TOYOTA MOTOR PHILS. WORKERS V.

NLRC 537 SCRA 171 (2007)

FACTS: Toyota Motor Philippines Corporation Workers Association (Union) and its
dismissed officers and members seek to set aside the decision declaring illegal the
strikes staged by the Union and upholding the dismissal of the 227 Union officers and
members. On the other hand, Toyota prays for the recall of the award of severance
compensation to the 227 dismissed employees.
1. The Union is a legitimate labor organization duly registered with the DOLE and is
the sole and exclusive bargaining agent of all Toyota rank and file employees.
2. Med-Arbiter Order certified the Union as the sole and exclusive bargaining agent
of all the Toyota rank and file employees. Toyota challenged said Order via an
appeal to the DOLE Secretary.
3. The Union submitted its CBA proposals to Toyota, but the latter refused to
negotiate in view of its pending appeal. Consequently, the Union filed a notice of
strike based on Toyotas refusal to bargain.
4. 135 Union officers and members failed to render the required overtime work, and
instead marched to and staged a picket in front of the BLR office. The Union also
requested that its members be allowed to be absent on February 22, 2001 to
attend the hearing and instead work on their next scheduled rest day. This
request however was denied by Toyota.
5. Despite denial of the Unions request, more than 200 employees staged mass
actions to protest the partisan and anti-union stance of Toyota.
6. Due to the deliberate absence of a considerable number of employees Toyota
experienced acute lack of manpower in its manufacturing and production lines,
and was unable to meet its production goals resulting in huge losses.
7. Toyota terminated the employment of 227 employees for participation in
concerted actions in violation of its Code of Conduct and for misconduct under
Article 282 of the Labor Code.
ISSUE: WON the mass actions committed by the Union on different occasions are
illegal strikes.
HELD: The Court affirmed the decision of NLRC which held that the strike was illegal
but deleted the grant of severance compensation.
The protest actions undertaken by the Union officials and members on February 21 to
23, 2001 are not valid and proper exercises of their right to assemble and ask
government for redress of their complaints, but are illegal strikes in breach of the Labor
Code. The concerted actions were undertaken without satisfying the prerequisites for a
valid strike under Art. 263 of the Labor Code
With respect to the strikes committed from March 17 to April 12, 2001, those were
initially legal as the legal requirements were met. However, the Union barricaded the
gates of the Bicutan and Sta. Rosa plants and blocked the free ingress to and egress
from the company premises. These strikes were illegal because unlawful means were
employed. The acts of the Union officers and members are in palpable violation of Art.

264(e) which proscribes acts of violence, coercion, or intimidation, or which obstruct the
free ingress to and egress from the company premises.
The individual respondents who staged illegal concerted actions on May 23 and 28,
2001 in contravention of the Order of the DOLE Secretary that no acts should be
undertaken by them to aggravate the already deteriorated situation. While it may be
conceded that there was no work disruption in the two Toyota plants, the Union and its
members picketed and performed concerted actions in front of the Company premises.
This is a patent violation of the assumption of jurisdiction and certification Order of the
DOLE Secretary, which ordered the parties to cease and desist from committing any
act that might lead to the worsening of an already deteriorated situation.
It is high time that employer and employee cease to view each other as adversaries and
instead recognize that theirs is a symbiotic relationship, wherein they must rely on each
other to ensure the success of the business. When they consider only their own selfinterests, and when they act only with their own benefit in mind, both parties suffer from
short-sightedness, failing to realize that they both have a stake in the business. The
employer wants the business to succeed, considering the investment that has been
made. The employee in turn, also wants the business to succeed, as continued
employment means a living, and the chance to better ones lot in life. It is clear then
that they both have the same goal, even if the benefit that results may be greater for
one party than the other. If this becomes a source of conflict, there are various, more
amicable means of settling disputes and of balancing interests that do not add fuel to
the fire, and instead open avenues for understanding and cooperation between the
employer and the employee. Even though strikes and lockouts have been recognized
as effective bargaining tools, it is an antiquated notion that they are truly beneficial, as
they only provide short-term solutions by forcing concessions from one party; but
staging such strikes would damage the working relationship between employers and
employees, thus endangering the business that they both want to succeed. The more
progressive and truly effective means of dispute resolution lies in mediation,
conciliation, and arbitration, which do not increase tension but instead provide relief
from them. In the end, an atmosphere of trust and understanding has much more to
offer a business relationship than the traditional enmity that has long divided the
employer and the employee.

CONFERENCE OF MARITIME MANNING AGENCIES V. POEA 243 SCRA 667 (1995)

FACTS: Petitioner Conference of Maritime Manning Agencies, Inc., an incorporated
association of licensed Filipino manning agencies, and its co-petitioners, all licensed
manning agencies which hire and recruit Filipino seamen for and in behalf of their
respective foreign shipowner-principals, urge us to annul

Resolution No. 01, series of 1994, of the Governing Board" of POEA

and
POEA Memorandum Circular No. 05, series of 1994, on the grounds
that:
(1) The POEA does not have the power and authority to fix and promulgate
rates affecting death and workmen's compensation of Filipino seamen
working in ocean-going vessels; only Congress can.
(2) The resolution and the memorandum circular are unconstitutional
because they violate the equal protection and non-impairment of
obligation of contracts clauses of the Constitution. (The petitioners claim
discrimination against foreign shipowners and principals employing
Filipino seamen and in favor of foreign employers employing overseas
Filipinos who are not seamen.)

The public respondents contend that the petition is without merit.

ISSUE: a. Whether or not challenged resolution and memorandum circular was a valid
exercise of the POEA's rule-making authority or power of subordinate legislation
b. Whether or not the resolution and the memorandum circular are
unconstitutional because they violate the equal protection and non-impairment of
obligation of contracts clauses of the Constitution.
HELD: a. YES.
The authority to issue the said regulation is clearly provided in Section
4(a) of Executive Order No. 797, reading as follows:
. . . The governing Board of the Administration (POEA), as hereunder
provided, shall promulgate the necessary rules and regulations to govern
the exercise of the adjudicatory functions of the Administration (POEA).
It is, of course, well established in our jurisdiction that, while the making of laws is a
non-delegable power that pertains exclusively to Congress, nevertheless, the latter may
constitutionally delegate the authority to promulgate rules and regulations to implement

a given legislation and effectuate its policies, for the reason that the legislature finds it
impracticable, if not impossible, to anticipate situations that may be met in carrying the
law into effect. All that is required is that the regulation should be germane to the
objects and purposes of the law; that the regulation be not in contradiction to but in
conformity with the standards prescribed by the law. This is the principle of subordinate
legislation.
That the challenged resolution and memorandum circular, which merely further
amended the previous Memorandum Circular No. 02, strictly conform to the sufficient
and valid standard of "fair and equitable employment practices" prescribed in E.O. No.
797 can no longer be disputed.
b. NO.
It does not violate the equal protection clauses of the Constitution. It is an
established principle of constitutional law that the guaranty of equal protection of the
laws is not violated by legislation based on reasonable classification. And for the
classification to be reasonable, it (1) must rest on substantial distinctions; (2) must be
germane to the purpose of the law; (3) must not be limited to existing conditions only;
and (4) must apply equally to all members of the same class. There can be no dispute
about the dissimilarities between land-based and sea-based Filipino overseas workers
in terms of, among other things, work environment, safety, dangers and risks to life and
limb, and accessibility to social, civic, and spiritual activities.
Nor is there-merit; in the claim that the resolution and memorandum circular
violate the contract clause of the Bill of Rights.
The executive order creating the POEA was enacted to further implement the
social justice provisions of the 1973. Constitution, which have been greatly enhanced
and expanded in the 1987 Constitution by placing them under a separate Article. The
Article on Social Justice was aptly described as the "heart of the new Charter" by the
President of the 1986 Constitution Commission, retired Justice-Cecilia Muoz-Palma.
Social justice is identified with the broad scope of the police power of the state and
requires the extensive use of such power. In Calalang vs. Williams, this. Court,
speaking through Justice Jose P. Laurel, expounded on social justice thus:
Social justice is "neither communism, nor despotism, nor atomism, nor
anarchy," but the Humanization of laws and the equalization of social and
economic forces by the State so that justice in its rational and objectively
secular conception may at least be approximated. Social justice means
the promotion of the welfare of all the people, the adoption by the
Government of measures calculated to insure economic stability of all the
competent elements of society, through the maintenance of a proper
economic and social equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers

underlying the existence of all governments on the time-honored principle

of salus populi est suprema lex.
Social justice, therefore, must be founded on the recognition of the
necessity of interdependence among divers and diverse units of a society
and of the protection that should be equally and evenly extended to all
groups as a combined force in our social and economic life, consistent
with the fundamental and paramount objective of the state of promoting
the health, comfort, and quiet of all persons, and of bringing about "the
greatest good to the greatest number."
The constitutional prohibition against impairing contractual obligations is not
absolute and is not to be read with literal exactness . It is restricted to contracts with
respect to property or some object of value and which confer rights that maybe asserted
in a court of justice; it has no application to statutes relating to public subjects within the
domain of the general legislative powers of the State and involving the public rights and
public welfare of the entire community affected by it. It does not prevent a proper
exercise by the State of its police power by enacting regulations reasonably necessary
to secure the health, safety, morals; comfort, or general welfare of the community, even
though contracts may thereby be affected, for such matters cannot be placed by
contract beyond the power of the State to regulate and control them.
Tthe freedom to contract is not absolute; all contracts and all rights are subject to
the police power of the State and not only may regulations which affect them be
established by the State, but all such regulations must be subject to change from time to
time, as the general, well-being of the community may require, or as the circumstances
may change, or as experience may demonstrate the necessity. And under the Civil
Code, contracts of labor are explicitly subject to the police power of the State because
they are not ordinary contracts but are impresses with public interest. Article 1700
thereof expressly provides:
Art. 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts
lust yield to the common good. Therefore, such contracts are subject to
the special laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.
The challenged resolution and memorandum circular being valid implementations
of E.O. No. 797, which was enacted under the police power of the State, they cannot be
struck down on the ground that they violate the contract clause. To hold otherwise is to
alter long-established constitutional doctrine and to subordinate the police power to the
contract clause.

TIRAZONA V. PHIL EDS TECHNO-SERVICE INC G.R. NO 169712 (2009)

FACTS: Tirazona worked as administrative manager of PET. After PET
officers/directors called her attention to her improper handling of a situation involving a
rank-and-file employee, she claimed that she was denied due process for which she
demanded indemnity from PET.
1. SC denied her claims for illegal termination on the account her arrogance,
hostility and uncompromising attitude justify the companys decision to terminate
her employement
2. Tirazona filed a MR citing that SC failed to consider the length of her service to
PET in affirming her termination from employment. She prayed that her dismissal
be declared illegal. Should Sc uphold the legality of her dismissal, Tirazona
pleaded she be awarded separation pay and retirement benefits out of
humanitarian considerations
ISSUE: WON THE PETITIONER IS ENTITLED TO SEPARATION PAY AND
RETIREMENT BENEFITS
HELD: No, as a general rule an employee who has been dismissed for any of the just
causes enumerated under Art 282 Labor Code is not entitled to separation pay.
Separation pay shall only allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character.
The policy of social justice is not intended to countenance wrongdoing simply because it
is committed by the underprivileged. At best it may mitigate the penalty but it certainly
will not condone the offense. Compassion for the poor is an imperative of every humane
society but only when the recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be [a] refuge of scoundrels any more than can
equity be an impediment to the punishment of the guilty. Those who invoke social
justice may do so only if their hands are clean and their motives blameless and not
simply because they happen to be poor. This great policy of our Constitution is not
meant for the protection of those who have proved they are not worthy of it, like the
workers who have tainted the cause of labor with the blemishes of their own character.

GONZALEZ V. NLRC 313 SCRA169 (1999)

FACTS: Petitioner Gonzales has been a schoolteacher in the Elementary Department
of private respondent Ateneo since 1974.
1. Ateneo Grade School Headmaster, sent a letter informing petitioner of the
complaints of two (2) parents for alleged use of corporal punishment on her
students.
2. It was only two (2) years after the complaints were made that she discovered,
through her students and their parents, that ATENEO was soliciting complainants
to lodge written complaints against her. She wrote a letter to Fr. Oscar Millar,
S.J., demanding that she be formally informed of the complaint and be duly
investigated.
3. An investigative committee organized by Fr. Oscar Millar, S.J., to look into the
alleged use of corporal punishment by petitioner in disciplining her students. She
was duly furnished with the rules of procedure, informed of the schedule of the
hearings, and given copies of the affidavits executed by the students who
testified against her.
4. Petitioner refused to take part in the investigation unless the rules of procedure
laid down by the Committee be revised, contending that the same were violative
of her right to due process. Petitioner specifically objected to the provision which
stated: . . . 3) Counsel for Ms. Lorlene Gonzales shall not directly participate in
the investigation but will merely advise Ms. Gonzales ...
5. Ateneo refused to change the rules of procedure. The Committee commenced
with its investigation without petitioners participation. Private respondent served
a Notice of Termination on petitioner pursuant to the findings and
recommendation of the Committee.
6. Petitioner filed a complaint before the Labor Arbiter for illegal dismissal. Labor
Arbiter found her dismissal illegal for lack of factual basis, although petitioner was
afforded procedural due process respondent institution "failed to establish
substantial evidence as to the guilt of the complainant of the offense charged."
NLRC reversed the decision of the Labor Arbiter and declareed petitioners
dismissal valid and legal
ISSUE: WON the NLRC committed grave abuse of discretion in sustaining as valid and
legal the dismissal of petitioner by private respondent ATENEO.
HELD: The conclusion of the NLRC is unwarranted. Employment is not merely a
contractual relationship; it has assumed the nature of property right. It may spell the
difference whether or not a family will have food on their table, roof over their heads and
education for their children. It is for this reason that the State has taken up measures to
protect employees from unjustified dismissals. It is also because of this that the right to
security of tenure is not only a statutory right but, more so, a constitutional right.

The NLRC, in our view, appears to have skirted several important issues raised by
petitioner foremost of which is the absence of due process. Ample opportunity must be
afforded the employee to defend herself either personally and/or with assistance of a
representative; to know the nature of her offense; and, to cross examine and confront
face to face the witnesses against her. The adamant refusal of the Committee to accede
to this demand resulted in her failure to confront and cross-examine her accusers. This
is not "harping at technicalities" as wrongfully pointed out by the NLRC but a serious
violation of petitioner's statutory and constitutional right to due process that ultimately
vitiated the investigation.
ATENEO failed to prove by substantial evidence that petitioner had inflicted corporal
punishment on her students. Substantial evidence is more than mere scintilla. It means
such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion." The evidence of private respondent did not measure up to this standard. It
relied solely on the witnesses' affidavits with questionable veracity.

CAPITOL MEDICAL CENTER V. MERIS 470 SCRA 125 (2005)

FACTS: Capital Medical Center hired Dr. Meris as in charge of its ISU (Industrial
Service Unit). He has been medical services as the Chief of ISU since 1974 until the
closure of the ISU on April 30, 1992.
1. Dr. Clemente, President and Chairman of the Board sent a notice to Dr. Meris
advising him of the managements decision to abolish the ISU and the
consequent termination of his services as Chief due to the almost extinct
demand for direct medical service by the private and semi-government
corporations in providing health care for their employees; and that such extinct
demand was brought about by the existing trend of industrial companies
allocating their health care requirements to Health Maintenance Organizations
(HMOs) or thru a tripartite arrangement with medical insurance carriers and
designated hospitals.
2. Dr. Meris doubted the reason behind the managements decision to close the
ISU and believe that the ISU was not abolished instead it continued its
operations with Dr. Clemente. The notice of closure was a mere ploy to for his
ouster because of his refusal to retire despite Dr. Clementes prodding to do so.
He then filed a case against Capital Medical and Dr. Clemente for illegal
dismissal and reinstatement with claims for backwages, moral and exemplary
damage plus attorneys fees.
3. Labor Arbiter held that the abolition of ISU was a valid and lawful exercise of
management prerogative and there was convincing evidence that shows ISU
was operating at a loss.
4. On appeal, NLRC held that in the exercise of Capitols Management prerogative,
it had the right to close even if it was not suffering business loss in view of Article
283 of LC and jurisprudence.
5. Dr. Meris elevated the case to the CA which reverse the decision of NLRC and
held that the Capitols evidence failed to meet the standard of sufficient and
adequate proof of loss necessary to justify the abolition, thus this petition.
ISSUE: WON not the CA erred in not upholding the petitioners management
prerogative to abolish the ISU.
HELD: Work is a necessity that has economic significance deserving legal protection.
The social justice and protection to labor provisions in the Constitution dictate so.
Employers are also accorded rights and privileges to assure their self-determination and
independence and reasonable return of capital. This mass of privileges comprises the
so-called management prerogatives. Although they may be broad and unlimited in
scope, the State has the right to determine whether an employers privilege is exercised
in a manner that complies with the legal requirements and does not offend the protected

rights of labor. One of the rights accorded an employer is the right to close an
establishment or undertaking.
The right to close the operation of an establishment or undertaking is explicitly
recognized under the Labor Code as one of the authorized causes in terminating
employment of workers, the only limitation being that the closure must not be for the
purpose of circumventing the provisions on termination of employment embodied in the
Labor Code.
It would indeed be stretching the intent and spirit of the law if a court were to unjustly
interfere in managements prerogative to close or cease its business operations just
because said business operation or undertaking is not suffering from any loss. As long
as the companys exercise of the same is in good faith to advance its interest and
not for the purpose of defeating or circumventing the rights of employees under
the law or a valid agreement, such exercise will be upheld. Clearly then, the right to
close an establishment or undertaking may be justified on grounds other than business
losses but it cannot be an unbridled prerogative to suit the whims of the employer. The
ultimate test of the validity of closure or cessation of establishment or undertaking is that
it must be bona fide in character. And the burden of proving such falls upon the
employer
In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.
Capitol failed, however, to present sufficient and convincing evidence to support such
claim of extinct demand. In fact, the employees of Capitol submitted a petition dated
April 21, 1992 addressed to Dr. Clemente opposing the abolition of the ISU. The
closure of ISU then surfaces to be contrary to the provisions of the Labor Code on
termination of employment. The termination of the services of Dr. Meris not having been
premised on a just or authorized cause, he is entitled to either reinstatement or
separation pay if reinstatement is no longer viable, and to backwages.
Reinstatement, however, is not feasible in case of a strained employer-employee
relationship or when the work or position formerly held by the dismissed employee no
longer exists, as in the instant case. Dr. Meris is thus entitled to payment of separation
pay at the rate of one (1) month salary for every year of his employment, with a fraction
of at least six (6) months being considered as one(1) year, and full backwages from the
time of his dismissal from April 30, 1992 until the expiration of his term as Chief of ISU
or his mandatory retirement, whichever comes first.

SALINAS V NLRC 319 SCRA 54 (1999)

FACTS: Petitioners were employed with Atlantic Gulf and Pacific Co. (AG & P): Salinas:
1983-1988 as carpenter/finishing carpenter; Alejandro: 1982-1989 as bulk cement
operator, bulk cement plant/carrier operator & crane driver; Cortez: 1979-1988 as
carpenter/forklift operator and; Samulde: 1982-1989 as lubeman/stationary operator
1. Complaints (separate but consolidated by the LA): illegal dismissal
2. Petitioners Claim: They had been covered by a number of contracts renewed
continuously, with periods ranging from five (5) to nine (9) years, and they
performed the same kind of work through out their employment, and such was
usually necessary and desirable in the trade or business of the respondent
corporation; and their work did not end on a project-to-project basis, although the
contrary was made to appear by the employer through the signing of separate
employment contracts.
3. LA: Dismissed petitions on the ground that the petitioners are project employees
are project employees whose work contracts with AG & P indicate that they were
employed in such category; that they have been assigned to different work
projects, not just to one and that their work relation with AG & P, relative to
termination, is governed by Policy Instruction No. 20 (rule governing project
employees).
4. Appeal to NLRC: Affirmed LAs findings
ISSUES: WON THE PETITIONERS ARE PROJECT EMPLOYEES
HELD: No, the petitioners are regular employees. he mandate in Art 281 Labor Code,
which pertinently prescribes that the 'provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreements 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' and 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,' should apply in the case of petitioner.
Failure to report the termination to Public Employment Office is a clear indication that
petitioners were not and are not project employees. (PI No. 20 requires reports of
terminations)
It is basic and irrefragable rule that in carrying out and interpreting the provisions of the
Labor Code and its implementing regulations, the workingman's welfare should be the
primordial and paramount consideration. The interpretation herein made gives meaning

and substance to the liberal and compassionate spirit of the law enunciated in Article 4
of Labor Code that "all doubts in the implementation and interpretation of the provisions
of the Labor Code including its implementing rules and regulations shall be resolved in
favor of labor".
It is beyond cavil that petitioners had been providing the respondent corporation with
continuous and uninterrupted services, except for a day or so gap in their successive
employment contracts. Their contracts had been renewed several times, with the total
length of their services ranging from five (5) to nine (9) years. Throughout the duration
of their contracts, they had been performing the same kinds of work (e.g., as lubeman,
bulk cement operator and carpenter), which were usually necessary and desirable in the
construction business of AG & P, its usual trade or business.
Undoubtedly, periods in the present case have been imposed to preclude the
acquisition of tenurial security by petitioners, and must be struck down for being
contrary to public policy, morals, good customs or public order.

