. Undoubtedly, Regala has been a
regular employee of the hotel since February 2000. At any rate, the Service Agreements and/or the fixed-
term service contracts which MHC and Regala executed were only meant to preclude Regala from attaining
regular employment status, and, thus, should be struck down or disregarded for being contrary to law, public
policy or morals.

Regala was constructively dismissed from employment.

Being a regular employee of MHC, Regala is entitled to security of tenure. Hence, he cannot be dismissed
from employment, constructive or otherwise, except for just or authorized causes.

At this juncture, Regala claims that despite having attained regular employment status, MHC, without any
valid cause, reduced his regular work days to two (2) days from the normal five (5) day work week starting
December 2, 2009. Regala insisted that MHC's act of unreasonably reducing his work days is tantamount
to constructive dismissal.

Without addressing the issue of constructive dismissal, MHC contended, by way of rebuttal, that Regala's
supposed severance from service simply resulted from the expiration of his fixed-term employment contract.
Along the same lines, the CA held in its May 22, 2012 Decision that Regala's "displacement each time said
fixed-term employment expired did not result in illegal dismissal."90

Both MHC and the CA completely missed the point at issue.

Regala's case is premised on the notion that he is a regular employee entitled to security of tenure but was
otherwise constructively dismissed when MHC, without valid cause, reduced his regular work days from
five (5) days to two (2) days. In other words, the question to be resolved here is whether the reduction of
his regular work days and consequent diminution of his salary amounted to constructive dismissal, and not
whether the supposed cessation of his services constituted illegal dismissal. Indeed, the determination of
the latter issue is impracticable in the case at bench as MHC, and even the CA, cannot even show or
identify to this Court when or at what point in time Regala's services were terminated by MHC.

Nor can it be said that MHC's defenses were responsive to Regala's allegations as they did not address
the propriety or impropriety of the reduction of his regular work days.91 Notably, on this point, what is clear
to this Court is that MHC failed to deny Regala's allegation of constructive dismissal. Nor did it present any
controverting evidence to prove otherwise. It is worth noting that, Section 11, Rule 8 of the Rules of Court,
which supplements the NLRC Rules of Procedure,92 provides that allegations which are not specifically
denied are deemed admitted.93

In any event, this Court will look into the merits of Regala's allegations in resolving the issue of constructive
dismissal.

There is constructive dismissal where "there is cessation of work because 'continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in
pay' and other benefits. Aptly called a dismissal in disguise or an act amounting to dismissal but made to
appear as if it were not, constructive dismissal may, likewise, exist if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it could
foreclose any choice by him except to forego his continued employment."94

Patently, the reduction of Regala's regular work days from five (5) days to two (2) days resulted to a
diminution in pay.Ꮮαwρhi৷ Regala's change in his work schedule resulting to the diminution of his take home
salary is, therefore, tantamount to constructive dismissal.

The fact that Rega1a may have continued reporting for work does not rule out constructive dismissal, nor
does it operate as a waiver.95 Thus, in The Orchard Golf and Country Club v. Francisco,96 this Court held
that:

Constructive dismissal occurs not when the employee ceases to report for work, but when the unwarranted
acts of the employer are committed to the end that the employee's continued employment shall become so
intolerable. In these difficult times, an employee may be left with no choice but to continue with his
employment despite abuses committed against him by the employer, and even during the pendency of a
labor dispute between them.97

Considering the foregoing recitals, the fact of constructive dismisal should be reckoned on December 2,
2009, or from the time Regala was made to accept the changes of his work schedule which thereby resulted
in the diminution of his take home pay.

In view therefore of Regala's constructive dismissal, reinstatement and payment of backwages must
necessarily be made. Regala must be reinstated to his former position as a regular waiter of MHC without
loss of seniority rights and shall enjoy the same employment benefits and privileges of a regular employee
of MHC. Regala's backwages must be computed from the time he was made to accept the changes of his
work schedule which thereby resulted in the diminution of his take home pay, or from December 2, 2009,
up to actual reinstatement. The amount thereof shall include benefits and allowances, or their monetary
equivalent, regularly received by a regular employee of MHC with like position and rank of Regala as of the
time he was constructively dismissed, as well as those granted under the Collective Bargaining Agreement,
if any.

WHEREFORE, the instant Petition is hereby GRANTED. The May 22, 2012 Decision and November 19,
2012 Resolution of the Court of Appeals in CA-G.R. SP No. 120748 are REVERSED and SET ASIDE. The
March 24, 2011 Decision and May 31, 2011 Resolution of the National Labor Relations Commission, which
declared petitioner Allan Regala, a regular employee of respondent Manila Hotel Corporation, to have been
constructively dismissed from employment, are REINSTATED and AFFIRMED.

The case is REMANDED to the Labor Arbiter for the purpose of re-computation of Regala's full backwages.

SO ORDERED.