PENAFLOR vs. OUTDOOR CLOTHING MANUFACTURING CORP G.R. NO 177114

(2010)
Facts of the Case: Peaflor was hired on September 2, 1999 as probationary Human
Resource Department (HRD) Manager of respondent Outdoor Clothing Manufacturing
Corporation (Outdoor Clothing or the company). As HRD head, Peaflor was expected
to (1) secure and maintain the right quality and quantity of people needed by the
company; (2) maintain the harmonious relationship between the employees and
management in a role that supports organizational goals and individual aspirations; and
(3) represent the company in labor cases or proceedings. Two staff members were
assigned to work with him to assist him in undertaking these functions.
When Outdoor Clothing began undertaking its alleged downsizing program due to
negative business returns, Peaflor alleged that his department had been singled out.
On the pretext of retrenchment, Peaflors two staff members were dismissed, leaving
him as the only member of Outdoor Clothings HRD and compelling him to perform all
personnel-related work. He worked as a one-man department, carrying out all clerical,
administrative and liaison work; he personally went to various government offices to
process the companys papers.
When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered injuries in a
bombing incident, the company required Peaflor to attend to her hospitalization needs;
he had to work outside office premises to undertake this task. As he was acting on the
companys orders, Peaflor considered himself to be on official business, but was
surprised when the company deducted six days salary corresponding to the time he
assisted Padilla. According to Finance Manager Medylene Demogena (Demogena), he
failed to submit his trip ticket, but Peaflor belied this claim as a trip ticket was required
only when a company vehicle was used and he did not use any company vehicle when
he attended to his off-premises work.
After Peaflor returned from his field work on March 13, 2000, his officemates informed
him that while he was away, Syfu had appointed Nathaniel Buenaobra (Buenaobra) as
the new HRD Manager. This information was confirmed by Syfus memorandum of
March 10, 2000 to the entire office stating that Buenaobra was the concurrent HRD and
Accounting Manager. 7Peaflor was surprised by the news; he also felt betrayed and
discouraged. He tried to talk to Syfu to clarify the matter, but was unable to do so.
Peaflor claimed that under these circumstances, he had no option but to resign. He
submitted a letter to Syfu declaring his irrevocable resignation from his employment with
Outdoor Clothing effective at the close of office hours on March 15, 2000.

Peaflor then filed a complaint for illegal dismissal with the labor arbiter, claiming that
he had been constructively dismissed. He included in his complaint a prayer for
reinstatement and payment of backwages, illegally deducted salaries, damages,
attorneys fees, and other monetary claims.
Outdoor Clothing alleged that he was not entitled to any backwages and damages. The
company likewise denied making any illegal deduction from Peaflors salary; while
deductions were made, they were due to Peaflors failure to report for work during the
dates the company questioned. As a probationary employee, he was not yet entitled to
any leave credit that would offset his absences.
In his August 15, 2001 decision, the labor arbiter found that Peaflor had been illegally
dismissed. Outdoor Clothing appealed the labor arbiters decision with the NLRC. It
insisted that Peaflor had not been constructively dismissed, claiming that Peaflor
tendered his resignation on March 1, 2000 because he saw no future with the
corporation due to its dire financial standing. Syfu alleged that he was compelled to
appoint Buenaobra as concurrent HRD Manager through a memorandum dated March
1, 2000 to cover the position that Peaflor would soon vacate
The NLRC apparently found Outdoor Clothings submitted memoranda sufficient to
overturn the labor arbiters decision.
Peaflor anchored his certiorari petition with the CA on the claim that the NLRC
decision was tainted with grave abuse of discretion, although he essentially adopted the
same arguments he presented before the labor arbiter and the NLRC.
The CA affirmed the NLRCs decision, stating that Peaflor failed to present sufficient
evidence supporting his claim that he had been constructively dismissed. The CA ruled
that Peaflors resignation was knowingly and voluntarily made.
Issue: Whether or not Peaflors undisputed resignation was a voluntary or a forced
one, in the latter case making it a constructive dismissal equivalent to an illegal
dismissal.
Ruling: First, we regard the Syfu memorandum of March 1, 2000 and the memorandum
of Buenaobra of March 3, 2000 accepting the position of HRD Head to be highly
suspect. In our view, these memoranda, while dated, do not constitute conclusive
evidence of their dates of preparation and communication. Surprisingly, Peaflor was
never informed about these memoranda when they directly concerned him, particularly
the turnover of responsibilities to Buenaobra if indeed Peaflor had resigned on March
1, 2000 and a smooth turnover to Buenaobra was intended. Even the recipients of these
communications do not appear to have signed for and dated their receipt. The AWOL
memoranda, to be sure, should have been presented with proof of service if they were
to have any binding effect on Peaflor.

Second,we find it surprising that these pieces of evidence pointing to a March 1, 2000
resignation specifically, Syfus March 1, 2000 memorandum to Buenaobra about
Penaflors resignation and Buenaobras own acknowledgment and acceptance were
only presented to the NLRC on appeal, not before the labor arbiter. The matter was not
even mentioned in the companys position paper filed with the labor arbiter. While the
presentation of evidence at the NLRC level on appeal is not unheard of in labor cases,
still sufficient explanation must be adduced to explain why this irregular practice should
be allowed. In the present case, Outdoor Clothing totally failed to explain the reason for
its omission. This failure, to us, is significant, as these were the clinching pieces of
evidence that allowed the NLRC to justify the reversal of the labor arbiters decision.
Third, the circumstances and other evidence surrounding Peaflors resignation support
his claim that he was practically compelled to resign from the company.
In our view, it is more consistent with human experience that Peaflor indeed learned of
the appointment of Buenaobra only on March 13, 2000 and reacted to this development
through his resignation letter after realizing that he would only face hostility and
frustration in his working environment. Three very basic labor law principles support this
conclusion and militate against the companys case.
The first is the settled rule that in employee termination disputes, the employer bears
the burden of proving that the employees dismissal was for just and valid cause. That
Peaflor did indeed file a letter of resignation does not help the companys case as,
other than the fact of resignation, the company must still prove that the employee
voluntarily resigned. There can be no valid resignation where the act was made under
compulsion or under circumstances approximating compulsion, such as when an
employees act of handing in his resignation was a reaction to circumstances leaving
him no alternative but to resign. In sum, the evidence does not support the existence of
voluntariness in Peaflors resignation.1 a vv p h i 1
Another basic principle is that expressed in Article 4 of the Labor Code that all doubts
in the interpretation and implementation of the Labor Code should be interpreted in
favor of the workingman. This principle has been extended by jurisprudence to cover
doubts in the evidence presented by the employer and the employee. As shown above,
Peaflor has, at very least, shown serious doubts about the merits of the companys
case, particularly in the appreciation of the clinching evidence on which the NLRC and
CA decisions were based. In such contest of evidence, the cited Article 4 compels us to
rule in Peaflors favor. Thus, we find that Peaflor was constructively dismissed given
the hostile and discriminatory working environment he found himself in, particularly
evidenced by the escalating acts of unfairness against him that culminated in the
appointment of another HRD manager without any prior notice to him. Where no less
than the companys chief corporate officer was against him, Peaflor had no alternative
but to resign from his employment.
Last but not the least, we have repeatedly given significance in abandonment and
constructive dismissal cases to the employees reaction to the termination of his

employment and have asked the question: is the complaint against the employer merely
a convenient afterthought subsequent to abandonment or a voluntary resignation? We
find from the records that Peaflor sought almost immediate official recourse to contest
his separation from service through a complaint for illegal dismissal. This is not the act
of one who voluntarily resigned; his immediate complaints characterize him as one who
deeply felt that he had been wronged.
NATIONAL FEDERATION OF LABOR V. NATIONAL
COMMISSION G.R. NO. 127718 (2000)

LABOR RELATIONS

Facts: Petitioners are employees of the Patalon Coconut Estate in Zamboanga. With
the advent of the RA No. 6657 or the Comprehensive Agrarian Reform Law, the
government sought the compulsory acquisition of the land for agrarian reform. Because
of this, the private respondents who are owners of the estate decided to shut down its
operation. Petitioners did not receive any separation pay. Now, the petitioners pray, with
the representation of their labor group, claiming that they were illegally dismissed. They
cite Article 283 of the Labor code where an employer may 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.
Issue: Whether or not the Court should apply the legal maxim verbal legis in construing
Article 283 of the Labor Code as regards its applicability to the case at bar.
Held: Yes, the legal maxim is applicable in this case. The use of the word may, in its
plain meaning, denotes that it is directory in nature and generally permissive only. Also,
Article 283 of the Labor Code does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the benefit of the
employees. The Patalon Coconut Estate was closed down because a large portion of
the said estate was acquired by the DAR pursuant to the CARP. The severance of
employer-employee relationship between the parties came about involuntarily, as a
result of an act of the State. Consequently, complainants are not entitled to any
separation pay. Where the words of a statute are clear, plain and free from ambiguity, it
must be given its literal meaning and applied without attempted interpretation.
Article 283 of the Labor Code applies in cases of closures of establishment and
reduction of personnel. The peculiar circumstances in the case at bar, however,
involves neither the closure of an establishment nor a reduction of personnel as
contemplated under the article.

LEDESMA JR V. NLRC 537 SCRA 358 (2007)

FACTS: Petitioner Ledesma was employed as a bus/service driver by the private
respondent Phil National Training Institute (PNTI) on probationary basis. As such he
was required to report at private respondents training site in Dasmarinas, Cavite under
the direct supervision of its site administrator, Pablo Manolo de Leon
1. Petitioner filed a complaint against de Leon for allegedly abusing his authority as
site administrator by using PNTIs vehicles and other facilities for personal ends.
Ledesma also accused de Leon of immoral conduct allegedly carried out within
PNTIs premises.
2. De Leon filed a written report against petitioner citing his suspected drug use. As
such the HR manager served a notice to explain to petitioner for violating the
companys code of conduct.
3. Subsequently, petitioner filed a complaint for illegal dismissal before LA, alleging
that the report regarding his suspected drug use was means of retaliation against
him. Petitioner also averred that he was barred from entering the work place
when he reported to work after undergoing a drug test which he personally
requested
4. Private respondent, on the other hand, countered that petitioner was never
dismissed from employed but was merely served a notice to explain in view of his
suspected drug use. But instead of filing an answer to the said notice, petitioner
prematurely lodged a complaint for illegal dismissal against PNTI
5. LA held in favor of petitioner, declaring his dismissal as illegal. However NLRC
reversed LA decision citing that petitioner failed to establish the fact of dismissal
for his claims
ISSUE: WON PETITONER WAS ILLEGALLY DISMISSED
HELD: No, in the present case there is hardly any evidence on record so as to meet the
quantum of evidence required. Petitioners claim of illegal dismissal is supported by no
other than his own bare, uncorroborated and self-serving allegations, which are
incoherent and inconsistent.
While SC is not unmindful of the rule that in cases of illegal dismissal, the employer
bears the burden of proof to prove that the termination was for a valid or authorized
cause in the case at bar, however, the facts and the evidence did not establish a prima
facie case that the petitioner was dismissed from employment. Before the private
respondent must bear the burden of proving that the dismissal was legal, petitioner
must first establish by substantial evidence the fact of his dismissal from service.

Logically, if there is no dismissal, then there can be no question as to the legality or

illegality thereof.
In earlier cases, the SC held that the burden of proving allegations rest upon the party
alleging, to wit:
1. The rule is that one who alleges a fact has the burden of proving it; thus,
petitioners were burdened to prove their allegation that respondents dismissed
them from their employment. It must be stressed that the evidence to prove
this fact must be clear, positive and convincing. The rule that the employer
bears the burden of proof in illegal dismissal cases finds no application here
because the respondents deny having dismissed the petitioners
2. It is a basic rule in evidence, however, that the burden of proof is on the part of
the party who makes the allegations ei incumbit probatio, qui dicit, non qui
negat. If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not
upon the weakness of that of his opponent
It is true that the Constitution affords full protection to labor, and that in light of
Constitutional mandate, we must be vigilant in striking down any attempt of
management to exploit or oppress the working class. However, it does not mean
we are bound to uphold the working class in every labor dispute brought before
Court for our resolution.

this
the
that
this

The law in protecting the rights of the employees, authorizes neither oppression nor
self-destruction of the employer. It should be made clear that when the law tilts the
scales of justice in favor of labor, it is in recognition of the inherent economic inequality
between labor and management. The intent is to balance the scales of justice; to put the
two parties on relatively equal positions. There may be cases where the circumstances
warrant favoring labor over the interests of management but never should the scale be
so tilted if the result is an injustice to the employer. Justitia nemini neganda est -- justice
is to be denied to none.

LEYTE IV ELECTRIC COOPERATIVE V. LEYECO IV Ees UNION- ALU 537 SCRA

154 (2007)
FACTS:The plaintiff and respondent union entered into a CBA covering petitioner rankand-file employees.
Two years after, respondent sent a letter to petitioner demanding holiday
pay for all employees, as provided for in the CBA.
Then, petitioner sent a letter-reply, explaining that after perusing all
available pay slips, it found that it had paid all employees all the holiday
pays enumerated in the CBA.
The parties agreed to submit the issues for arbitration.
Arbitrator rendered a Decision in favor of respondent, holding petitioner
liable for payment of unpaid holidays. He reasoned that petitioner failed
to show that it complied with the CBA mandate since the payroll
slips did not reflect any payment of the paid holidays. .

ISSUE: WON The Voluntary Arbitrator gravely abused its discretion in interpreting the
CBA provisions that the holiday pay be reflected in the payroll slips?
RULING:

YES.

In this case, the employees are required to work only from Monday to Friday. Thus, the
minimum allowable divisor is 263, which arrived by deducting 51 un-worked Sundays
and 51 un-worked Saturdays from 365 days. Considering that petitioner used the 360day divisor, which is clearly above the minimum, petitioner's employees are being given
their holiday pay.
Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's
divisor formula. It is also absurd to grant respondent's claim of non-payment when they
in fact admitted that they were being paid all of the days of the month even if not
worked.
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor
dispute would automatically be decided in favor of labor. Management also has it

own rights which, as such, are entitled to respect and enforcement in the interest
of simple fair play. Out of concern for those with less privileges in life, this Court has
inclined more often than not toward the worker and upheld his cause in his conflicts with
the employer. Such favoritism, however, has not blinded us to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established facts and
the applicable law and doctrine.
RONILO SORREDA vs CAMBRIDGE ELECTRONICS CORP G.R. NO 172927 (2010)
Facts: On May 8, 1999, petitioner was hired by respondent as a technician for a
period of 5 months at minimum wage. Five weeks into a job (on June 15, 1999),
petitioner met an accident in which his left arm was crushed by a machine and had to
be amputated. In September 1999, after he recovered from his injury, petitioner
reported for work. Instead of giving him employment, they made him sign a
memorandum of resignation to formalize his separation from the company in the light of
the expiration of his five-month contract.
(Petitioner filed a case for illegal dismissal. Defendant averred that there was no
employer-empleyee relationship. CA ruled that the petitioner RoniloSorreda was not a
regular employee of respondent Cambridge Electronic Corporation.
Issue: Whether or not there is an employer-employee relationship
Held: NO. In this instance, petitioner, from the period May 8, 1999 to October 8,
1999, was clearly a per-project of private respondent, resulting in a employer-employee
relationship. Consequently, questions and disputes arising out of this relationship fell
under the jurisdiction of the labor arbiter.
However, based on petitioners allegation on his position paper, his cause of action was
based on an alleged second contract of employment separate and distinct from the perproject employment contract. Thus, petitioner insisted that there was a perfected
contract of perpetual employment and that respondent was liable to pay him damages.
We note, however, that petitioner filed the case only when respondent refused to rehire
him. While there was a employer-employee relationship between the parties under their
five months per-project contract of employment, the present dispute is neither rooted in
the aforestated contract nor is it one inherently linked to it.
While the Constitution recognizes the primary of labor, it also recognizes the critical role
of private enterprise in nation-building and the prerogatives of management. A contract
perpetual employment deprives management of its prerogatives to decide when to hire,
fire and promote, and render inutile the basic precepts of labor relations. While
management may validly waive it prerogatives, such waiver should not be contrary to
law, public order, public policy, morals or good custom. [24] An absolute and unqualified
employment for life in the mold of petitioners concept of perpetual employment is
contrary to public policy and good customs, as it unjustly forbids the employer

terminating the services of the employee despite the existence of a just or valid cause.
It likewise compels the employer to retain an employee despite the attainment of the
statutory retirement age, even if the employee has became a non performing asset or,
worse, a liability to the employer.
Moreover, aside from the self-serving claim of petitioner, there was no concrete proof to
establish existence of such agreement. Petitioner cannot validly force respondent to
enter into a permanent employment contract with him. Such stance is contrary to the
consensuality principle of contracts as well as to the management prerogative of
respondent company to choose its employees.

ANGELES CONSTRUCTION V. NLRC 305 SCRA 734 (1999)

FACTS: Private respondent Pedro Santos was employed in 1969 as a carpenter, by the
petitioner JV Angeles Construction Corp. In 1973, he was promoted to a position of
foreman which he held until his retirement in February 1992 when he was 62 years old
1. Santos filed a complaint for retirement benefits and service incentive leave pay.
LA held in favor of petitioner
2. Petitioner filed an appeal before NLRC, assailing that the said ruling of LA
granting retirement benefits to Santos, by giving RA 7641 (Retirement Pay Law)
a retroactive application although Santos had retired almost a year prior to the
effectivity of said law in January 7, 1993. Petitioner cited the case of Llora Motors
v. Drilon where the SC held that in the absence of a CBA or other employment
contract, there is no obligation on the part of the employer to set up a retirement
scheme over and above that already established under existing laws. Since
Santos has been receiving his retirement benefits from SSS, he cannot anymore
ask for additional benefits from his employer in the absence of company practice,
policy or contract granting such benefits
3. NLRC upheld LA decision citing Oro Enterprises v. NLRC
ISSUE: WON RA 7641 CAN BE RETROACTIVELY APPLIED IN THIS CASE
HELD: No. In Oro Enterprises, Inc. v. NLRC, the court held that R.A. 7641 can be
applied retroactively, rationalizing thus: "R.A. 7641 is undoubtedly, a social legislation.
The law has been enacted as a labor protection measure and as a curative statue that absent a retirement plan devised by, an agreement with, or a voluntary grant from an
employer can respond, in part at least to the financial well-being of workers during
their twilight years soon following their life of labor. There should be little doubt about
the fact that the law can apply to labor contracts still existing at the time the statute has
taken effect, and that its benefits can be reckoned not only from the date of the laws
enactment but retroactively to the time said employment contracts have started.
CJC Trading Inc. v. NLRC, enumerated the circumstances which must occur before the
law could be given retroactive effect, to wit: (1) the claimant for retirement benefits was
still the employee of the employer at the time the statute took effect; and (2) the
claimant has complied with the requirements for eligibility under the statute for such
retirement benefits.
In the case under scrutiny, private respondent Santos retired and ceased to be an
employee of petitioner on February 1992, eleven (11) months before the effectivity

of R.A. 7641, and he brought his complaint on October 23, 1993, nine (9) months
after the laws effectivity. It is thus decisively clear that the provisions of R.A.
7641 could not be given retroactive effect in his favor. Consequently, the NLRC
erred in upholding the Labor Arbiters award of retirement benefits to private
respondent.

PASTOR AUSTRIA V. NLRC 312 SCRA 410 (1999)

Facts: The records show that petitioner Pastor Dionisio V. Austria worked with the SDA
for twenty eight (28) years from 1963 to 1991. On various occasions from August up to
October, 1991, petitioner received several communications3 from Mr. Eufronio Ibesate,
the treasurer of the Negros Mission asking him to admit accountability and responsibility
for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his
district which amounted to P15,078.10, and to remit the same to the Negros Mission. on
29 October 1991, petitioner received a letter of dismissal10 citing misappropriation of
denominational funds, willful breach of trust, serious misconduct, gross and habitual
neglect of duties, and commission of an offense against the person of employer's duly
authorized representative, as grounds for the termination of his services. Reacting
against the adverse decision of the SDA, petitioner filed a complaint. Respondent in its
answer contends that the termination of the service of petitioner is an ecclesiastical
affair as such it involves the separation of church and state.
Issue: whether or not Labor arbiter/NLRC has jurisdiction to try the case and whether
or not it involves an ecclesiastical affair.
Held: The case at bar does not concern an ecclesiastical or purely religious affair as to
bar the State from taking cognizance of the same. An ecclesiastical affair is "one that
concerns doctrine, creed, or form of worship of the church, or the adoption and
enforcement within a religious association of needful laws and regulations for the
government of the membership, and the power of excluding from such associations
those deemed unworthy of membership. Based on this definition, an ecclesiastical affair
involves the relationship between the church and its members and relate to matters of
faith, religious doctrines, worship and governance of the congregation.
Under the Labor Code, the provision which governs the dismissal of employees, is
comprehensive enough to include religious corporations, such as the SDA, in its
coverage. Article 278 of the Labor Code on post-employment states that "the provisions
of this Title shall apply to all establishments or undertakings, whether for profit or not."
Obviously, the cited article does not make any exception in favor of a religious
corporation. This is made more evident by the fact that the Rules Implementing the
Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment
and Retirement, categorically includes religious institutions in the coverage of the law, to
wit:
Sec. 1. Coverage. This Rule shall apply to all establishments and
undertakings, whether operated for profit or not, including educational, medical,

charitable and religious institutions and organizations, in cases of regular

employment with the exception of the Government and its political subdivisions
including government-owned or controlled corporations.
With this clear mandate, the SDA cannot hide behind the mantle of protection of the
doctrine of separation of church and state to avoid its responsibilities as an employer
under the Labor Code.
LVN V. PHIL MUSICIANS GUILD 1 SCRA 132 (1961)

FACTS: Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a
review by certiorari of an order of the Court of Industrial Relations, certifying the
Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole
and exclusive bargaining agency of all musicians working with said companies.
Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a
duly registered legitimate labor organization;
LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are
corporations, duly organized under the Philippine laws, engaged in the making of
motion pictures and in the processing and distribution thereof; that said companies
employ musicians for the purpose of making music recordings for title music,
background music, musical numbers, finale music and other incidental music, without
which a motion picture is incomplete;
That ninety-five (95%) percent of all the musicians playing for the musical recordings of
said companies are members of the Guild; and that the same has no knowledge of the
existence of any other legitimate labor organization representing musicians in said
companies.
Premised upon these allegations, the Guild prayed that it be certified as the sole and
exclusive bargaining agency for all musicians working in the aforementioned
companies.
The companies denied that they have any musicians as employees, and alleged that
the musical numbers in the filing of the companies are furnished by independent
contractors.
ISSUE: Whether or not the musicians in question are employees of the film companies.
HELD: YES THE MUSICIANS ARE EMPLOYEES OF THE COMPANIES.
Lower Courts RulingAs a normal and usual course of procedure employed by the companies when a
picture is to be made, the producer invariably chooses, from the musical

directors, one who will furnish the musical background for a film. A price is
agreed upon verbally between the producer and musical director for the cost of
furnishing such musical background. Thus, the musical director may compose his
own music specially written for or adapted to the picture. He engages his own
men and pays the corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are summoned
through 'call slips' in the name of the film company, which show the name
of the musician, his musical instrument, and the date, time and place
where he will be picked up by the truck of the film company. The film
company provides the studio for the use of the musicians for that
particular recording. The musicians are also provided transportation to and
from the studio by the company. Similarly, the company furnishes them
meals at dinner time.
During the recording sessions, the motion picture director, who is an
employee of the company, supervises the recording of the musicians and
tells what to do in every detail. He solely directs the performance of the
musicians before the camera as director, he supervises the performance
of all the action, including the musicians who appear in the scenes so that
in the actual performance to be shown on the screen, the musical
director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a
scene, the technicians, soundmen and other employees of the company
assist in the operation. Hence, the work of the musicians is an integral part
of the entire motion picture since they not only furnish the music but are
also called upon to appear in the finished picture.
The work of the musical director and musicians is a functional and integral
part of the enterprise performed at the same studio substantially under the
direction and control of the company.
In other words, to determine whether a person who performs work for
another is the latter's employee or an independent contractor, the National
Labor Relations relies on 'the right to control' test. Under this test an
employer-employee relationship exist where the person for whom the
services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end.
The right of control of the film company over the musicians is shown (1) by
calling the musicians through 'call slips' in 'the name of the company; (2)
by arranging schedules in its studio for recording sessions; (3) by
furnishing transportation and meals to musicians; and (4) by supervising
and directing in detail, through the motion picture director, the

performance of the musicians before the camera, in order to suit the music
they are playing to the picture which is being flashed on the screen.
We conclude that by virtue of the 'right of control' test, the members of the
Philippine Musicians Guild are employees of the three film companies
and, therefore, entitled to right of collective bargaining under Republic Act
No. 875..
In view of the fact that the three (3) film companies did not question the
union's majority, the Philippine Musicians Guild is hereby declared as the
sole collective bargaining representative for all the musicians employed by
the film companies."
SC is fully in agreement with the foregoing conclusion and the reasons given in support
thereof.
What is more in the language of the order appealed from "during the recording
sessions, the motion picture director who is an employee of the company" not the
musical director "supervises the recording of the musicians and tells them what to do
in every detail". The motion picture director not the musical director "solely directs
and performance of the musicians before the camera". The motion picture director
"supervises the performance of all the actors, including the musicians who appear in the
scenes, so that in the actual performance to be shown in the screen, the musical
director's intervention has stopped." Or, as testified to in the lower court, "the movie
director tells the musical director what to do; tells the music to be cut or tells additional
music in this part or he eliminates the entire music he does not (want) or he may want
more drums or move violin or piano, as the case may be". The movie director "directly
controls the activities of the musicians." He "says he wants more drums and the
drummer plays more" or "if he wants more violin or he does not like that.".
It is well settled that "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 . . . ." The decisive nature
of said control over the "means to be used", is illustrated in the case of Gilchrist Timber
Co., et al., in which, by reason of said control, the employer-employee relationship was
held to exist between the management and the workers, notwithstanding the
intervention of an alleged independent contractor, who had, and exercise, the power to
hire and fire said workers. The aforementioned control over the means to be used" in
reading the desired end is possessed and exercised by the film companies over the
musicians in the cases before us.

ROSARIO BROS V. OPLE 131 SCRA 72 (1984)

FACTS: Private respondents are tailors, pressers, stitchers and similar workers hired by
the petitioner in its tailoring department (Modes Suburbia). Some had worked there
since 1969 until their separation in January 1978.
1. For their services, they were paid weekly wages on piece-work basis, minus the
withholding tax. Further, they were registered with SSS as employees of
petitioner and premiums were deducted from their, wages; they were also
members of the Avenida-Cubao Manila COD Department Store Labor Union
which has a CBA with the company and; they were required to report for work
from Monday to Saturday and to stay in the tailoring shop for no less than 8
hours a day, unless no job order was given them after waiting for 2-3 hours. Their
attendance was recorded through a bundy clock just like other employees of
petitioner. A master cutter distributes job orders equally, supervises the work and
sees to it that they were finished as a soon as possible
2. Subsequently, private respondents filed a complaint for violation of PD 851 (13th
month pay) and PD 525 (Emergency living allowance) against petitioner
3. LA rendered in favor of petitioner, citing that private respondents are not
employees of the petitioner within the meaning of Art 267(b) Labor Code. NLRC
reversed the same
ISSUE: WON THERE IS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENTS
HELD: Yes, As held in Mafinco Trading Corporation vs. Ople, 70 SCRA 139, the
existence of employer-employee relationship is determined by the following elements,
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 employees' conduct although
the latter is the most important element. On the other hand, an independent contractor
is one who exercises independent employment and contracts to do a piece of work
according to his own methods and without being subjected to control of his employer
except as to the result of his work.
1. In the case at bar, as found by the public respondent, the selection and hiring of
private respondents were done by the petitioner, through the master cutter of its
tailoring department who was a regular employee. The procedure was modified
when the employment of personnel in the tailoring department was made by the
management itself after the applicants' qualifications had been passed upon by a
committee of four. Later, further approval by the Personnel Department was

2.

3.

4.

5.

required.
Private respondents received their weekly wages from petitioner on piece-work
basis which is within the scope and meaning of the term "wage" as defined under
Article 97(f) Labor Code
Petitioner had the power to dismiss private respondents, as shown by the various
memoranda issued for strict compliance by private respondents, violations of
which, in extreme cases, are grounds for outright dismissal. In fact, they were
dismissed on January 2, 1978, although, the dismissal was declared illegal by
LA.
Private respondents' conduct in the performance of their work was controlled by
petitioner, such as: (1) they were required to work from Monday through
Saturday; (2) they worked on job orders without waiting for the deadline; (3) they
were to observe cleanliness in their place of work and were not allowed to bring
out tailoring shop patterns; and (4) they were subject to quality control by
petitioner.
Private respondents were allowed to register with the Social Security System
(SSS) as employees of petitioner and premiums were deducted from their wages
just like its other employees. And, withholding taxes were also deducted from
their wages for transmittal to the Bureau of Internal Revenue (BIR).

Well-established is the principle that "findings of administrative agencies which have

acquired expertise because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality. Judicial review by this Court on labor cases
do not go so far as to evaluate the sufficiency of the evidence upon which the Deputy
Minister and the Regional Director based their determinations but are limited to issues
of jurisdiction or grave abuse of discretion." In the case at bar, the questioned decision
and order of execution of public respondents are not tainted with unfairness or
arbitrariness that would amount to abuse of discretion or lack of jurisdiction and,
therefore, this Court finds no necessity to disturb, much less, reverse the same.

BRO. LABOR UNITY V. ZAMORA 147 SCRA 49 (1987)

FACTS: The petitioners are workers who have been employed at the San Miguel Parola
Glass Factory since 1961. They worked as "cargadores" or "pahinante" at the SMC
Plant loading, unloading, piling or palleting empty bottles and woosen shells to and from
company trucks and warehouses. At times, they accompanied the company trucks on
their delivery routes.
1. The petitioners first reported for work to Superintendent-in-Charge Camahort.
They were issued gate passes signed by Camahort and were provided by San
Miguel with the tools, equipment and paraphernalia used in the loading,
unloading, piling and hauling operation.
2. Job orders emanated from Camahort. Work at times, exceeded the eight (8) hour
day and necessitated work on Sundays and holidays. For this, they were neither
paid overtime nor compensation for work on Sundays and holidays.
3. The petitioners worked exclusive at the SMC plant, never having been assigned
to other companies or departments of SMC plant, even when the volume of work
was at its minimum.
4. Sometime in January, 1969, the petitioner workers numbering 140 organized
and affiliated themselves with the petitioner union and engaged in union
activities. Believing themselves entitled to overtime and holiday pay, the
petitioners pressed management, airing other grievances such as being paid
below the minimum wage law, inhuman treatment, being forced to borrow at
usurious rates of interest and to buy raffle tickets, coerced by withholding their
salaries, and salary deductions made without their consent. However, their gripes
and grievances were not heeded by the respondents.
5. The complainant union through its officers presented a letter to the respondent
company containing proposals and/or labor demands together with a request for
recognition and collective bargaining. San Miguel refused to bargain with the
petitioner union alleging that the workers are not their employees.
6. On February 20, 1969, all the petitioners were dismissed from their jobs and,
thereafter, denied entrance to respondent company's glass factory despite their
regularly reporting for work. A complaint for illegal dismissal and unfair labor
practice was filed by the petitioners. Thus this petition.
ISSUE: WON an employer-employee relationship exists between petitioners-members
of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM) and respondent
San Miguel Corporation

HELD: Evidence shows there existence of an employer-employee relationship between

petitioner workers and respondent San Miguel Corporation.
In determining the existence of an employer-employee relationship, the elements that
are generally considered are the following: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee with respect to the means and methods by which the
work is to be accomplished. It. is the called "control test" that is the most important
element.
The respondent asserts that the petitioners are employees of the Guaranteed Labor
Contractor, an independent labor contracting firm.
The existence of an independent contractor relationship is generally established by the
following criteria: "whether or not the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control
and supervision of the work to another; the employer's power with respect to the hiring,
firing and payment of the contractor's workers; the control of the premises; the duty to
supply the premises tools, appliances, materials and labor; and the mode, manner and
terms of payment" None of the above criteria exists in the case at bar.
Each of the petitioners have worked continuously and exclusively for an average of 7
years for SMC plant. Considering the length of time that the petitioners have worked
with the respondent company, there is justification to conclude that they were engaged
to perform activities necessary or desirable in the usual business or trade of the
respondent, and the petitioners are, therefore regular employee.
The Guaranteed and Reliable Labor contractors have neither substantial capital nor
investment to qualify as an independent contractor under the law. The premises, tools,
equipment and paraphernalia used by the petitioners in their jobs are admittedly all
supplied by respondent company. The alleged contractor's office, which consists of a
space at respondent company's warehouse, table, chair, typewriter and cabinet, are
provided for by respondent SMC. It is only the manpower or labor force which the
alleged contractors supply, suggesting the existence of a "labor only" contracting
scheme prohibited by law.
THE PAYMENT OF WAGES. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of the latter.
Nor is the profit or gain of the alleged contractor in the conduct of its business provided
for as an amount over and above the workers' wages. Instead, the alleged contractor
receives a percentage from the total earnings of all the workers plus an additional
amount corresponding to a percentage of the earnings of each individual worker.
EMPLOYERS POWER OF CONTROL. Documentary evidence presented by the
petitioners establish respondent SMC's right to impose disciplinary measures for

violations or infractions of its rules and regulations as well as its right to recommend
transfers and dismissals of the piece workers. The inter-office memoranda submitted in
evidence prove the company's control over the petitioners.

TABAS V. CALIFORNIA MKTG 169 SCRA 459

Facts: On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the
National Labor Relations Commission for reinstatement and payment of various
benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and
emergency cost of living allowance pay, against the respondent, the California
Manufacturing Company. On October 7, 1986, after the cases had been consolidated,
the California Manufacturing Company (California) filed a motion to dismiss as well as a
position paper denying the existence of an employer-employee relation between the
petitioners and the company and, consequently, any liability for payment of money
claims. It appears that the petitioners were, prior to their stint with California,
employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned them to
work as "promotional merchandisers" for the former firm pursuant to a manpower supply
agreement. Among other things, the agreement provided that California "has no control
or supervisions whatsoever over [Livi's] workers with respect to how they accomplish
their work or perform [Californias] obligation"; the Livi "is an independent contractor and
nothing herein contained shall be construed as creating between [California] and [Livi] .
. . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby
agreed that it is the sole responsibility of [Livi] to comply with all existing as well as
future laws, rules and regulations pertinent to employment of labor" 6 and that
"[California] is free and harmless from any liability arising from such laws or from any
accident that may befall workers and employees of [Livi] while in the performance of
their duties for [California].
It was further expressly stipulated that the assignment of workers to California shall be
on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10 legal
holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the
preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises."
The petitioners were then made to sign employment contracts with durations of six
months, upon the expiration of which they signed new agreements with the same
period, and so on. Unlike regular California employees, who received not less than
P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received
P38.56 plus P15.00 in allowance daily.
The petitioners now allege that they had become regular California employees and
demand, as a consequence whereof, similar benefits. They likewise claim that pending
further proceedings below, they were notified by California that they would not be

rehired. As a result, they filed an amended complaint charging California with illegal
dismissal.
California admits having refused to accept the petitioners back to work but deny liability
therefor for the reason that it is not, to begin with, the petitioners' employer and that the
"retrenchment" had been forced by business losses as well as expiration of contracts. It
appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or
standby" status.
Issue: Whether or not the petitioners are California's or Livi's employees.
Ruling: The existence of an employer-employees relation is a question of law and
being such, it cannot be made the subject of agreement. Hence, the fact that the
manpower supply agreement between Livi and California had specifically designated
the former as the petitioners' employer and had absolved the latter from any liability as
an employer, will not erase either party's obligations as an employer, if an employeremployee relation otherwise exists between the workers and either firm. At any rate,
since the agreement was between Livi and California, they alone are bound by it, and
the petitioners cannot be made to suffer from its adverse consequences.
This Court has consistently ruled that the determination of whether or not there is an
employer-employee relation depends upon four standards: (1) the manner of selection
and engagement of the putative employee; (2) the mode of payment of wages; (3) the
presence or absence of a power of dismissal; and (4) the presence or absence of a
power to control the putative employee's conduct. Of the four, the right-of-control test
has been held to be the decisive factor.
There is 'labor-only' contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Notwithstanding the absence of a direct employer-employee relationship between the
employer in whose favor work had been contracted out by a "labor-only" contractor, and
the employees, the former has the responsibility, together with the "labor-only"
contractor, for any valid labor claims, by operation of law. The reason, so we held, is
that the "labor-only" contractor is considered "merely an agent of the employer," and
liability must be shouldered by either one or shared by both.
There is no doubt that in the case at bar, Livi performs "manpower services", meaning
to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its
vehement claims to the contrary, and notwithstanding the provision of the contract that it
is "an independent contractor." The nature of one's business is not determined by selfserving appellations one attaches thereto but by the tests provided by statute and

prevailing case law. The bare fact that Livi maintains a separate line of business does
not extinguish the equal fact that it has provided California with workers to pursue the
latter's own business. In this connection, we do not agree that the petitioners had been
made to perform activities 'which are not directly related to the general business of
manufacturing," California's purported "principal operation activity. " 23 The petitioner's
had been charged with "merchandizing [sic] promotion or sale of the products of
[California] in the different sales outlets in Metro Manila including task and occational
[sic] price tagging," an activity that is doubtless, an integral part of the manufacturing
business. It is not, then, as if Livi had served as its (California's) promotions or sales
arm or agent, or otherwise, rendered a piece of work it (California) could not have itself
done; Livi, as a placement agency, had simply supplied it with the manpower necessary
to carry out its (California's) merchandising activities, using its (California's) premises
and equipment. 25
Neither Livi nor California can therefore escape liability, which is, assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct employees" in
their complaints is nothing conclusive. For one thing, the fact that the petitioners were
(are), will not absolve California since liability has been imposed by legal operation. For
another, and as we indicated, the relations of parties must be judged from case to case
and the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis merely
is no argument either. As we held in Philippine Bank of Communications v. NLRC, a
temporary or casual employee, under Article 218 of the Labor Code, becomes regular
after service of one year, unless he has been contracted for a specific project. And we
cannot say that merchandising is a specific project for the obvious reason that it is an
activity related to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm, and
that California had hired it to perform the latter's merchandising activities. For then, Livi
would have been truly the employer of its employees, and California, its client. The
client, in that case, would have been a mere patron, and not an employer. The
employees would not in that event be unlike waiters, who, although at the service of
customers, are not the latter's employees, but of the restaurant.
In the case at bar, Livi is admittedly an "independent contractor providing temporary
services of manpower to its client. "When it thus provided California with manpower, it
supplied California with personnel, as if such personnel had been directly hired by
California. Hence, Article 106 of the Code applies.
Petition is GRANTED.

ZANOTTE SHOES V. NLRC 241 SCRA 261 (1961)

FACTS: Private respondents filed a complaint for illegal dismissal and various money
claims against petitioners.
1. They alleged that they worked for a minimum of 12 hours daily, including
Sundays and holidays when needed; they were paid on piece-work basis
2. They also alleged that it angered petitioner when they requested to be made
members of SSS and when they demanded an increase in their pay rates, they
were prevented from entering the work premises
3. Petitioners, on the other hand, claimed that their business operations were only
seasonal, normally twice a year (one in June and another in December), when
heavy job orders would come in. According to petitioners, private respondents
were engaged on purely contractual basis
4. LA rendered in favor of complainants, citing that there was an employeremployee relationship that existed between the two. NLRC affirmed the same
ISSUE: WON THERE EXISTS AN EMPLOYER-EMPLOYEE
BETWEEN PETITIONER AND PRIVATE RESPONDENTS

RELATIONSHIP

HELD: Yes. The work of private respondents is clearly related to, and in the pursuit of,
the principal business activity of petitioners. The indicia used for determining the
existence of an employer-employee relationship, all extant in the case at bench, include
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with respect
to the result of the work to be done and to the means and methods by which the work to
be done and to the means and methods by which the work is to be accomplished. The
requirement, so herein posed as an issue, refers to the existence of the right to control
and not necessarily to the actual exercise of the right.
While this Court up holds 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.

MAM REALTY V. NLRC 244 SCRA 797 (1995)

FACTS: Balbastro filed a complaint against petitioners, MAM realty and its Vice Pres
Centeno, for wage differentials,overtime pay and others. Balbastro alleged that he was
employed by MAM as a pump operator and performed suchwork at its Rancho Estate.
He earned a monthly salary who worked seven days a week.Petitioner alleged that
Balbastro had previously been employed by Francisco Cancho Inc., the developer of
Rancho Estates. His services were contracted by petitioner for the operation of the
Rancho Estates water pump. Under the agreement, Balbastro was made to open and
close daily the water supply system. He worked foronly a maximum of 3 hours a day
and used his free times by offering plumbing services to the residents of the subdivision.
ISSUE: W/N there exists an ER-EE relationship between petitioner and Balbastro
HELD: The issue of the existence of ER-EE relationship is determined by the following
factors:
1.selection and engagement of the employees
2.payment of wages
3.power of dismissal
4.employers power to control the employee with respect to the result to be done and to
the means and methods by which the work is to be accomplished.
The power of control refers merely to the existence of the power and not to the actual
exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the former has a right to wield
the power. With regards to the liability of Centeno, Vice Pres of MAM, he is not jointly
and severally liable with MAM. A corporation, being a juridical entity, may act only
through its directors, officers, employees. Obligations incurred by them, are not theirs
but the direct accountabilities of the corporation they represent. Solidary liability may at
times be incurred but only when exceptional circumstances warrant, such as:
1.When directors and trustees or the officers of a corporation:
a. vote for or assent to patently unlawful acts of the corporation
b. act in bad faith or with gross negligence
c. guilty of conflict of interest
2.When a director or officer has consented to the issuance of watered stocks or who,
having knowledge thereof, did not file his written objection thereto
3.When a director, trustee or officer has agreed to hold himself personally and solidarily
liable with corporation

4.When a director, trustee or officer is made personally liable for his corporate action.
In the case at bench, there is nothing substantial that can justify Centenos solidary
liability with
corporation.

TONGCO V. MANUFACTURERS LIFE INSURANCE CO INC G..R NO 167622 (2008)

FACTS: The case arose from a complaint of illegal dismissal with various claims filed by
tongco against Manulife. Tongco alleged that he was an employee of the company
since the latter exercise control over.
The labor arbiter dismissed the complaint finding no employer-employee
relationship exists. This was reversed by NLRC. On appeal to the CA, the latter
ruled in favor of Manulife finding no employer-employee relationship. Hence
Tongko appealed to the SC.
The SC held that if the specific rules and regulations that are enforced would
directly affect the means and methods by which such agents or managers would
achieve the objectives set by the insurance company, they are employees of
insurance company.
Applying said standard, the court held that Tongko was an employee of Manulife
since the latter has the power of control over the former. By this decision
Manulife filed MR.
ISSUE: Whether an agency or an employment relationship exists between
Tongko and Manulife?

RULING:
In disposing of this MR, the SC placed heavy significance on the application of the Civil
Code and insurance provisions on agency. The original agreement of Tongko with the
company dictates that he is an insurance agent. No other documentary evidences were
found to support subsequent stipulations as to their relationship that would negate the
agency, and not the employment, relationship on the original agreement.
It was found by the court that Tongko declared himself as business or self-employed
person in his income tax return. In this sense, an independent contractor. This bolters
the content of the agreement mentioned above that he was a insurance agent in the
context of the insurance code and the civil code. To the court, this aspect of the
evidence was not considered in its original decision, which they had been given an
importance, would have changed the decision as it is an admission against interest on
the part of Tongko.

Another principle that surfaced here is the concept of estoppel. Tongkos previous
admissions in several years of tax returns as independent agent, as against his belated
claim that all along he was an employee, are too diametrically opposed to be simply
dismissed or ignored.
As to the value of code of conduct relied upon by Tongko in claiming that he is an
employee, the court posits:
What, to Tongko, serves as evidence of labor law control are the codes of conduct that
Manulife imposes on its agents in the sale of insurance. The mere presentation of
codes or rules and regulations, however, is not per se indicative of labor law control as
the law and jurisprudence teach us.
As already cited above, the Insurance code imposes obligations on both the insurance
company and its agents in the performance of their respective obligations under the
code particularly on licenses and their renewals, on the representations to be made to
potential customers, the collection of premiums, on the delivery of insurance policies, on
the matter of compensation, and on measures to ensure ethical business practice in the
industry.
The general law on agency, on the other hand, expressly allows the principal an
element of control over the agent in a manner consistent with an agency relationship. In
this sense, these control measures cannot be read as indicative of labor law control.
Foremost, among these are the directives that the principal may impose on the agent to
achieve the assigned task, to the extent that they do not involve the means and manner
of undertaking these tasks. The law likewise obligates the agent to render an account;
in this sense, the principal may impose on agents specific instructions on how an
account shall be made, particularly on the matter of expenses and reimbursements. To
these extents, control can be imposed through rules and regulations without intruding to
the labor law concept of control for purpose of employment.
The court further held that a commitment to abide by the rules and regulations of an
insurance company does not ipso facto make the insurance agent an employee.
Neither do guidelines somehow restrictive of the insurance agents conduct necessarily
indicate control as this term is defined in jurisprudence. Guidelines indicative of labor
law control, should not merely relate to the mutually desirable result intended by the
contractual relationship; they must the nature of dictating the means or method to be
employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact, results-wise, the principal
can impose production quotas and can determine how many agents, with specific
territories ought to be employed to achieve the companys objectives. These are
management policy decisions that the labor law element of control cannot reach. Thus,
as will be shown more fully, Manulifes codes of conduct, all of which do not intrude into
the insurance agents means and manner of conducting their sales and only control

them as to the desired results and insurance code norms, cannot be used as basis for a
finding that the labor law concept of control existed between Manulife and Tongko.
Thus, the SC did not see the existence of an employer-employee relationship and
reversed its earlier ruling.

DEALCO FARMS V. NLRC G.R. NO 153192 (2009)

FACTS: Petitioner is a corporation engaged in the business of importation, production,
fattening and distribution of live cattle for sale to meat dealers, meat traders, meat
processors, canned good manufacturers and other dealers in Mindanao and Metro
Manila
1. Private respondents were hired by petitioner as escorts or comboys for the
transit of live cattle from General Santos City to Manila. Respondents work
entailed tending to the cattle during transportation. It included feeding and
frequently showering the cattle to prevent dehydration and to develop heat
resistance.
2. Upon arrival to Manila, the cattle are turned over to and received by duly
acknowledged buyers or customers of petitioner, at which point, respondents
work ceases. For every round trip travel which lasted an average of 12 days,
respondents were each paid P1500. The 12-day period is occasionally extended
when petitioners customers were delayed in receiving the cattle.
3. Private respondents filed a complaint for illegal dismissal with claims for
separation pay with full back wages, salary differentials, service incentive leave
pay, 13th month pay etc.
4. Respondents alleged that: 1. They were illegally dismissed, as they never
violated any of petitioners company rules and policies; 2. Their dismissal was not
due to any just or authorized cause and; 3. petitioner did not observe due
process in effecting their dismissal, failing to give them written notice thereof
5. Petitioner, however, asserted that the finished cattle are sold to traders and
middlemen who undertake transportation thereof to Manila. Buyers themselves
arrange, through local representatives, for the hauling from petitioners farm to
the port area, shipment of the finished cattle to Manila and; escort or comboy
services to feed and water the cattle during transit. There was only once instance
when it engaged the services of respondents as comboys which was only on a
per-trip or per-contract basis
6. Petitioner posited that respondents are independent contractors who offer
comboy services to various shippers and traders of cattle, not only to petitioner;
in the performance of work on board the ship, respondents are free from the
control and supervision of the cattle since the latter is interested only in the result
thereof; in the alternative, respondents can only be considered as casual
employees performing work not necessary and desirable to the usual business of
petitioner; respondents likewise failed to complete the one-year service period,

whether continuous or broken, set forth in Art 280 Labor Code as petitioners
shipments were substantially reduced in 1988-89, thereby limiting the escort
activity for which respondents were employed
7. LA found that private respondents were employees of Dealco Farms since all
the four elements in the determination of an employer-employee relationship
were present in the instant case. NLRC affirmed the same
ISSUE: WON PRIVATE RESPONDENTS ARE EMPLOYEES OF DEALCO FARMS
HELD: Yes, the presence of the 4 elements in the determination of employer-employee
relationship has been clearly established by the facts and evidence on record, starting
with the admissions of petitioner who acknowledged the engagement of respondents as
escorts of their cattle from General Santos City to Manila with compensation of P1500
per trip.
In determining the existence of an employer-employee relationship between the parties,
both the Labor Arbiter and the NLRC examined and weighed the circumstances against
the four-fold test which has the following elements: (1) the power to hire, (2) the
payment of wages, (3) the power to dismiss, and (4) the power to control the
employees conduct, or the so-called "control test." Of the four, the power of control is
the most important element. More importantly, the control test merely calls for the
existence of the right to control, and not necessarily the exercise thereof.
Having failed to substantiate its allegation on the relationship between the parties, we
stick to the settled rule in controversies between a laborer and his master that doubts
reasonably arising from the evidence should be resolved in the formers favor. The
policy is reflected in no less than the Constitution, Labor Code and Civil Code.

Jose Mel Bernante v. PBA et al., G.R. No. 192084 (2011)

(TOPIC: Employee; existence of employer-employee relationship. To determine the
existence of an employer-employee relationship, case law has consistently applied the
four-fold test. )
FACTS: Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were
invited to join the PBA as referees. During the leadership of Commissioner Emilio
Bernardino, they were made to sign contracts on a year-to-year basis. During the term
of Commissioner Eala, however, changes were made on the terms of their employment.
Complainant Bernarte, for instance, was not made to sign a contract during the
first conference of the All-Filipino Cup which was from February 23, 2003 to June
2003. It was only during the second conference when he was made to sign a one
and a half month contract for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the
Commissioner advising him that his contract would not be renewed citing his
unsatisfactory performance on and off the court. It was a total shock for Bernarte
who was awarded Referee of the year in 2003. He felt that the dismissal was
caused by his refusal to fix a game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was invited to join the
PBA pool of referees in February 2001. On March 1, 2001, he signed a contract
as trainee. Beginning 2002, he signed a yearly contract as Regular Class C
referee. On May 6, 2003, respondent Martinez issued a memorandum to
Guevarra expressing dissatisfaction over his questioning on the assignment of
referees officiating out-of-town games. Beginning February 2004, he was no
longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into two
contracts of retainer with the PBA in the year 2003. The first contract was for the
period January 1, 2003 to July 15, 2003; and the second was for September 1 to
December 2003. After the lapse of the latter period, PBA decided not to renew
their contracts.
Complainants were not illegally dismissed because they were not employees of
the PBA. Their respective contracts of retainer were simply not renewed. PBA
had the prerogative of whether or not to renew their contracts, which they knew
were fixed.

Respondents argue that the element of control is lacking in this case, making
petitioner-referee an independent contractor and not an employee of
respondents.

ISSUE:
WON there was no control over the means and methods by which petitioner performs
his work as a referee officiating a PBA basketball game
HELD:
The Supreme Court agreed as it found that there was no control over the means and
methods by which petitioner performs his work as a referee officiating a PBA basketball
game. The contractual stipulations in the retainer contracts do not pertain to, much less
dictate, how and when petitioner will blow the whistle and make calls. On the contrary,
they merely serve as rules of conduct or guidelines in order to maintain the integrity of
the professional basketball league. Moreover, the following circumstances indicate that
petitioner is an independent contractor: (1) the referees are required to report for work
only when PBA games are scheduled, which is three times a week spread over an
average of only 105 playing days a year, and they officiate games at an average of two
hours per game; and (2) the only deductions from the fees received by the referees are
withholding taxes. There are no deductions for contributions to the Social Security
System, Philhealth or Pag-Ibig, which are the usual deductions from employees
salaries. These undisputed circumstances buttress the fact that petitioner is an
independent contractor, and not an employee of respondents.

PEOPLES BROADCASTING V. SECRETARY OF LABOR G.R. NO 179652 (2009)

Facts: The petition traces its origins to a complaint filed by Jandeleon Juezan
(respondent) against Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc)
(petitioner) for illegal deduction, non-payment of service incentive leave, 13th month
pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed
payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before the
Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City.
Respondent deny employer-employee relationship with the complainant; accordingly
the complainant is a drama talent hired on a per drama participation basis hence no
employer-employeeship [existed between them. As proof of this, management
presented photocopies of cash vouchers, billing statement, employments of specific
undertaking (a contract between the talent director & the complainant), summary of
billing of drama production etc. They (mgt.) has not control of the talent if he ventures
into another contract w/ other broadcasting industries.
But the more important issue to be resolved in this case is on the issue of jurisdiction.
Petitioner argues that NLRC and not the DOLE secretary has jurisdiction over the
respondents claim. While respondent invokes Republic Act No. 7730, which removes
the jurisdiction of the Secretary of Labor and Employment or his duly authorized
representatives, from the effects of the restrictive provisions of Article 129 and 217 of
the Labor Code, regarding the confinement of jurisdiction based on the amount of
claims.
Issue: whether or not the absence of employer-employee rel. deprives DOLE secretary
its right to exercise visitorial and enforcement powers
Held: The court ruled that;a reading of Art. 128 of the Labor Code reveals that the
Secretary of Labor or his authorized representatives was granted visitorial and
enforcement powers for the purpose of determining violations of, and enforcing, the
Labor Code and any labor law, wage order, or rules and regulations issued pursuant
thereto. Necessarily, the actual existence of an employer-employee relationship affects
the complexion of the putative findings that the Secretary of Labor may determine, since
employees are entitled to a different set of rights under the Labor Code from the
employer as opposed to non-employees. Among these differentiated rights are those
accorded by the labor standards provisions of the Labor Code, which the Secretary of
Labor is mandated to enforce. If there is no employer-employee relationship in the first

place, the duty of the employer to adhere to those labor standards with respect to the
non-employees is questionable.
This decision should not be considered as placing an undue burden on the Secretary of
Labor in the exercise of visitorial and enforcement powers, nor seen as an
unprecedented diminution of the same, but rather a recognition of the statutory
limitations thereon. A mere assertion of absence of employer-employee relationship
does not deprive the DOLE of jurisdiction over the claim under Article 128 of the Labor
Code. At least a prima facie showing of such absence of relationship, as in this case, is
needed to preclude the DOLE from the exercise of its power.

METEORO ET AL V. CREATIVE CREATURES G.R. NO 171275 (2009)

FACTS: Respondent Creative Creatures Inc is a corporation engaged in the business of
producing, providing, or procuring the production of set designs and set construction
services for TV exhibitions, concerts, theatrical performances, motion pictures and the
like. It primarily caters to the production design requirements of ABS-CBN in Metro
Manila and nationwide.
1. On the other hand, petitioners were hired by respondent on various dates as
artists, carpenters and welders. They were tasked to design, create, assemble,
set up and dismantle props, and provide sound effects to respondents various
TV programs and movies
2. Petitioners filed a complaint for nonpayment of night shift differential pay,
overtime pay, holiday pay, 13th month pay, premium pay for Sundays and/or rest
days, service incentive leave pay, paternity leave pay, educational assistance,
rice benefits, and illegal/unauthorized deductions from salaries
3. Respondent claimed that petitioners were contractual employees and/or
independent talent workers and that DOLE had no jurisdiction over the complaint
because of the absence of an employer-employee relationship
4. DOLE held in favor petitioners, citing that the four elements in determination an
employer-emmployee relationship were present in the instant case
5. CA reversed the decision and held in favor of respondent Creative Creatures
based on the exception provided in Art 128 Labor Code
ISSUE: WON DOLE HAS JURISDICTION OVER THE INSTANT CASE
HELD: No, The last sentence of Article 128 (b) of the Labor Code, otherwise known as
the exception clause, provides an instance when the Regional Director or his
representatives may be divested of jurisdiction over a labor standards case.
Under prevailing jurisprudence, the so-called exception clause has the following
elements, all of which must concur:
(a) that the employer contests the findings of the labor regulations officer
and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and
(c) that such matters are not verifiable in the normal course of inspection.

In the present case, the CA aptly applied the exception clause. At the earliest
opportunity, respondent registered its objection to the findings of the labor inspector.
The labor inspector, in fact, noted in its report that respondent alleged that petitioners
were contractual workers and/or independent and talent workers without control or
supervision and also supplied with tools and apparatus pertaining to their job. In its
position paper, respondent again insisted that petitioners were not its employees. It
then questioned the Regional Directors jurisdiction to entertain the matter before it,
primarily because of the absence of an employer-employee relationship. Finally, it
raised the same arguments before the Secretary of Labor and the appellate court. It is,
therefore, clear that respondent contested and continues to contest the findings and
conclusions of the labor inspector.
Thus, in addition to the above-mentioned documents, other pieces of evidence are
considered in ascertaining the true nature of the parties relationship. This is especially
true in determining the element of control. The most important index of an employeremployee relationship is the so-called control test, that is, whether the employer
controls or has reserved the right to control the employee, not only as to the result of the
work to be done, but also as to the means and methods by which the same is to be
accomplished.
In the case at bar, whether or not petitioners were independent contractors/project
employees/free lance workers is a question of fact that necessitates the examination of
evidentiary matters not verifiable in the normal course of inspection. Indeed, the
contracts of independent services, as well as the check vouchers, were kept and
maintained in or about the premises of the workplace and were, therefore, verifiable in
the course of inspection. However, respondent likewise claimed that petitioners were
not precluded from working outside the service contracts they had entered into with it
(respondent); and that there were instances when petitioners abandoned their service
contracts with the respondent, because they had to work on another project with a
different company.

SMART COMMUNICATIONS V. ASTORGA 542 SCRA 434 (2008)

FACTS:
Regina M. Astorga (Astorga) was employed by respondent Smart
Communications, Incorporated (SMART) as District Sales Manager of the Corporate
Sales Marketing Group/ Fixed Services Division. As District Sales Manager, Astorga
enjoyed additional benefits, namely, among which, a car plan in the amount of
P455,000.00.
Then, SMART launched an organizational realignment to achieve more efficient
operations. Thus, SMART entered into a joint venture agreement with NTT of Japan,
and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to
do the sales and marketing work, SMART abolished the CSMG/FSD, Astorgas division.
SNMI agreed to absorb the CSMG personnel who would be recommended by SMART.
SMART then conducted a performance evaluation of CSMG personnel and those who
garnered the highest ratings were favorably recommended to SNMI. Astorga landed last
in the performance evaluation, thus, she was not recommended by SMART. SMART,
nonetheless, offered her a supervisory position in the Customer Care Department, but
she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on
March 3, 1998, SMART issued a memorandum advising Astorga of the termination of
her employment on ground of redundancy.
The termination of her employment prompted Astorga to file a Complaint for illegal
dismissal, non-payment of salaries and other benefits with prayer for moral and
exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She
claimed that abolishing CSMG and, consequently, terminating her employment was
illegal for it violated her right to security of tenure. She also posited that it was illegal for
an employer, like SMART, to contract out services which will displace the employees,
especially if the contractor is an in-house agency.
SMART responded that there was valid termination. It argued that Astorga was
dismissed by reason of redundancy, which is an authorized cause for termination of
employment, and the dismissal was effected in accordance with the requirements of the
Labor Code. The redundancy of Astorgas position was the result of the abolition of
CSMG and the creation of a specialized and more technically equipped SNMI, which is
a valid and legitimate exercise of management prerogative.

In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she
pay the current market value of the Honda Civic Sedan which was given to her under
the companys car plan program, or to surrender the same to the company for proper
disposition. Astorga, however, failed and refused to do either, thus prompting SMART to
file a suit for replevin with the Regional Trial Court of Makati (RTC).
Astorgas contention that the regular courts have no jurisdiction over the complaint
because the subject thereof pertains to a benefit arising from an employment contract;
hence, jurisdiction over the same is vested in the labor tribunal and not in regular courts.
Pending resolution of Astorgas motion to dismiss the replevin case in the RTC, the
Labor Arbiter rendered a Decision declaring Astorgas dismissal from employment
illegal. While recognizing SMARTs right to abolish any of its departments, the Labor
Arbiter held that such right should be exercised in good faith and for causes beyond its
control. The Arbiter found the abolition of CSMG done neither in good faith nor for
causes beyond the control of SMART, but a ploy to terminate Astorgas employment.
RTC issued an Order denying Astorgas motion to dismiss the replevin case. In so
ruling, the RTC ratiocinated that:
this case is to enforce a right of possession over a company car assigned
to the defendant under a car plan privilege arrangement. The car is
registered in the name of the plaintiff. Recovery thereof via replevin suit is
allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is
undoubtedly within the jurisdiction of the Regional Trial Court.
Astorga filed a motion for reconsideration, but the RTC denied it.
CA held that the case is intertwined with Astorgas complaint for illegal dismissal; thus, it
is the labor tribunal that has rightful jurisdiction over the complaint.
SMARTs motion for reconsideration having been denied, it elevated the case to this
Court.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the
illegal dismissal case to the National Labor Relations Commission (NLRC).
The NLRC sustained Astorgas dismissal, reversing the Labor
ISSUE: a. Whether or not the RTC of Makati has jurisdiction over the replevin case.
b. Whether or not Astorga is illegally dismissed.
HELD:
a. YES, RTC HAS JURISDICTION.

Replevin is an action whereby the owner or person entitled to repossession of goods or

chattels may recover those goods or chattels from one who has wrongfully distrained or
taken, or who wrongfully detains such goods or chattels. Recovery of personalty, or to
the provisional remedy traditionally associated with it, by which possession of the
property may be obtained by the plaintiff and retained during the pendency of the action.
The RTC rightfully assumed jurisdiction over the suit and acted well within its discretion
in denying Astorgas motion to dismiss. SMARTs demand for payment of the market
value of the car or, in the alternative, the surrender of the car, is not a labor, but a
civil dispute. It involves the relationship of debtor and creditor rather than employeeemployer relations. As such, the dispute falls within the jurisdiction of the regular courts.
The labor dispute involved is not intertwined with the issue in the Replevin Case. The
respective issues raised in each forum can be resolved independently on the other.
b. NO, SHE IS NOT ILLEGALLY DISMISSED.
Astorga was terminated due to redundancy, which is one of the authorized causes for
the dismissal of an employee. The nature of redundancy as an authorized cause for
dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor
Relations Commission,
x x x redundancy in an employers personnel force necessarily or even
ordinarily refers to duplication of work. Succinctly put, a position is
redundant where it is superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.
The characterization of an employees services as superfluous or no longer necessary
and, therefore, properly terminable, is an exercise of business judgment on the part of
the employer. The wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation of law or arbitrary or
malicious action is not shown.
Astorga claims that the termination of her employment was illegal and tainted with bad
faith. She asserts that the reorganization was done in order to get rid of her. But except
for her barefaced allegation, no convincing evidence was offered to prove it. This Court
finds it extremely difficult to believe that SMART would enter into a joint venture
agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of
easing out a particular employee, such as Astorga. Moreover, Astorga never denied that
SMART offered her a supervisory position in the Customer Care Department, but she
refused the offer because the position carried a lower salary rank and rate. If indeed
SMART simply wanted to get rid of her, it would not have offered her a position in any
department in the enterprise.

Astorga also states that the justification advanced by SMART is not true because there
was no compelling economic reason for redundancy. But contrary to her claim, an
employer is not precluded from adopting a new policy conducive to a more economical
and effective management even if it is not experiencing economic reverses. Neither
does the law require that the employer should suffer financial losses before he can
terminate the services of the employee on the ground of redundancy. 37
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined
towards the worker and upheld his cause in most of his conflicts with his employer. This
favored treatment is consonant with the social justice policy of the Constitution. But
while tilting the scales of justice in favor of workers, the fundamental law also
guarantees the right of the employer to reasonable returns for his investment. In this
light, we must acknowledge the prerogative of the employer to adopt such measures as
will promote greater efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing laws. Accordingly, we
sustain the reorganization and redundancy program undertaken by SMART.
However, SMART failed to comply with the mandated one (1) month notice prior to
termination. The record is clear that Astorga received the notice of termination less than
a month prior to its effectivity. Likewise, the Department of Labor and Employment was
notified of the redundancy program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
Art. 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 x x x.
SMARTs assertion that Astorga cannot complain of lack of notice because the
organizational realignment was made known to all the employees as early as February
1998 fails to persuade. Astorgas actual knowledge of the reorganization cannot replace
the formal and written notice required by the law. In the written notice, the employees
are informed of the specific date of the termination, at least a month prior to the
effectivity of such termination, to give them sufficient time to find other suitable
employment or to make whatever arrangements are needed to cushion the impact of
termination. In this case, notwithstanding Astorgas knowledge of the reorganization,
she remained uncertain about the status of her employment until SMART gave her
formal notice of termination. But such notice was received by Astorga barely two (2)
weeks before the effective date of termination, a period very much shorter than that
required by law.

GRANDTEQ INDUSTRIAL STEEL PRODUCTS V. EDNA MARGALLO, G.R. NO.

181393 (2009)
FACTS: Grandteq is a domestic corporation engaged in the business of selling welding
electrodes, alloy steels, aluminum and copper alloys. Gonzales is the President/Owner
of Grandteq. Grandteq employed Margallo as Sales Engineer beginning 3 August 1999.
1. Margallo availed herself of the car loan program offered to her by Grandteq as a
reward for being "Salesman of the Year." She paid the down payment on a brand
new Toyota Corolla. She paid the half of the amortization of the car and the other
half was paid by Grandteq.
2. Grandteq sent a letter requiring petitioner to provide her written explanation for
allegedly committing: Moonlighting, Sabotage and Breach of trust and confidence
for working with JVM Industrial Supply and Allied Services while being employed
with Grandteq. Responding to the foregoing letter, Margallo contends that she
was only instructed by her superior to deliver the said items.
3. Margallo averred that De Leon asked her to resign, promising that if she did, she
will still be paid her commissions and other benefits as well as be reimbursed her
car loan payment. Relying on De Leons promise, Margallo resigned. Margallo
alleged that she was never paid her money claims. After Margallos resignation,
Grandteq sold her car to Annaliza Estrella, another employee.
4. Margallo filed a complaint before the Labor Arbiter for recovery of sales
commission, cash incentive and car loan payment. Grandteq and Gonzales
insisted that Margallo had no right to the refund of her car loan payments under
the car loan agreement she executed with Grandteq, which expressly provided
that in the event that Margallo resigned or was terminated for cause during the
effectivity of said agreement, her car loan payments would be forfeited in favor of
Grandteq, and Grandteq would regain possession of the car.
5. Labor Arbiter dismissed all her claims. NLRC reversed the previous decision by
grating Margallo her claims for sales commission, reimbursement of her car loan
payments and attorneys fees. Grandteq elevated the case to the CA. Like the
NLRC, Court of Appeals found that Margallo had a right to be reimbursed her car
loan payments, and the terms of the car loan agreement between Margallo and
Grandteq should not be applied for being highly prejudicial to the employees
interest.
ISSUE: WON the CA erred in declaring the car loan agreement between Grandteq and
Margallo, particularly the provision therein on the forfeiture of car loan payments in favor
of Grandteq should Margallo resign from the company, as null and void.

HELD: The provision in the car loan agreement between Grandteq and Margallo which
provides the forfeiture of the car loan payments in favor of Grandteq should Margallo
resign from the company is null and void.
Contracts are respected as the law between the contracting parties. The contracting
parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public
order or public policy.
Said provisions plainly are contrary to the fundamental principles of justice and fairness.
It must be remembered that Margallo herself paid for the down payment and her share
in the monthly amortization of the car. The principle that no person may unjustly enrich
oneself at the expense of another is the "basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order. There is
unjust enrichment when a person unjustly retains a benefit at the loss of another, or
when a person retains the money or property of another against the fundamental
principles of justice, equity and good conscience.
The principle against unjust enrichment obliges Grandteq and Gonzales to refund to
Margallo the car loan payments she had made, since she has not actually acquired the
car. To relieve Grandteq and Gonzales of their obligation to reimburse Margallo would,
indeed, be to sanction unjust enrichment in favor of the first two and cause unjust
poverty to the latter.
The Court rigorously disapproves contracts that demonstrate a clear attempt to exploit
the employee and deprive him of the protection sanctioned by both the Constitution and
the Labor Code. The Constitution and the Labor Code mandate the protection of labor.
Hence, as a matter of judicial policy, this Court has, in a number of instances, leaned
backwards to protect labor and the working class against the machinations and
incursions of their more financially entrenched employers.
Although not strictly a labor contract, the car loan agreement herein involves a benefit
extended by the employers, Grandteq and Gonzales, to their employee, Margallo. It
should benefit, and not unduly burden, Margallo. The Court cannot, in any way, uphold
a car loan agreement that threatens the employee with the forfeiture of all the car loan
payments he/she had previously made, plus loss of the possession of the car, should
the employee wish to resign; otherwise, said agreement can then be used by the
employer as an instrument to either hold said employee hostage to the job or punish
him/her for resigning.

DOMONDON V. NLRC 471 SCRA 559 (2005)

FACTS: Domondon filed a complaint against private respondent Van Melle Phils Inc
(VMPI), claiming illegal dismissal and thus prayed for reinstatement, payment of full
back wages inclusive of allowances, 14th month pay, sick and vacation leaves, share in
the profits etc.
1. Petitioner alleged that VMPI hired him as a materials manager through the
companys president and GM Victor Endaya. He was given a guaranteed
monthly salary of P98,000 for 14 months with annual merit adjustment, profit
sharing bonus from 0-2 months based on individual, company and corporate
performance and a brand new car with gas allowance
2. Petitioner averred that Have as the new president of VMPI requested his
courtesy resignation and when he refused, life got difficult for him. His decisions
were always questioned Have and was also subjected to verbal abuse
3. On their part, private respondents admitted hiring petitioner but denied illegally
dismissing him. According to the private respondents, Domondon informed them
about his intention to resign and requested a soft land financial support for
P300,000. Petitioner also proposed the transfer of ownership of the car assigned
to him in lieu of the financial assistance from the company. Since company policy
prohibits disposition of assets without valuable consideration, the parties agreed
that petitioner shall pay for the car with the soft landing financial assistance from
VMPI
4. VMPI alleged that when petitioner received the P300,000, he did not use it to pay
for the car as agreed upon. Repeated demands for payment were unheeded.
VMPI, then, gave petitioner an option to apply his sick and vacation leave credits,
13th and 14th month pay less taxes and pay the balance thereof, or return the car
to the company. Petitioner did not exercise either option and instead filed a
complaint for illegal dismissal
5. LA held in favor of VMPI and dismissed the case for lack of merit. NLRC affirmed
the same
ISSUE: WON THE TRANSFER OF OWNERSHIP OF TH SAID CAR IS WITHIN THE
JURISDICTION OF NLRC
HELD: The jurisdiction of Labor Arbiters is provided under Article 217(a) of the Labor
Code, as amended:
(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 nonagricultural:

1.
2.

Unfair labor practice cases;

Termination disputes;

3.

If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment;
Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts;
Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, 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.

4.
5.

6.

In all these instances, the matrix is the existence of an employer-employee relationship.

In the case at bar, there is no dispute that petitioner is an employee of the respondents.
In the case at bar, petitioner claims illegal dismissal and prays for reinstatement,
payment of full back wages inclusive of allowances, 14 th month pay, sick and vacation
leaves, share in the profits, moral and exemplary damages and attorneys fees. These
causes of action clearly fall within the jurisdiction of LA, specifically under paragraphs 2,
3 and 4 of Article 217(a). On the other hand, private respondents made a counterclaim
involving the transfer of ownership of a company car to petitioner. They maintain that
he failed to pay for the car in accordance with their agreement.
Based on the facts presented, the transfer of the ownership of the company car to
petitioner is connected with his resignation and arose out of the parties employeremployee relations. Accordingly, private respondents claim for damages falls within the
jurisdiction of the Labor Arbiter.

MANLIGUEZ V. CA 232 SCRA 427

Facts: On May 25, 1988, petitioners filed with the RTC of Cebu City Complaint which
sought the lifting of the levy over, and annulment of the sale of, the Tipolo properties.
The Complaint was docketed as Civil Case No. Ceb-6917, and raffled to Branch 8 of the
trial court. Petitioners therein alleged that: they are the owners of the Lot 109; they
entered into a lease agreement with Inductocast Cebu over Lot 109; the lease contract
provided that, except for machineries and equipment, all improvements introduced in
the leased premises shall automatically be owned by the Lessor (petitioners) upon the
expiration/termination of the contract; the lease agreement was terminated by
petitioners in November, 1980 due to non-payment of rentals by Inductocast
Cebu; thereafter, petitioners took actual possession of and occupied the Tipolo
properties. Petitioners likewise alleged in their Complaint that they became aware of the
labor dispute involving Inductocast only after the impugned public auction sale.
Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion
to dismiss on the ground that the trial court had no jurisdiction over the case. The
buyers of the Tipolo properties, as intervenors, also filed a motion to dismiss on the
same ground. Both motions, which were opposed by petitioners, were denied.
The intervenors, however, moved for reconsideration of the denial. In an Order dated
April 18, 1989, the trial court granted the motion and dismissed Civil Case No. Ceb6917. It held that the civil case "is actually in the nature of a quashal of the levy and the
certificate of sale, a case arising out of a dispute that was instituted by the previous
employees of Inductocast before the Department of Labor and Employment, Region
7." Citing Pucan vs.Bengzon, 155 SCRA 692 (1987), it held it had no jurisdiction over
the case since the levy and sale "are connected with the case within the exclusive
jurisdiction of the Department of Labor and Employment."
Petitioners questioned the dismissal of their Complaint to the respondent Court of
Appeals, through a petition forcertiorari and preliminary injunction. The appellate court,
in its impugned Decision, denied the petition as it held:
To Our minds, the issue on what forum the case must be tried or heard is
a settled one. The Department of Labor is the agency upon which
devolves the jurisdiction over disputes emanating from and in relation with
labor controversies to the exclusion of the regular courts.

The issue in the case at bar concerns the levy of a property in pursuance
to a writ of execution, arising out of labor disputes. There can be no doubt
that jurisdiction pertains to the Department of Labor.
xxx xxx xxx
In the light of the factual antecedents and incidents that transpired in the
hearing of this case at bar, the (trial court) correctly ruled that indeed the
Department of Labor has jurisdiction over the case. Consequently, WE
see no abuse of discretion let alone a grave one, amounting to lack or in
excess of its jurisdiction correctible with a writ of certiorari.
Indeed, the issue of granting or denying a motion to dismiss is addressed
to the sound discretion of the court, and in the absence of a capricious
and whimsical exercise of power, certiorari will not lie.
Issue: Whether or not THE RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE DEPARTMENT OF LABOR HAS JURISDICTION ON THE
SUBJECT MATTER AND NATURE OF THE CASE AS AGAINST THE CIVIL COURT.
Ruling: We find merit in the appeal. Firstly, respondent court erred in holding that the
trial court does not have jurisdiction over the case filed by petitioners. No employeremployee relationship exists between petitioners and the other parties, and no issue is
involved which may be resolved by reference to the Labor Code, other labor statutes, or
any collective bargaining agreement. Neither can we characterize petitioner's action
before the trial court as arising out of a labor dispute. It was not brought to reverse or
modify the judgment of the Department of Labor and Employment (DOLE). Neither did it
question the validity of, or pray for, the quashal of the writ of execution against
Inductocast.
What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the
Tipolo properties. Clearly, it is the RTC and not the labor department which can take
cognizance of the case, as provided by B.P. Blg. 129 ("An Act Reorganizing the
Judiciary, Appropriating Funds Therefor, and For Other Purposes"), thus:
Sec. 19. Jurisdiction in civil case. Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx xxx xxx
(2) In all civil actions which involve the title to, or possession of real
property, or any interest therein, except actions for forcible entry into and
unlawful detainer of lands or buildings, original jurisdiction over which is
conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;

GEORG GROTJAHN GMBH V. ISNANI 235 SCRA 216

Facts: On July 6, 1983, petitioner filed an application, dated July 2, 1983, 1 with the
Securities and Exchange Commission (SEC) for the establishment of a regional or area
headquarters in the Philippines, pursuant to Presidential Decree No. 218. The
application was approved by the Board of Investments (BOI) on September 6, 1983.
respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983
to mid-1992. On March 12, 1992, she secured a loan of twenty-five thousand pesos
(P25,000.00) from petitioner. ). Of the total amount, twelve thousand one hundred
seventy pesos and thirty-seven centavos (P12,170.37) remained unpaid. Despite
demand, private respondent Romana failed to settle her obligation with petitioner.
Respondent Romana Lanchinebre filed with the Arbitration Branch of the National Labor
Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal
and non-payment of commissions against petitioner. On August 18, 1992, petitioner in
turn filed against private respondent a Complaint for damages amounting to one
hundred twenty thousand pesos (P120,000.00) also with the NLRC Arbitration Branch
(Manila). 3 The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for collection of sum of money
against private respondents spouses Romana and Teofilo Lanchinebre which was
docketed as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead
of filing their Answer, private respondents moved to dismiss the Complaint. This was
opposed by petitioner.
On December 21, 1992, respondent judge issued the first impugned Order, granting the
motion to dismiss.
Issue: Whether regular courts have no jurisdiction over disputes between employee and
employer
Held: Not every dispute between an employer and employee involves matters that only
labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasijudicial powers. 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.

Stated differently, petitioner seeks protection under the civil laws and claims no benefits
under the Labor Code. The primary relief sought is for liquidated damages for breach of
a contractual obligation. The other items demanded are not labor benefits demanded by
workers generally taken cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are the natural
consequences flowing from breach of an obligation, intrinsically a civil dispute.
Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner,
as creditor, against private respondent Romana Lanchinebre, as debtor. The fact that
they were employer and employee at the time of the transaction does not negate the
civil jurisdiction of the trial court. The case does not involve adjudication of a labor
dispute but recovery of a sum of money based on our civil laws on obligation and
contract.

EVIOTA V. CA 407 SCRA 394 (2003)

FACTS: Respondent Standard Chartered Bank and petitioner Eviota executed a
contract of employment where the latter was employed as compensation and benefits
manager. However, petitioner abruptly resigned from the respondent bank barely a
month after his employment and rejoined his former employer
1. The bank alleged that Eviota made off with a files and other documents
containing confidential information on employee compensation and other bank
matters
2. Petitioner filed a motion to dismiss on the ground that the action for damages
was within the exclusive jurisdiction of LA under par 4 Art 217 Labor Code.
Petitioner alleged that the banks claim for damages arose out of or were in
connection with his employer-employee relationship with the respondent bank
3. Trial court denied petitioners motion to dismiss citing that the relief prayed for by
Standard Chartered Bank was ground on the tortious manner by which petitioner
terminated his employment with the latter, and as such is governed by NCC. CA
affirmed the same
ISSUE: WON THE LA HAS JURISDICTION OVER THE CASE
HELD: Not every controversy or money claim by an employee against the employer or
vice-versa is within the exclusive jurisdiction of the labor arbiter. A money claim by a
worker against the employer or vice-versa is within the exclusive jurisdiction of the labor
arbiter only if there is a reasonable causal connection between the claim asserted and
employee-employer relation. Absent such a link, the complaint will be cognizable by the
regular courts of justice.
Actions between employees and employer where the employer-employee relationship is
merely incidental and the cause of action precedes from a different source of obligation
is within the exclusive jurisdiction of the regular court. In Georg Grotjahn GMBH & Co.
v. Isnani, we held that the jurisdiction of the Labor Arbiter under Article 217 of the Labor
Code, as amended, is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code of the
Philippines, other labor laws or their collective bargaining agreements.
The claims were the natural consequences flowing from a breach of an obligation,
intrinsically civil in nature.

In this case, the private respondents first cause of action for damages is anchored on
the petitioners employment of deceit and of making the private respondent believe that
he would fulfill his obligation under the employment contract with assiduousness and
earnestness. The petitioner volte face when, without the requisite thirty-day notice
under the contract and the Labor Code of the Philippines, as amended, he abandoned
his office and rejoined his former employer; thus, forcing the private respondent to hire a
replacement. The private respondent was left in a lurch, and its corporate plans and
program in jeopardy and disarray. Moreover, the petitioner took off with the private
respondents computer diskette, papers and documents containing confidential
information on employee compensation and other bank matters. On its second cause
of action, the petitioner simply walked away from his employment with the private
respondent sans any written notice, to the prejudice of the private respondent, its
banking operations and the conduct of its business. Anent its third cause of action, the
petitioner made false and derogatory statements that the private respondent reneged on
its obligations under their contract of employment; thus, depicting the private
respondent as unworthy of trust.
It is evident that the causes of action of the private respondent against the
petitioner do not involve the provisions of the Labor Code of the Philippines and
other labor laws but the New Civil Code. Thus, the said causes of action are
intrinsically civil. There is no causal relationship between the causes of action of
the private respondents causes of action against the petitioner and their
employer-employee relationship. The fact that the private respondent was the
erstwhile employer of the petitioner under an existing employment contract
before the latter abandoned his employment is merely incidental.

ASIAN ALCOHOL CORP V. NLRC 305 SCRA 416 (1999)

FACTS: Prior Holdings took over the management and operation of Asian Alcohol due
to business losses.
Then, it implemented a reorganizational plan and other cost-saving measures
wherein 72 of Asian Alcohol employees who occupied redundant positions were
abolished.
Respondents are whose positions were abolished due to redundancy.
Respondents received individual notices of termination, paid separation pay, the
money value of their unused sick, vacation, emergency and seniority leave
credits13th month pay, medicine allowance, tax refunds, and cash bonuses for
those with at 10 years of service.
Then, respondents filed complaints for illegal dismissal. They maintained that
Asian Alcohol was not bankrupt as it has engaged in an aggressive scheme of
contractual hiring.

ISSUE: WON the redundancy program by Asian Alcohol was destroyed by availment of
the services of an independent contractor to replace the services of the terminated
employees.

RULING: In the case at bar, the termination of service of the private respondents was
based on the grounds of retrenchment and redundancy.
Respondents raised the issue that casuals were hired to replace complainants as
water pump tenders at the Ubay wells. They rely on the testimony of the head of
the Mechanical Engineering Department who admitted the engagement of
independent contractors to operate the wells. However, it will reveal that
Engineer referred not to the Ubay wells which were tended by private
respondents but to the Laura wells.
In any event, we have held that an employers good faith in implementing a
redundancy program is not necessarily destroyed by availment of the
services of an independent contractor to replace the services of the
terminated employees. We have previously ruled that the reduction of the
number of workers in a company made necessary by the introduction of

the services of an independent contractor is justified when the latter is

undertaken in order to effectuate more economic and efficient methods of
production.
In the case at bar, respondent failed to offer any proof that the management
acted in a malicious or arbitrary manner in engaging the services of an
independent contractor to operate the Laura wells. Absent such proof, the Court
has no basis to interfere with the bona fide decision of management to
effect more economic and efficient methods of production.
MERALCO V. QUISUMBING G.R. NO 127598 (2000)
(TOPIC: When employer-employee does not exist)
I think the issue being discussed here is on the Rule involving CBAs concluded
through arbitral awards by DOLE Secretary, NLRC or Voluntary Arbitrator. In the
January 27, 1999 ruling, the effectivity date of CBA was made prospective and later, per
its February 22, 2000 ruling in the same case which was rendered upon motion for
reconsideration, the effectivity of the CBA was made retroactive. But later, in its August
1, 2000 ruling which was rendered after a Motion for Partial Reconsideration was filed
by MERALCO, the Supreme Court finally changed the effectivity date thereof. It held
that the arbitral award should retroact to the first day after the six-month period following
the expiration of the last day of the CBA, i.e., from June 1, 1996 to May 31, 1998.
FACTS:
In the Decision promulgated on January 27, 1999, the Court disposed of the case
as follows:
"WHEREFORE, the petition is granted and the orders of public respondent
Secretary of Labor dated August 19, 1996 and December 28, 1996 are set
aside to the extent set forth above. The parties are directed to execute a
Collective Bargaining Agreement incorporating the terms and conditions
contained in the unaffected portions of the Secretary of Labors orders of
August 19, 1996 and December 28, 1996, and the modifications set forth
above. The retirement fund issue is remanded to the Secretary of Labor for
reception of evidence and determination of the legal personality of the
Meralco retirement fund."
The modifications of the public respondents resolutions include the following:
January 27, 1999 decision Secretarys resolution
Wages -P1,900.00 for 1995-96 P2,200.00
Xmas bonus -modified to one month 2 months
Retirees -remanded to the Secretary granted
Loan to coops -denied granted
GHSIP, HMP
and Housing loans -granted up to P60,000.00 granted
Signing bonus -denied granted
Union leave -40 days (typo error) 30 days
High voltage/pole -not apply to those who are members of a team
not exposed to the risk

Collectors -no need for cash bond, no need to reduce quota and
MAPL

CBU -exclude confidential employees include

Union security -maintenance of membership closed shop
Contracting out -no need to consult union consult first
All benefits -existing terms and conditions all terms
Retroactivity -Dec 28, 1996-Dec 27, 199(9) from Dec 1, 1995
Dissatisfied with the Decision, some alleged members of private respondent
union (Union for brevity) filed a motion for intervention and a motion for
reconsideration of the said Decision.
The issues raised in the motions for reconsideration had already been passed
upon by the Court in the January 27, 1999 decision. No new arguments were
presented for consideration of the Court. Nonetheless, certain matters will be
considered herein.

ISSUE:
WON there is no need to consult union when employer engages in contract out services
HELD: The added requirement of consultation imposed by the Secretary in cases of
contracting out for six (6) months or more has been rejected by the Court. Suffice it to
say that the employer is allowed to contract out services for six months or more.
However, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of employees, and in treating the
latter, the employer should see to it that its employees are at least properly informed of
its decision or modes of action in order to attain a harmonious labor-management
relationship and enlighten the workers concerning their rights. Hiring of workers is within
the employers inherent freedom to regulate and is a valid exercise of its management
prerogative subject only to special laws and agreements on the matter and the fair
standards of justice. The management cannot be denied the faculty of promoting
efficiency and attaining economy by a study of what units are essential for its operation.
It has the ultimate determination of whether services should be performed by its
personnel or contracted to outside agencies. While there should be mutual consultation,
eventually deference is to be paid to what management decides. Contracting out of
services is an exercise of business judgment or management prerogative. Absent proof
that management acted in a malicious or arbitrary manner, the Court will not interfere
with the exercise of judgment by an employer. As mentioned in the January 27, 1999
Decision, the law already sufficiently regulates this matter. Jurisprudence also provides
adequate limitations, such that the employer must be motivated by good faith and the
contracting out should not be resorted to circumvent the law or must not have been the
result of malicious or arbitrary actions. These are matters that may be categorically
determined only when an actual suit on the matter arises.

ALVIADO ET AL V. PROCTER & GAMBLE AND PROMM-GEM INC G.R. NO 160506

(2010)
FACTS: Petitioners worked as merchandisers of P&G from various dates, allegedly
starting as early as 1982 or as late as June 1991 to either May 1992 or March 1993.
1. Petitioners filed a complaint against P&G for regularization, service incentive
leave pay and other benefits; the complaint was later amended to include illegal
dismissal
2. LA dismissed the complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and P&G as the selection
and engagement of petitioners, payment of wages, power of dismissal and
control with respect to the means and methods by which their work was
accomplished, were all done and exercised by Promm-Gem Inc. Promm-Gem Inc
was a legitimate independent job contractor. NLRC affirmed the same
3. Petitioners claimed they were recruited by the salesmen of P&G and were
engaged to undertaking merchandising chores for P&G even before the
existence of Promm-Gem. Petitioners also alleged that P&G instigated their
dismissal from work. Petitioners further assert that Promm-Gem are labor-only
contractors providing services of manpower to their client
4. P&G, on the other hand, argued that there is no employment relationship
between them and petitioners. P&G also contends that Labor Code neither
defines nor limits which services or activities may be validly outsourced. Thus, an
employer can farm out any of its activities to an independent contractor,
regardless of whether such activity is peripheral or core in nature. It insisted that
the determination of whether to engage the services of a job contractor or to
engage in direct hiring is within the ambit of management prerogative
ISSUE: WON P&G IS THE EMPLOYER OF PETITIONERS
HELD: In order to resolve the issue of whether P&G is the employer of petitioners, it is
necessary to first determine whether Promm-Gem and SAPS are labor-only contractors
or legitimate job contractors.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by

such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Clearly, the law and its implementing rules allow contracting arrangements for the
performance of specific jobs, works or services. Indeed, it is management prerogative to
farm out any of its activities, regardless of whether such activity is peripheral or core in
nature. However, in order for such outsourcing to be valid, it must be made to an
independent contractor because the current labor rules expressly prohibit labor-only
contracting.
To emphasize, there is labor-only contracting when the contractor or sub-contractor
merely recruits, supplies or places workers to perform a job, work or service for a
principal and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of the
principal; or
ii) The contractor does not exercise the right to control over the performance of
the work of the contractual employee. Under the circumstances, Promm-Gem
cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.
Where labor-only contracting exists, the Labor Code itself establishes an employeremployee relationship between the employer and the employees of the labor-only
contractor." The statute establishes this relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor is considered merely an agent of
the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer.

BAGUIO V. NLRC 202 SCRA 465 (1991)

Facts: Sometime in 1983, private respondent Feliciano LUPO, a building contractor,
entered into a contract with GMC, a domestic corporation engaged in flour and feeds
manufacturing, for the construction of an annex building inside the latter's plant in Cebu
City. In connection with the aforesaid contract, LUPO hired herein petitioners either as
carpenters, masons or laborers.Subsequently, LUPO terminated petitioners' services,
on different dates. As a result, petitioners filed Complaints against LUPO and GMC
before the NLRC Regional Arbitration Branch No. VII, Cebu City, for unpaid wages,
COLA differentials, bonus and overtime pay.
Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's
obligations to them. They seek recovery from GMC based on the provisions of the
Labor Code which holds the employer jointly and severally liable with his contractor for
unpaid wages of employees of the latter.
Issue: whether or not GMC is solidarily liable with LUPO
Held: There is "job contracting" where (1) the contractor 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 (2) the contractor has substantial capital
or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business. It may be that LUPO
subsequently ran out of capital and was unable to satisfy the award to petitioners. That
was an after-the-fact development, however, and does not detract from his status as an
independent contractor.
Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a
contract with an independent contractor, LUPO, for the construction of an annex
building, a work, task, job or project not directly related to GMC's business of flour and
feeds manufacturing. Being an "indirect employer," GMC is solidarily liable with LUPO
for any violation of the Labor Code pursuant to Article 109 thereof, reading:
Art. 109. Solidary Liability. The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible

with a contractor or subcontractor for any violation of any provision of this Code.
For purposes of determining the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
Wherefore, petition for certiorari is granted.

MANILA GOLF V. NLRC 237 SCRA 207

FACTS: This case is initiated by private respondent, Fermin Llamar and his fellow
caddies. Originally filed with the Social Security Commission (SSC) by petition of
seventeen (17) persons who declared themselves as "Caddies of Manila Golf and
Country Club-PTCCEA, they were seeking for coverage and availment of benefits
under the Social Security Act.
Manila Golf Club filed answer praying for the dismissal of the petition, alleging in
substance that the petitioners, caddies by occupation, were allowed into the Club
premises to render services as such to the individual members and guests playing the
Club's golf course and who themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the Club as regards the
manner in which they performed their work; and hence, they were not the Club's
employees.
ISSUE: Whether or not persons rendering caddying services for members of golf clubs
and their guests in said clubs' courses or premises are the employees of such clubs and
therefore within the compulsory coverage of the Social Security System (SSS).
HELD: NO, caddies are not employees of the golf club.
The various matters of conduct, dress, language, etc. covered by the petitioner's
regulations, do not leave them little or no freedom of choice whatsoever in the manner
of carrying out their services.
In the very nature of things, caddies must submit to some supervision of their
conduct while enjoying the privilege of pursuing their occupation within the premises
and grounds of whatever club they do their work in. For all that is made to appear, they
work for the club to which they attach themselves on sufference but, on the other hand,
also without having to observe any working hours, free to leave anytime they please, to
stay away for as long they like.
It is not pretended that if found remiss in the observance of said rules, any
discipline may be meted them beyond barring them from the premises which, it may be

supposed, the Club may do in any case even absent any breach of the rules, and
without violating any right to work on their part. All these considerations clash frontally
with the concept of employment.
Manila Golf Club has no means of compelling the presence of a caddy. A caddy is not
required to exercise his occupation in the premises of petitioner. He may work with any
other golf club or he may seek employment as caddy or otherwise with any entity or
individual without restriction by petitioner. . . .
Petitioner has no ways of compelling the presence of the caddies as they are not
required to render a definite number of hours of work on a single day. Even the group
rotation of caddies is not absolute because a player is at liberty to choose a caddy of his
preference regardless of the caddy's order in the rotation.
It can happen that a caddy who has rendered services to a player on one day may still
find sufficient time to work elsewhere. Under such circumstances, he may then leave
the premises of petitioner and go to such other place of work that he wishes. Or a caddy
who is on call for a particular day may deliberately absent himself if he has more
profitable caddying, or another, engagement in some other place. These are things
beyond petitioner's control and for which it imposes no direct sanctions on the caddies.
The Decision of the Intermediate Appellant Court, is reversed and set aside, it being
hereby declared that the private respondent, Fermin Llamar, is not an employee of
petitioner Manila Golf and Country Club and that petitioner is under no obligation to
report him for compulsory coverage to the Social Security System.

CABALAN (CAPANELA) V. NLRC 241 SCRA 643 (1995)

FACTS: Private respondent Fernando Sanchez filed a complaint for illegal dismissal,
nonpayment of back wages and other benefits against petitioner CAPANELA
1. Private respondent alleged that there existed an employer-employee relationship
between him and CAPANELA and that the latter exercised control as employer
over the means and methods by which the work was accomplished
2. Petitioners asserted that CAPANELA is an association composed of Negritos
who worked inside the American naval base in Subic Bay. Said association
organized the system of employment of members of this cultural community who
were accorded special treatment because of the occupancy of their ancestral
lands as part of the operational area and military facility used by the Base
authorities
3. CAPANELA alleged that neither the association nor its president was the
employer of private respondent; rather, it was the US government acting through
military base authorities
4. LA held in favor of private respondent in declaring his dismissal illegal
ISSUE: WON PETITIONER IS A LABOR-ONLY CONTRACTOR
HELD: Neither can petitioners be deemed to have been engaged in permissible job
contracting under the law, for failure to satisfy the following prescribed conditions:
1. The contractor 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 performance of the work
except as to the results thereof; and
2. The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business.
In the present case, the setup was such that CAPANELA was merely tasked with
organizing the Negritos to facilitate the orderly administration of work made available to
them at the base facilities, that is, sorting scraps for recycling. CAPANELA recorded the

attendance of its members and submitted the same to the Base authorities for the
determination of wages due them and the preparation of the payroll. Payment of wages
was coursed through CAPANELA but the funds therefor came from the coffers of the
Base. Once inside the Base, control over the means and methods of work was
exercised by the Base authorities. Accordingly, CAPANELA functioned as just an
administrator of its Negrito members employed at the Base.
From the legal standpoint, CAPANELA's activities may at most be considered akin to
that of labor-only contracting, albeit of a special or peculiar type, wherein CAPANELA,
operating like a contractor, merely acted as an agent or intermediary of the employer.
PAL V. NLRC 263 SCRA 639 (1996)
FACTS: Private respondent Unicorn Security Services Inc (USSI) and PAL executed a
security service agreement. Under the agreement, selection, wages, dismissal and
control remain with USSI. It was also clearly stipulated that there is no employeremployee relationship between PAL and the security guards
1. Eventually, PAL terminated the security service agreement with USSI without
giving 30-day notice pursuant to the terms of the contract. Instead, PAL paid
each of the security guards actually assigned at the time of the termination of the
agreement, an amount equivalent to their one-month salary to compensate for
the lack of notice
2. USSI then filed a complaint before NLRC for the recovery of an amount
representing termination pay benefit due the alleged 16 additional security
guards hired, which PAL failed and refused to pay despite demands
3. PAL argued that since USSIs cause of action was founded on the security
service agreement, there is no employer-employee relationship existed between
PAL and the security guards and NLRC had no jurisdiction over the complaint.
4. PAL also asserted it was not liable to pay separation pay because:
a. It was not the employer of the security guards
b. Even as indirect employer, its liability was limited to violations of labor
standards law and non-payment of separation pay is not a violation of the
said law
c. The security service agreement with USSI did not provide for payment of
separation pay
d. Since PAL was not the employer of the security guards, in no way could it
terminate their services
ISSUE: WON USSI is an indirect employer; WON PAL is solidarily liable with USSI
HELD: LA was without jurisdiction over the subject matter because no employeremployee relationship existed between PAL and the security guards provided by USSI
under the security service agreement, including the alleged 16 additional security
guards. USSI is an independent contractor.

In determining the existence of an employer-employee relationship, the following

elements are generally considered: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power to dismiss; and (4) the power to control the
employee's conduct. was USSI which (a) selected, engaged or hired and discharged the
security guards; (b) assigned them to PAL according to the number agreed upon; (c)
provided, at its own expense, the security guards with firearms and ammunitions; (d)
disciplined and supervised them or controlled their conduct; and (e) determined their
wages, salaries, and compensation; and (f) paid them salaries or wages. Even if we
disregard the explicit covenant in said agreement that "there exists no employeremployee relationship between contractor and/or his guards on the one hand, and PAL
on the other" all other considerations confirm the fact that PAL was not the security
guards' employer.
While USSI is an independent contractor under the security service agreement and PAL
may be considered an indirect employer, that status did not make PAL the employer to
the security guards in every respect. As correctly posited by the Office of the Solicitor
General, PAL may be considered an indirect employer only for purposes of unpaid
wages since Article 106, which is applicable to the situation contemplated in Section
107, speaks of wages. The concept of indirect employer only relates or refers to the
liability for unpaid wages. Read together, Articles 106 and 109 simply mean that the
party with whom an independent contractor deals is solidarily liable with the latter for
unpaid wages, and only to that extent and for that purpose that the latter is considered a
direct employer.

SAN MIGUEL V. ABALLA, 462 SCRA 392 (2005)

FACTS: Petitioner San Miguel Corporation (SMC) and Sunflower Multi-Purpose
Cooperative (Sunflower), entered into a one-year Contract of Services commencing on
January 1, 1993, to be renewed on a month to month basis until terminated by either
party. The pertinent provisions of the contract are:
a. The cooperative agrees and undertakes to perform and/or provide for the
company, on a non-exclusive basis for a period of one year the following
services for the Bacolod Shrimp Processing Plant: Messengerial/Janitorial,
Shrimp Harvesting/Receiving, Sanitation/Washing/Cold Storage
b. There is no employer-employee relationship between the company and
the cooperative, or the cooperative and any of its members, or the
company and any members of the cooperative.
1. Pursuant to the contract, Sunflower engaged private respondents to, as they did,
render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod
City. The contract was deemed renewed by the parties every month after its and
private respondents continued to perform their tasks until September 11, 1995.
2. Private respondents filed a complaint before the NLRC, praying to be declared as
regular employees of SMC, with claims for recovery of all benefits and privileges
enjoyed by SMC rank and file employees. Private respondents subsequently filed
an Amended Complaint to include illegal dismissal as additional cause of action
following SMCs closure of its Bacolod Shrimp Processing Plant which resulted in
the termination of their services.
3. SMC filed a Motion to implead Sunflower as Third Party Defendant which,
granted by Labor. In the meantime, SMC filed before the Regional Office at Iloilo
City of the DOLE a Notice of Closure of its aquaculture operations effective on
even date citing serious business losses.
4. Labor Arbiter and NLRC dismissed private respondents complaint for lack of
merit, finding that third party respondent Sunflower was an independent
contractor.
5. The CA reversed the NLRC decision and accordingly found for private
respondents. The CA held that there being a finding of labor-only contracting,
liability must be shouldered either by SMC or [Sunflower] or shared by both. SMC

however should be held solely liable for [Sunflower] became non-existent with
the closure of the aquaculture business of SMC.
6. SMC insists that private respondents are the employees of Sunflower, an
independent contractor. On the other hand, private respondents assert that
Sunflower is a labor-only contractor.
ISSUE: WON Sunflower Multi-Purpose Cooperative is considered an Independent
Contractor or a Labor-only Contractor.
HELD: The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.
In legitimate labor contracting, the law creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees are paid their wages. The principal
employer becomes jointly and severally liable with the job contractor, only for the
payment of the employees wages whenever the contractor fails to pay the same. Other
than that, the principal employer is not responsible for any claim made by the
employees.
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.
The Contract of Services between SMC and Sunflower shows that the parties clearly
disavowed the existence of an employer-employee relationship between SMC and
private respondents. The language of a contract is not, however, determinative of the
parties relationship; rather it is the totality of the facts and surrounding circumstances of
the case. A party cannot dictate, by the mere expedient of a unilateral declaration in a
contract, the character of its business, i.e., whether as labor-only contractor or job
contractor, it being crucial that its character be measured in terms of and determined by
the criteria set by statute.
Sunflower does not have substantial capitalization or investment in the form of tools,
equipment, machineries, work premises and other materials to qualify it as an
independent contractor. The lot, building, machineries and all other working tools
utilized by private respondents in carrying out their tasks were owned and provided by
SMC.
And from the job description provided by SMC itself, the work assigned to private
respondents was directly related to the aquaculture operations of SMC. The nature of
the work performed by private respondents in shrimp harvesting, receiving and packing
formed an integral part of the shrimp processing operations of SMC. As for janitorial
and messengerial services, that they are considered directly related to the principal

Sunflower did not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the control and
supervision of its principal, SMC, its apparent role having been merely to recruit persons
to work for SMC.
Control of the premises in which private respondents worked was by SMC. These tend
to disprove the independence of the contractor. Sunflower did not cater to clients other
than SMC, and with the closure of SMCs Bacolod Shrimp Processing Plant, Sunflower
likewise ceased to exist.

PAL V. LIGAN 548 SCRA 181 (2008)

Facts: Synergy Services Corporation (Synergy) having been found to be a labor-only

contractor, respondents were consequently declared as petitioners regular employees
who are entitled to the salaries, allowances, and other employment benefits under the
pertinent Collective Bargaining Agreement.
Petitioner prays for a reconsideration of the Decision, maintaining its position that
respondents were employed by Synergy, and to "reinstate" respondents as regular
employees is iniquitous since it would be compelled to employ personnel more than
what its operations require. It adds that the Court should declare that reinstatement is
no longer an appropriate relief in view of the long period of time that had elapsed.
For their part, respondents, deducing from the Decision that their termination was found
to be illegal, posit that the portion of the Decision ordering petitioner to "accept" them
should also mean to "reinstate" them with backwages.2Respondents additionally pray
for the award to them of attorneys fees, albeit they admit that they failed to raise it as
an issue.
Both parties point out that the Courts Decision "presupposes" or "was based on the
erroneous assumption" that respondents are still in the actual employ of petitioner.
Respondents disclose that except for those who have either died, accepted settlement
earlier, or declared as employee of Synergy, the remaining respondents have all been
terminated in the guise of retrenchment. Joining such account, petitioner reveals that 13
out of the 25 respondents filed an illegal dismissal case, which is pending before the
appellate court stationed at Cebu City. Respondents add that the appellate court, by
Resolution of April 22, 2008, held the illegal dismissal case in abeyance until after this
Court rules on the present case.

While this Courts Decision ruled on the regular status of respondents, it must be
deemed to be without prejudice to the resolution of the issue of illegal dismissal in
the proper case.
Ruling: Respondents, having been declared to be regular employees of petitioner,
Synergy being a mere agent of the latter, had acquired security of tenure. As such, they
could only be dismissed by petitioner, the real employer, on the basis of just or
authorized cause, and with observance of procedural due process.
Respecting petitioners allegation of financial woes that led to the June 30, 1998 lay-off
of respondents, as the Court held in its Decision, petitioner failed to establish such
economic losses which rendered impossible the compliance with the order to accept
respondent as regular employees. Thus the Decision reads:
Other than its bare allegations, petitioner presented nothing to substantiate
its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it
in its Memorandum filed on June 14, 1999 before the Court of Appeals. x x
x15 (Underscoring supplied)
Petitioner, for the first time, revealed the matter of termination and the allegation of
financial woes in its Motion for Reconsideration of October 10, 2000 before the
appellate court,16 not by way of defense to a charge of illegal dismissal but to
manifest that supervening events have rendered it impossible for petitioner to
comply with the order to accept respondents as regular employees. Moreover, the
issue of economic losses as a ground for dismissing respondents is factual in nature,
hence, it may be determined in the proper case.
The Courts finding that respondents are regular employees of petitioner neither
frustrates nor preempts the appellate courts proceedings in resolving the issue of
retrenchment as an authorized cause for termination. If an authorized cause for
dismissal is later found to exist, petitioner would still have to pay respondents their
corresponding benefits and salary differential up to June 30, 1998. Otherwise, if there is
a finding of illegal dismissal, an order for reinstatement with full backwages does not
conflict with the Courts declaration of the regular employee status of respondents.
Petitioner PHILIPPINE AIRLINES, INC., is ordered to recognize respondents ENRIQUE
LIGAN etc. as its regular employees in their same or substantially equivalent positions,
and pay the wages and benefits due them as regular employees plus salary differential
corresponding to the difference between the wages and benefits given them and those
granted to petitioners other regular employees of the same or substantially equivalent
rank without prejudice to the resolution of the illegal dismissal case.

ESCASINAS V. SHANGRI-LA MACTAN G.R. NO 178827 (2009)

FACTS: Petitioners Escasinas and Songco were engaged in 1999 and 1996 by Dr
Jessica Pepito to work in her clinic at respondent Shangri-La Mactan resort, where the
latter was a retained physician
1. Petitioners filed a complaint for regularization, underpayment of wages,
nonpayment of holiday pay, night shift differential and 13 th month pay differential
against respondents, claiming that they are regular employees of Shangri-La
2. Shangri-La claimed, however, that petitioners are not its employees but of the
respondent doctor via MOA pursuant to Art 157 Labor Code
3. Respondent doctor, on the other hand, claimed that petitioners were already
working for the previous retained physicians of Shangri-La before she was
retained by the resort and that she maintained petitioners services upon their
request
4. LA declared petitioners to be regular employees of Shangr-La as they usually
perform work which is necessary and desirable to the resort and that 4 elements
which determine employment relationship are present
5. NLRC reversed the LA decision and dismissed the petitioners complaint for lack
of merit, finding that there was no employer-employee relationship between
petitioner and Shangri-La. CA affirmed the same
6. Petitioners insisted that under Art 157 Labor Code, Shangri-La is required to hire
a full-time registered nurse, apart from a physician, hence, their engagement
should be deemed as regular employment and that MOA signed by Pepito and
Shangri-La is contrary to public policy as it circumvents tenurial security. At most,
the MOA is a mere job contract
7. Petitioners further averred that respondent doctor is a labor-only contractor for
she has no license or business permit which is contrary to the requirements
under Sec 19-20 of IRR of the Labor Code on subcontracting. Petitioners also
contended that respondent doctor cannot be a legitimate independent contractor
as she lacks the substantial capital and that she has no control over how the
clinic is being run

ISSUE: WON RESPONDENT DOCTOR IS A LABOR-ONLY CONTRACTOR

HELD: The existence of an independent and permissible contractor relationship is
generally established by considering the following determinants: whether the contractor
is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance
of a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.
On the other hand, existence of an employer- employee relationship is established
by the presence of the following determinants: (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.
Against the above-listed determinants, the respondent doctor is a legitimate
independent contractor. That Shangri-la provides the clinic premises and medical
supplies for use of its employees and guests, does not necessarily prove that
respondent doctor lacks substantial capital and investment. Besides, the maintenance
of a clinic and provision of medical services to its employees is required under Art 157,
are not directly related to Shangri-las principal businessoperation of hotels and
restaurants.
In fine, as Shangri-la does not control how the work should be performed by petitioners,
it is not petitioners employer.

COCA-COLA BOTTLERS V. DELA CRUZ G.R. NO 184977 (2009)

Facts: Respondents filed two separate complaints for regularization with money claims
against Coca-Cola Bottlers Philippines, Inc. Before the Labor Arbiter, the respondents
alleged that they are route helpers assigned to work in the petitioners trucks. They go
from the Coca-Cola sales offices or plants to customer outlets; they were hired either
directly by the petitioner or by its contractors, but they do not enjoy the full
remuneration, benefits and privileges granted to the petitioners regular sales force.
They argued that the services they render are necessary and desirable in the regular
business of the petitioner. In defense, the petitioner contended that it entered into
contracts of services with Peerless and Excellent Partners Cooperative, Inc. (Excellent)
to provide allied services; under these contracts, Peerless and Excellent retained the
right to select, hire, dismiss, supervise, control and discipline and pay the salaries of all
personnel they assign to the petitioner; in return for these services, Peerless and
Excellent were paid a stipulated fee. The petitioner posited that there is no employeremployee relationship between the company and the respondents and the complaints
should be dismissed for lack of jurisdiction on the part of the NLRC. In reply, the
respondents countered that they worked under the control and supervision of the
companys supervisors who prepared their work schedules and assignments. Peerless
and Excellent, too, did not have sufficient capital or investment to provide services to
the petitioner. The respondents thus argued that the petitioners contracts of services
with Peerless and Excellent are in the nature of "labor-only" contracts prohibited by law.
Issue: Was there labor-only contracting?
Held: Yes. The contract between the principal and the contractor is not the final word on
how the contracted workers relate to the principal and the purported contractor; the
relationships must be tested on the basis of how they actually operate. The legitimate
job contractor must have the capitalization and equipment to undertake the sale and
distribution of the manufacturers products, and must do it on its own using its own
means and selling methods.

Even before going into the realities of workplace operations, the Court of Appeals found
that the service contracts themselves provide ample leads into the relationship between
the company, on the one hand, and Peerless and Excellent, on the other. The Court of
Appeals noted that both the Peerless and the Excellent contracts show that their
obligation was solely to provide the company with the services of contractual
employees, and nothing more. These contracted services were for the handling and
delivery of the companys products and allied services. Following D.O. 18-02 and the
contracts that spoke purely of the supply of labor, the Court of Appeals concluded that
Peerless and Excellent were labor-only contractors unless they could prove that they
had the required capitalization and the right of control over their contracted workers.
The contractors were not independently selling and distributing company products,
using their own equipment, means and methods of selling and distribution; they only
supplied the manpower that helped the company in the handing of products for sale and
distribution. In the context of D.O. 18-02, the contracting for sale and distribution as an
independent and self-contained operation is a legitimate contract, but the pure supply of
manpower with the task of assisting in sales and distribution controlled by a principal
falls within prohibited labor-only contracting. Consequently, the contracted personnel,
engaged in component functions in the main business of the company under the latters
supervision and control, cannot but be regular company employees.

SAN MIGUEL CORP V. SEMILLANO G.R. NO 164257 (2010)

FACTS: AMPCO hired the services of Semillao et al. All of them were assigned to work in
SMCs Bottling Plant.
They were required to work inside the premises of SMC using SMCs
equipment.
Subsequently, SMC entered into a Contract of Services with AMPCO
designating the latter as the employer of Semillano, et al.
As a result, Semillano et al. failed to claim the rights and benefits ordinarily
accorded a regular employee of SMC.
Then, sometime in June 1995, they were not allowed to enter the premises
of SMC.
Semillano et al., filed a COMPLAINT FOR ILLEGAL DISMISSAL.

ISSUE: WON AMPCO is an independent contractor/legitimate job contractor?

RULING: NO. DOLE Department Order No. 10, Series of 1997, defines job
contracting and labor-only contracting as follows:
Job contracting. There is job contracting if the following conditions are met:
1) The contractor 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
2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.
Labor-only contracting. (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
2) The workers recruited and placed by such persons are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually
employed.
Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules
Implementing Articles 106 to 109 of the Labor Code further provides that:
Substantial capital or investment refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job
work or service contracted out.
The "right to control" shall refer to the right reserved to the person
for whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether or not the
one claiming to be an independent contractor has contracted to do the work according to
his own methods and without being subject to the control of the employer, except only
as to the results of the work.
The existence of an independent and permissible contractor relationship is
generally established by the following criteria:
whether or not the contractor is carrying on an independent business;
the nature and extent of the work;
the skill required;
the term and duration of the relationship;
the right to assign the performance of a specified piece of work;

the control and supervision of the work to another;

the employer's power with respect to the hiring, firing and payment of the
contractor's workers;
the control of the premises;
the duty to supply the premises, tools, appliances, materials, and labor; and the
mode, manner and terms of payment.

Neither did petitioner prove that AMPCO had substantial equipment, tools, machineries,
and supplies actually and directly used by it in the performance or completion of the
segregation and piling job.
It also fails to show how AMPCO took entire charge, control and supervision of the work
and service agreed upon. The evidence is clear that respondents performed activities
which were directly related to petitioners main line of business.
When AMPCOs project manager, told respondents to wait for further instructions from
the SMCs supervisor led to a logical conclusion that it was SMC, not AMPCO, who
wielded power of control.
Petitioner cannot rely either on AMPCOs Certificate of Registration as an Independent
Contractor. In distinguishing between permissible job contracting and prohibited laboronly contracting, the totality of the facts and the surrounding circumstances of the case
are to be considered.

BABAS V. LORENZO SHIPPING CORP G.R. NO 186091 (2010)

FACTS: Respondent Lorenzo Shipping Corp (LSC) entered into an agreement with
Best Manpower Services Inc (BMSI) to provide maintenance and repair services to
LSCs container vans, heavy equipment, trailer chassis, etc. BMSI further undertook to
provide checkers to inspect all containers received for loading to and/or unloading from
its vessels
1. Simultaneous with the agreement, LSC leased its equipment, tools and tractors
to BMSI, said lease was coterminous with the agreement
2. BMSI, then, hired petitioners to work at LSC as checkers, welders, utility men etc
3. Subsequently, petitioners filed a complaint for regularization against LSC and
BMSI. But when LSC terminated its agreement with BMSI, petitioners lost their
employment
4. BMSI asserted that it is an independent contractor. It averred that it was willing to
regularize petitioners; however, some of them lacked the requisite qualifications
for the job. BMSI was willing to reassign petitioners who were willing to accept
reassignment. BMSI denied petitioners claim for underpayment of wages and
non-payment of 13th month pay and other benefits.
5. LSC, on the other hand, averred that petitioners were employees of BMSI and
were assigned to LSC by virtue of the Agreement. BMSI is an independent job
contractor with substantial capital or investment in the form of tools, equipment,
and machinery necessary in the conduct of its business. The Agreement
between LSC and BMSI constituted legitimate job contracting. Thus, petitioners
were employees of BMSI and not of LSC.
6. LA dismissed petitioners complaint citing that the latter were employees of BMSI
7. NLRC reversed the decision on the ground that based on the agreement, BMSI
was not engaged in legitimate job contracting but was a labor-only contractor
8. CA ruled that BMSI was an independent job contractor based on the provisions
of the agreement
ISSUE: WON BMSI IS ENAGAGED IN LABOR-ONLY CONTRACTING

HELD: Thus, in distinguishing between prohibited labor-only contracting and

permissible job contracting, the totality of the facts and the surrounding circumstances
of the case are to be considered.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job, work, or
service for a principal. In labor-only contracting, the following elements are present: (a)
the contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work, or service under its own account and responsibility; and
(b) the employees recruited, supplied, or placed by such contractor or subcontractor
perform activities which are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within a
definite or predetermined period, regardless of whether such job, work, or service is to
be performed or completed within or outside the premises of the principal.
A person is considered engaged in legitimate job contracting or subcontracting if the
following conditions concur:
(a) The contractor carries on a distinct and independent business and undertakes
the contract work on his 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 his work except as to
the results thereof;
(b) The contractor has substantial capital or investment; and
(c) The agreement between the principal and the contractor or subcontractor
assures the contractual employees' entitlement to all labor and occupational
safety and health standards, free exercise of the right to self-organization,
security of tenure, and social welfare benefits.
Given the above standards, we sustain the petitioners contention that BMSI is engaged
in labor-only contracting.

ATOK BIG WEDGE CO V. JESUS GISON G.R. NO 169510 (2011)

FACTS: Respondent Jesus P. Gison was engaged as part-time consultant on retainer
basis by petitioner Atok Big Wedge Company, Inc. As a consultant on retainer basis,
respondent assisted petitioner's retained legal counsel with matters pertaining to the
prosecution of cases against illegal surface occupants within the area covered by the
company's mineral claims. Respondent was likewise tasked to perform liaison work with
several government agencies, which he said was his expertise.
Petitioner did not require respondent to report to its office on a regular basis, except
when occasionally requested by the management to discuss matters needing his
expertise as a consultant. As payment for his services, respondent received a
retainer fee of P3,000.00 a month, which was delivered to him either at his residence
or in a local restaurant. The parties executed a retainer agreement, but such
agreement was misplaced and can no longer be found.
The
said
arrangement
continued
for
the
next
eleven
years.
Sometime thereafter, since respondent was getting old, he requested that petitioner
cause his registration with the Social Security System (SSS), but petitioner did not
accede to his request. He later reiterated his request but it was ignored by
respondent considering that he was only a retainer/consultant. On February 4,
2003, respondent filed a Complaint with the SSS against petitioner for the latter's
refusal to cause his registration with the SSS.
On the same date, Mario D. Cera, in his capacity as resident manager of petitioner,
issued a Memorandum advising respondent that within 30 days from receipt thereof,
petitioner is terminating his retainer contract with the company since his services are
no longer necessary.
On February 21, 2003, respondent filed a Complaint[6] for illegal dismissal, unfair
labor practice, underpayment of wages, non-payment of 13th month pay, vacation
pay, and sick leave pay with the National Labor Relations Commission (NLRC),

Regional Arbitration Branch (RAB), Cordillera Administrative Region, against

petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as
NLRC Case No. RAB-CAR-02-0098-03.
On September 26, 2003, after the parties have submitted their respective pleadings,
Labor Arbiter Rolando D. Gambito rendered a Decision[8] ruling in favor of the
petitioner. Finding no employer-employee relationship between petitioner and
respondent, the Labor Arbiter dismissed the complaint for lack of merit.

ISSUE: WON employer-employee relationship exist in the case at bar

HELD: NONE. To ascertain the existence of an employer-employee relationship
jurisprudence has invariably adhered to the four-fold test, to wit: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
(4) the power to control the employee's conduct, or the so-called "control test."[18] Of
these four, the last one is the most important.[19] The so-called "control test" is
commonly regarded as the most crucial and determinative indicator of the presence or
absence of an employer-employee relationship. Under the control test, an employeremployee relationship exists where the person for whom the services are performed
reserves the right to control not only the end achieved, but also the manner and means
to be used in reaching that end.
Applying the aforementioned test, an employer-employee relationship is apparently
absent in the case at bar. Among other things, respondent was not required to report
everyday during regular office hours of petitioner. Respondent's monthly retainer fees
were paid to him either at his residence or a local restaurant. More importantly,
petitioner did not prescribe the manner in which respondent would accomplish any of
the tasks in which his expertise as a liaison officer was needed; respondent was left
alone and given the freedom to accomplish the tasks using his own means and method.
Respondent was assigned tasks to perform, but petitioner did not control the manner
and methods by which respondent performed these tasks. Verily, the absence of the
element of control on the part of the petitioner engenders a conclusion that he is not an
employee of the petitioner.Furthermore, despite the fact that petitioner made use of the
services of respondent for eleven years, he still cannot be considered as a regular
employee of petitioner. Article 280 of the Labor Code, in which the lower court used to
buttress its findings that respondent became a regular employee of the petitioner, is not
applicable in the case at bar. Indeed, the Court has ruled that said provision is not the
yardstick for determining the existence of an employment relationship because it merely
distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits, to
join or form a union, or to security of tenure; it does not apply where the existence of an
employment relationship is in dispute.[24] It is, therefore, erroneous on the part of the
Court of Appeals to rely on Article 280 in determining whether an employer-employee
relationship exists between respondent and the petitioner
Considering that there is no employer-employee relationship between the parties, the
termination of respondent's services by the petitioner after due notice did not constitute

illegal dismissal warranting his reinstatement and the payment of full backwages,
allowances and other benefits.

TEMIC AUTOMOTIVE PHILS V. TEMIC AUTOMOTIVE PHILS EMPLOYEES UNIONFFW G.R. NO 18695 (2009)
Facts:
The petitioner is a corporation engaged in the manufacture of electronic brake systems
and comfort body electronics for automotive vehicles. Respondent Temic Automotive
Philippines, Inc. Employees Union-FFW (union) is the exclusive bargaining agent of the
petitioner's rank-and-file employees. By practice established since 1998, the petitioner
contracts out some of the work in the warehouse department, specifically those in the
receiving and finished goods sections, to three independent service providers or
forwarders (forwarders), namely: Diversified Cargo Services, Inc. (Diversified), Airfreight
2100 (Airfreight) and Kuehne & Nagel, Inc. (KNI). These forwarders also have their own
employees who hold the positions of clerk, material handler, system encoder and
general clerk. The regular employees of the petitioner and those of the forwarders
share the same work area and use the same equipment, tools and computers all
belonging to the petitioner.
This outsourcing arrangement gave rise to a union
grievance on the issue of the scope and coverage of the collective bargaining unit,
specifically to the question of whether or not the functions of the forwarders employees
are functions being performed by the regular rank-and-file employees covered by the
bargaining unit.
Issue: whether or not the forwarding system violates the law.
Held: Our own examination of the agreement shows that the forwarding arrangement
complies with the requirements of Article 106 of the Labor Code and its implementing
rules. To reiterate, no evidence or argument questions the companys basic objective of
achieving greater economy and efficiency of operations. This, to our mind, goes a long
way to negate the presence of bad faith. The forwarding arrangement has been in
place since 1998 and no evidence has been presented showing that any regular
employee has been dismissed or displaced by the forwarders employees since then.

No evidence likewise stands before us showing that the outsourcing has resulted in a
reduction of work hours or the splitting of the bargaining unit effects that under the
implementing rules of Article 106 of the Labor Code can make a contracting
arrangement illegal. The other requirements of Article 106, on the other hand, are
simply not material to the present petition. Thus, on the whole, we see no evidence or
argument effectively showing that the outsourcing of the forwarding activities violate our
labor laws, regulations, and the parties CBA, specifically that it interfered with,
restrained or coerced employees in the exercise of their rights to self-organization as
provided in Section 6, par. (f) of the implementing rules.

JOSE SONZA V. ABS-CBN G.R. NO 138051 (2004)

FACTS: ABS-CBN signed an agreement with Mel and Jay Management and Devt Corp
(MJMDC) that petitioner Sonza would co-host for Mel & Jay (radio and TV program).
ABS-CBN agreed to pay for Sonzas services a monthly talent fee
1. Subsequently, Sonza resigned as co-host of the said programs. He then filed a
complaint against ABS-CBN for nonpayment of salary, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel allowance and amount
due under Employees Stock Option Plan (ESOP)
2. ABS-CBN filed a motion to dismiss on the ground that no employer-employee
relationship existed between the parties
3. LA dismissed the complaint for lack of jurisdiction, finding that unlike an ordinary
employee, Sonza was free to perform the services he undertook to render in
accordance with his own style. NLRC and CA affirmed the same
ISSUE: WON SONZA IS AN EMPLOYEE OF RESPONDENT ABS-CBN
HELD: 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. Moreover, during the life of the
Agreement, ABS-CBN agreed to pay Sonzas talent fees as long as "AGENT and Jay

Sonza shall faithfully and completely perform each condition of this Agreement." Even if
it suffered severe business losses, ABS-CBN could not retrench Sonza because ABSCBN remained obligated to pay Sonzas talent fees during the life of the Agreement.
This circumstance indicates an independent contractual relationship between SONZA
and ABS-CBN.
Applying the control test to the present case, Sonza is not an employee but an
independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor. This test is based on the
extent of control the hirer exercises over a worker. The greater the supervision and
control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.
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. 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." 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.
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. These circumstances are not present in this case. 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.

ABS-CBN V. NAZARENO G.R. NO 164156 (2006)

FACTS: ABS-CBN employed respondents Nazareno et al. as production assistants
(PA) on different dates. They were assigned at the news and public affairs, for various
radio programs in the Cebu Broadcasting Station, with a monthly compensation of
P4,000. They were issued ABS-CBN employees ID and were required to work for a
minimum of 8 hours a day, including Sundays and holidays. They were made to:
a. Prepare, arrange airing of commercial broadcasting based on the daily
operations log and digicart of ABS-CBN
b. Coordinate, arrange personalities for air interviews
c. Coordinate, prepare schedule of reporters for scheduled news reporting and
lead-in or incoming reports
d. Facilitate prepare and arrange airtime schedule for public service announcement
and complaints
e. Assist, anchor program interview
f. Record, log clerical reports, man based control radio
Petitioner and ABS-CBN rank and file employees executed a CBA to be effective during
the period from December 11, 1996 to December 11, 1999. However, since petitioner
refused recognize PAs as part of the bargaining unit, respondents were not included in
the CBA.
Due to a memorandum assigning PAs to non-drama programs, and that the DYAB
studio operations would be handled by studio technician, there was a revision of the
schedule and assignments and that Gerzon was assigned as full time PA of the TV
news department reporting directly to Leo Lastimosa.
Respondents filed a complaint for recognition of regular employment status,
underpayment of overtime pay, holiday pay, premium pay, service incentive leave pay
and 13th month pay w
ISSUE: WON the respondents are regular employees
HELD: Respondents are considered regular employees of ABS-CBN and are entitled
to benefits granted to all regular employees.
Where a person has rendered at least one year of service, regardless of the nature of
the activity performed, or where the work is continuous or intermittent, the employment
is considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having
attained regular status. Article 280 of the Labor Code provides:
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 services to be performed is seasonal in nature and the
employment is for the duration of the season.
Any employee who has rendered at least one year of service, whether continuous or
intermittent, is deemed regular with respect to the activity performed and while such
activity actually exists. The fact that respondents received pre-agreed talent fees
instead of salaries, that they did not observe the required office hours, and that they
were permitted to join other productions during their free time are not conclusive of the
nature of their employment. Respondents cannot be considered talents because they
are not actors or actresses or radio specialists or mere clerks or utility employees. They
are regular employees who perform several different duties under the control and
direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those 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 activities in which they are
employed.
What determines whether a certain employment is regular or otherwise is not the will or
word of the employer, to which the worker oftentimes acquiesces, much less the
procedure of hiring the employee or the manner of paying the salary or the actual time
spent at work. It is the character of the activities performed in relation to the particular
trade or business taking into account all the circumstances, and in some cases the
length of time of its performance and its continued existence. It is obvious that one year
after they were employed by petitioner, respondents became regular employees by
operation of law.
In the case at bar, however, the employer-employee relationship between petitioner and
respondents has been proven.
1. 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 petitioners personnel department just like any
ordinary employee.
2. 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.

3. Petitioner could always discharge respondents should it find their work

unsatisfactory, and respondents are highly dependent on the petitioner for
continued work.
4. 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.

FARLEY FULACHE ET AL VS. ABS-CBN G.R. NO 183810 (2010)

FACTS: Petitioners worked as driver/cameramen, drivers, cameramen/editors of
respondent ABS-CBN, filed separate complaints for regularization, unfair labor practice
and several money claims against:
a. They were excluded from the coverage of the CBA as ABS-CBN
considered them temporary and not regular employees in violation of the
Labor Coe
b. Having rendered more than 1 year of service in the company, they should
be recognized as regular employees
1. ABS-CBN, on the other hand, contended that:
a. The production of programs per se is not necessary or desirable in its
business because it could generate profits by selling airtime to blocktimers or through advertising
b. It contracts on a case-to-case basis the services of persons who possess
the necessary talent, skills, training, etc to meet the requirements of its
programs and productions. These contracted persons are called talents
and are considered independent contractors who offer their services to
broadcasting companies
c. Instead of salaries, talents are paid a pre-arranged consideration called
talent fee taken from the budget of a particular program and subject to
10% withholding tax. Talents do not undergo probation. Their services are
engaged for a specific program, production or segment thereof. Their
contracts are terminated once the program, production or segment is
completed
2. LA held that petitioners were regular employees of ABS-CBN and are entitled to
the benefits and privileges of regular employees
3. While the appeal of the regularization case was pending, ABS-CBN dismissed
petitioners for their refusal to sign the contract of employment with service
contractor Able Services. As such, petitioners filed a complaint for illegal
dismissal
4. LA held that petitioners were dismissed due to redundancy which is an
authorized cause under the law
5. NLRC held that petitioners were regular employees and held their dismissal
illegal. There was an employer-employee relationship between petitioners and
ABS-CBN based on the following:
a. Petitioners were engaged to perform activities usually necessary or
desirable in ABS-CBN trade or business
b. The company exercised control over the petitioners in the performance of
their work
c. Petitioners were not paid by the result of their work but on a monthly basis
and were required to do their work in accordance with the companys
schedule
ISSUE: WON petitioners are regular employees

HELD: Respondent alleged that the petitioners were not employees (whose services
therefore could be terminated through dismissal under the Labor Code); they were
independent contractors whose services could be terminated at will, subject only to the
terms of their contracts. To justify the termination of service, the company cited
redundancy as its authorized cause but offered no justificatory supporting evidence. It
merely claimed that it was contracting out the petitioners activities in the exercise of its
management prerogative.
By claiming redundancy as authorized cause for dismissal, it impliedly admitted that the
petitioners were regular employees whose services, by law, can only be terminated for
the just and authorized causes defined under the Labor Code. It similarly forgot that an
exercise of management prerogative can be valid only if it is undertaken in good faith
and with no intent to defeat or circumvent the rights of its employees under the laws or
under valid agreements.

INSULAR LIFE V. NLRC 179 SCRA 459 (1989)

FACTS: Insular Life Assurance Co., Ltd. and Melecio T. Basiao entered into a contract,
stipulating that Basiao (1) would be an authorized agent of the Company; (2) to receive
compensation in the form of commissions; and (3) the Company's Rate Book and its
Agent's Manual, as well as all its circulars will be deemed part of the contract.
1. The contract also expressly stipulated that there was no employer-employee
relationship between the parties
2. Subsequently, the parties entered into another contract; in line with this, Basiao
organized an agency while concurrently fulfilling his commitments under the first
contract with the company. However it was terminated. As such, Basiao soguht
for a reconsideration and later sued the company in a civil action.
3. Thereafter, Basiao filed a complaint against the company and its president. The
company disputed the Ministry's jurisdiction over Basiao's claim and asserted
that he was not a company's employee, but an independent contractor. The
company had no obligation to him for unpaid commissions under the terms and
conditions of his contract.
4. LA held in favor of Basiao finding that an employer-employee relationship existed
between him and Insular Life. NLRC affirmed the same
5. Insular averred that the terms of the contract the company and Basiao entered
into expressly conferred to Basiao an independent contractor status. The
company did not have a hand in determining the time, place and means of
soliciting insurance and have set no accomplishment quotas. The company only
compensated him on the basis of results obtained. Further, it contends that they
do not constitute the decisive determinant of the nature of his engagement,
invoking precedents to the effect that the critical feature distinguishing the
status of an employee from that of an independent contractor is control,
that is, whether or not the party who engages the services of another has the
power to control the latter's conduct in rendering such services.
ISSUES: WON BASIAO IS AN EMPLOYEE OF PETITIONER COMPANY
HELD: No. The provisions of the contract which obliged Basiao to "observe and
conform to all rules and regulations which the company may from time to time
prescribe," as well as to the fact that the company prescribed the qualifications of
applicants for insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made Basiao, in legal
contemplation, an employee of the company.
However, in Viana vs. Alejo Al-Lagadan, it was held that 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. Realistically, it would be a rare contract of service that gives untrammelled
freedom to the party hired and eschews any intervention whatsoever in his performance
of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only
to promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve it. The
distinction acquires particular relevance in the case of an enterprise affected with public
interest, as is the business of insurance, and is on that account subject to regulation by
the State with respect, not only to the relations between insurer and insured but also to
the internal affairs of the insurance company.
The Insurance Code provides the rules and regulations governing the conduct of the
business and these are enforced by the Insurance Commissioner. It is expected for an
insurance company to promulgate a set of rules to guide its commission agents in
selling its policies that are in line with the law. The character of such rules (e.g. which
prescribe the qualifications of persons who may be insured, determination of the
premiums to be paid and the schedules of payment) does not invade the agent's
contractual prerogative to adopt his own selling methods or to sell insurance at
his own time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.
The company has limited themselves to pointing out that Basiao's contract with the
company bound him to observe and conform to such rules and regulations as the latter
might from time to time prescribe. There has been no showing that any such rules or
regulations were in fact promulgated, much less that any rules existed or were
issued which effectively controlled or restricted his choice of methods or the
methods themselves of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the express provision
of the contract leaving Basiao "... free to exercise his own judgment as to the time, place
and means of soliciting insurance."
Under the contract invoked by him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for unpaid commissions
should have been litigated in an ordinary civil action.

TONGKO V. MANULIFE G.R. NO 167622 (2010)

Facts: The contractual relationship between Tongko and Manulife had two basic
phases. The first or initial phase began on July 1, 1977, under a Career Agents
Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing
contained herein shall be construed or interpreted as creating an employer-employee
relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies
and other products offered by the Company, and collect, in exchange for provisional
receipts issued by the Agent, money due to or become due to the Company in respect
of applications or policies obtained by or through the Agent or from policyholders
allotted by the Company to the Agent for servicing, subject to subsequent confirmation
of receipt of payment by the Company as evidenced by an Official Receipt issued by the
Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the
provisions hereof by the Agent by giving written notice to the Agent within fifteen (15)
days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by the
Company shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without
cause, by giving to the other party fifteen (15) days notice in writing.
Tongko additionally agreed (1) to comply with all regulations and requirements of
Manulife, and (2) to maintain a standard of knowledge and competency in the sale of
Manulifes products, satisfactory to Manulife and sufficient to meet the volume of the
new business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit Manager in Manulifes
Sales Agency Organization. In 1990, he became a Branch Manager. Six years later (or
in 1996), Tongko became a Regional Sales Manager.
Tongkos gross earnings consisted of commissions, persistency income, and
management overrides. Since the beginning, Tongko consistently declared himself selfemployed in his income tax returns. Thus, under oath, he declared his gross business

income and deducted his business expenses to arrive at his taxable business income.
Manulife withheld the corresponding 10% tax on Tongkos earnings.
Subsequently, de Dios wrote Tongko a letter, dated December 18, 2001, terminating
Tongkos services:
It would appear, however, that despite the series of meetings and communications, both
one-on-one meetings between yourself and SVP Kevin OConnor, some of them with
me, as well as group meetings with your Sales Managers, all these efforts have failed in
helping you align your directions with Managements avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your
Agents Contract as we are now issuing this notice of termination of your Agency
Agreement with us effective fifteen days from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the National Labor
Relations Commission (NLRC) Arbitration Branch. He essentially alleged despite the
clear terms of the letter terminating his Agency Agreement that he was Manulifes
employee before he was illegally dismissed.
The labor arbiter decreed that no employer-employee relationship existed between the
parties. However, the NLRC reversed the labor arbiters decision on appeal; it found the
existence of an employer-employee relationship and concluded that Tongko had been
illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the
appellate court found that the NLRC gravely abused its discretion in its ruling and
reverted to the labor arbiters decision that no employer-employee relationship existed
between Tongko and Manulife.
Issue: Whether or not an employer-employee existed between Tongko and Manulife.
Ruling: The Insurance and the Civil Codes; the Parties Intent and Established
Industry Practices
Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers"
and specifically defines the agents and brokers relationship with the insurance company
and how they are governed by the Code and regulated by the Insurance Commission.
To forget these other laws is to take a myopic view of the present case and to add to the
uncertainties that now exist in considering the legal relationship between the insurance
company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on
the incidents of the relationship. The Labor Code concept of "control" has to be
compared and distinguished with the "control" that must necessarily exist in a principalagent relationship. The principal cannot but also have his or her say in directing the

course of the principal-agent relationship, especially in cases where the companyrepresentative relationship in the insurance industry is an agency.
Section 186 of the Insurance Code provides that "No person, partnership, or association
of persons shall transact any insurance business in the Philippines except as agent of a
person or corporation authorized to do the business of insurance in the Philippines."
Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among
other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for services in
obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation
or procurement of applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any insurance company doing
business in the Philippines or any agent thereof, without first procuring a license so to
act from the Commissioner x x x The Commissioner shall satisfy himself as to the
competence and trustworthiness of the applicant and shall have the right to refuse to
issue or renew and to suspend or revoke any such license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf
of any insurance company or transmits for a person other than himself an application for
a policy or contract of insurance to or from such company or offers or assumes to act in
the negotiating of such insurance shall be an insurance agent within the intent of this
section and shall thereby become liable to all the duties, requirements, liabilities and
penalties to which an insurance agent is subject.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be
licensed and must also act within the parameters of the authority granted under the
license and under the contract with the principal. Other than the need for a license, the
agent is limited in the way he offers and negotiates for the sale of the companys
insurance products, in his collection activities, and in the delivery of the insurance
contract or policy. Rules regarding the desired results (e.g., the required volume to
continue to qualify as a company agent, rules to check on the parameters on the
authority given to the agent, and rules to ensure that industry, legal and ethical rules are
followed) are built-in elements of control specific to an insurance agency and should not
and cannot be read as elements of control that attend an employment relationship
governed by the Labor Code.
Generally, the determinative element is the control exercised over the one rendering
service. The employer controls the employee both in the results and in the means and
manner of achieving this result. The principal in an agency relationship, on the other

hand, also has the prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent laws.
With particular relevance to the present case is the provision that "In the execution of
the agency, the agent shall act in accordance with the instructions of the principal." This
provision is pertinent for purposes of the necessary control that the principal exercises
over the agent in undertaking the assigned task, and is an area where the instructions
can intrude into the labor law concept of control so that minute consideration of the facts
is necessary. A related article is Article 1891 of the Civil Code which binds the agent to
render an account of his transactions to the principal.
Evidence shows that Tongkos role as an insurance agent never changed during his
relationship with Manulife. If changes occurred at all, the changes did not appear to be
in the nature of their core relationship. Tongko essentially remained an agent, but
moved up in this role through Manulifes recognition that he could use other agents
approved by Manulife, but operating under his guidance and in whose commissions he
had a share. Tongko perhaps could be labeled as a "lead agent" who guided under his
wing other Manulife agents similarly tasked with the selling of Manulife insurance.
Evidence indicates that Tongko consistently clung to the view that he was an
independent agent selling Manulife insurance products since he invariably declared
himself a business or self-employed person in his income tax returns.
Hand in hand with the concept of admission against interest in considering the tax
returns, the concept of estoppel a legal and equitable concept necessarily must
come into play. A glaring evidentiary gap for Tongko in this case is the lack of evidence
on record showing that Manulife ever exercised means-and-manner control, even to a
limited extent, over Tongko during his ascent in Manulifes sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present
any evidence at all on what this designation meant. This also holds true for Tongkos
appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The
best evidence of control the agreement or directive relating to Tongkos duties and
responsibilities was never introduced as part of the records of the case. The reality is,
prior to de Dios letter, Manulife had practically left Tongko alone not only in doing the
business of selling insurance, but also in guiding the agents under his wing. As
discussed below, the alleged directives covered by de Dios letter, heretofore quoted in
full, were policy directions and targeted results that the company wanted Tongko and
the other sales groups to realign with in their own selling activities. This is the reality that
the parties presented evidence consistently tells us. What, to Tongko, serve as
evidence of labor law control are the codes of conduct that Manulife imposes on its
agents in the sale of insurance. The mere presentation of codes or of rules and
regulations, however, is not per se indicative of labor law control as the law and
jurisprudence teach us.
In light of these conclusions, the sufficiency of Tongkos failure to comply with the
guidelines of de Dios letter, as a ground for termination of Tongkos agency, is a matter

that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of
insurance, agency and contracts.

BESA V. TRAJANO 146 SCRA 501

FACTS: Respondent KAMPI filed a Petition for Certification Election. Petitioner
opposed alleging that there is no ER-EE relationship between Besa and petitioners.
These petitioners are shoe shiners paid on a commission basis. Thequestion of ER-EE
relationship became a primordial consideration in resolving whether or not the subject
shoeshiners have the juridical personality and standing to present a petition for
certification as well as to vote therein.
ISSUE: W/N ER-EE relationship exists between shoe shiners and Besa
HELD: Shoe shiner is different from a piece worker:
Piece Woker
Shoe shiner
1. paid for work accomplished
2. the employer pays his wages
3. paid for work accomplished without
concern to the profit derived by employer
4. the employer supervises and controls his
work.
BESA
1. contributes anything to the capital of the
Employer
2. paid directly by his customer
3. the proceeds derived from the trade are divided share with respondent BESA
4. respondent does not exercise control
Thus, shoe shiners are not employees of the company, but are partners, because there
is no control by theowner and shoe shiners have their own customers whom they
charge a fee and divide the proceeds equally with the owner.

MAFINCO TRADING CORP V. OPLE 70 SCRA 139 (1976)

FACTS: Cosmos Aerated Water Factory Inc (Cosmos) appointed Mafinco as its sole
distributor of Cosmos soft drinks in Manila. Subsequently, Private respondent
Repomanta and Mafinco entered into a peddling contract whereby Repomanta agreed
to buy and sell cosmos soft drinks. The contracts were to remain in force for one year
unless terminated by either party upon five days notice to the other
1. Thereafter, Mafinco terminated the contracted with Repomanta. Repomanta,
then, filed a complaint charging the GM of Mafinco of having violated PD 21
which created the NLRC
2. Mafinco filed a motion to dismiss on the ground that NLRC had no jurisdiction
because private respondents were not its employees but were independent
contractor. It also argued that there was no termination of employee, but a
termination of contract
3. NLRC ruled in favor of Mafinco citing that private respondents were independent
contractors. DOLE secretary Ople reversed the same, finding that the
complainants were driver-salesmen of the company and that they were not
independent contractors because they had no capital of their own
ISSUE: WON PRIVATE RESPONDENTS WERE EMPLOYEES OF MAFINCO UNDER
THE PEDDLING CONTRACT
HELD: Under their peddling contracts, Repomanta and Moralde were not employees of
Mafinco but were independent contractors as found by the NLRC and its fact-finder and
by the committee appointed by the Secretary of Labor to look into the status of Cosmos
and Mafinco peddlers. They were distributors of Cosmos soft drinks with their own
capital and employees. Ordinarily, an employee or a mere peddler does not execute a
formal contract of employment. He is simply hired and he works under the direction and
control of the employer.
On the other hand, an independent contractor is "one who exercises independent
employment and contracts to do a piece of work according to his own methods and
without being subject to control of his employer except as to the result of the work."
Among the factors to be considered are whether the contractor is carrying on an
independent business; whether the work is part of the employer's general business; the
nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of the work to another; the power to
terminate the relationship; the existence of a contract for the performance of a specified
piece of work; the control and supervision of the work; the employer's powers and duties
with respect to the hiring, firing, and payment of the contractor's servants; the control of
the premises; the duty to supply the premises, tools, appliances, material and labor; and
the mode, manner, and terms of payment.
Those tests to determine the existence of an employer-employee relationship or
whether the person doing a particular work for another is an independent contractor
cannot be satisfactorily applied in the instant case. It should be obvious by now that the

instant case is a penumbral, sui generis case lying on the shadowy borderline that
separates an employee from an independent contractor.
In determining whether the relationship is that of employer and employee or whether
one is an independent contractor, "each case must be determined on its own facts and
all the features of the relationship are to be considered." On the basis of the peddling
contract, no employer-employee relationship was created. Hence, the old NLRC had no
jurisdiction over the termination of the peddling contract.

SINGER SEWING MACHINE CO V. DRILON 183 SCRA 270

FACTS: SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondent
union, filed a petition for certification as the sole and exclusive bargaining agent of all
the collectors of the Singer Sewing Machine Company, Bagiuo City branch.
The Company opposed the petition saying that the union members were not
employees but independent contractors as evidenced by the collection agency
agreement they signed.
ISSUE: Whether there exists an employee-employer relationship?
HELD: The nature of the relationship between a collecting agent and the company
depends on the circumstances surrounding each case.
In this case, the Agreement confirms the status of the collecting agent as an
independent contractor not only because he is explicitly described as such but
because he is allowed by the provisions of the agreement to perform collection
services without being subject to the control of the latter except only as to the
result of his work. Hence, the requirement that receipt forms issued by the company
shall be submitted once a week is but a method to avoid co-mingling of personal funds
of the agent with the money of the company.
Likewise, the use of standard report forms are only intended to facilitate order in the
office.
Even if the report requirements are to be called control measures, any control is
only with respect to the end result of the collection since the requirements regulate
the things to be done after the performance of the collection job or the rendition of the
service.
The respondents' contention that the union members are employees of the Company is
based on selected provisions of the Agreement but ignores the following circumstances
which respondents never refuted either in the trial proceedings before the labor officials
nor in its pleadings filed before this Court.
1. The collection agents are not required to observe office hours or report to
Singer's office everyday except, naturally and necessarily, for the purpose
of remitting their collections;
2. The collection agents do not have to devote their time exclusively for
SINGER. There is no prohibition on the part of the collection agents from
working elsewhere. Nor are these agents required to account for their time
and submit a record of their activity.;
3. The manner and method of effecting collections are left solely to the
discretion of the collection agents without any interference on the part of
Singer.;

4. The collection agents shoulder their transportation expenses incurred in

the collections of the accounts assigned to them.;
5. The collection agents are paid strictly on commission basis. The amounts
paid to them are based solely on the amounts of collection each of them
make. They do not receive any commission if they do not effect any
collection even if they put a lot of effort in collecting. They are paid
commission on the basis of actual collections.;
6. The commissions earned by the collection agents are directly deducted by
them from the amount of collections they are able to effect. The net
amount is what is then remitted to Singer."
If indeed the union members are controlled as to the manner by which they are
supposed to perform their collections, they should have explicitly said so in detail by
specifically denying each of the facts asserted by the petitioner.
The last and most important element of the control test is not satisfied by the terms and
conditions of the contracts. There is nothing in the agreement which implies control by
the Company not only over the end to be achieved but also over the means and
methods in achieving the end.
The Court finds the contention of the respondents that the union members are
employees under Article 280 of the Labor Code to have no basis.
The Court agrees with the petitioner's argument that Article 280 is not the yardstick for
determining the existence of an employment relationship because it merely
distinguishes between two kinds of employees.
The Court finds that since private respondents are not employees of the Company, they
are not entitled to the constitutional right to join or form a labor organization for
purposes of collective bargaining. Accordingly, there is no constitutional and legal basis
for their "union" to be granted their petition for direct certification. Order of Med-Arbiter
and DOLE Secretary reversed and set aside

SY V. CA 398 SCRA 301 (2003)

FACTS: Sometime in 1958, private respondent Jaime Sahot started working as a truck
helper for petitioners family-owned trucking business.In 1965, he became a truck driver
of the same family business, thereafter known as SBT Trucking Corporation since 1994.
Throughout all these changes for 36 years, private respondent continuously served
the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as
he was suffering from various ailments. Particularly causing him pain was his left
thigh, which greatly affected the performance of his task as a driver.
He inquired about his medical and retirement benefits with the Social Security
System (SSS) on April 25, 1994, but discovered that his premium payments had not
been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. He was medically
examined and treated for EOR, presleyopia, hypertensive retinopathy G II, HPM,
UTI, Osteoarthritis and heart enlargement.
Belen Paulino of the SBT Trucking Service management told him to file a formal
request for extension of his leave. At the end of his week-long absence, Sahot
applied for extension of his leave for the whole month of June, 1994. It was at this
time when petitioners allegedly threatened to terminate his employment should he
refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he
refused to work, but he could not retire on pension because petitioners never paid
his correct SSS premiums. The fact remained he could no longer work as his left
thigh hurt abominably.
They carried out their threat and dismissed him from work, effective June 30, 1994.
He ended up sick, jobless and penniless.On September 13, 1994, Sahot filed with
the NLRC NCR Arbitration Branch, a complaint for illegal dismissal. He prayed for
the recovery of separation pay and attorneys fees against Vicente Sy and Trinidad
Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs
Trucking and SBT Trucking, herein petitioners.
Petitioners admitted they had a trucking business in the 1950s but denied
employing helpers and drivers. They contend that private respondent was not
illegally dismissed as a driver because he was in fact petitioners industrial partner.
They add that it was not until the year 1994, when SBT Trucking Corporation was
established, and only then did respondent Sahot become an employee of the
company, with a monthly salary that reached P4,160.00 at the time of his
separation.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos,
ruled that there was no illegal dismissal in Sahots case. National Labor Relations
Commission modified the judgment of the Labor Arbiter. It declared that private

respondent was an employee, not an industrial partner, since the start. The
appellate court affirmed with modification the judgment of the NLRC. It held that
private respondent was indeed an employee of petitioners since 1958.
ISSUE: WON private respondent is an employee or an industrial partner of herein
petitioner
HELD: Private respondent is an employee of petitioner.
The elements to determine the existence 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 employers power to control the employees conduct. The most
important element is the employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish
it.
As found by the appellate court, petitioners owned and operated a trucking business
since the 1950s and by their own allegations, they determined private respondents
wages and rest day. Records of the case show that private respondent actually
engaged in work as an employee. During the entire course of his employment he did not
have the freedom to determine where he would go, what he would do, and how he
would do it. He merely followed instructions of petitioners and was content to do so, as
long as he was paid his wages. Indeed, said the CA, private respondent had worked as
a truck helper and driver of petitioners not for his own pleasure but under the latters
control.
Article 1767 of the Civil Code states that in a contract of partnership two or more
persons bind themselves to contribute money, property or industry to a common fund,
with the intention of dividing the profits among themselves.
Not one of these circumstances is present in this case. No written agreement exists to
prove the partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is no
proof that he was receiving a share in the profits as a matter of course, during the
period when the trucking business was under operation. Neither is there any proof that
he had actively participated in the management, administration and adoption of policies
of the business. Thus, the NLRC and the CA did not err in reversing the finding of the
Labor Arbiter that private respondent was an industrial partner from 1958 to 1994.
On this point, we affirm the findings of the appellate court and the NLRC. Private
respondent Jaime Sahot was not an industrial partner but an employee of petitioners
from 1958 to 1994. The existence of an employer-employee relationship is ultimately a
question of fact and the findings thereon by the NLRC, as affirmed by the Court of
Appeals, deserve not only respect but finality when supported by substantial evidence.
Substantial evidence is such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion.

FELIX V. BUENASEDA 240 SCRA 139 (1995)

FACTS: Petitioner Dr. Felix joined the National Center for Mental Health (NCMH) as a
resident physician and after 3 years, he was promoted to Senior Resident Physician.
The Ministry of Health reorganized the NCMH pursuant to E.O. 119.
1. Under the said reorganization, Felix was appointed to the position of Sr. Resident
Physician in a temporary capacity.
2. Felix was later promoted to the position of Medical Specialist 1 (Temporary
Status) which was renewed the following year.
3. In 1988, the DOH issued Dept. Order 347, which required board certification as a
prerequisite for renewal of specialist positions in various med. centers, hospitals
and agencies.
4. Then Sec. of Health issued D.O. 478 (amending Sec.4 of D.O. 347) which
provided for an extension of appointments of Medical Specialists in cases where
termination of those who failed to meet the requirement for board certification
might result in disruption of hospital services.
5. In 1991, after reviewing petitioners service record and performance, the Medical
Credentials Committee of the NCMH recommended non-renewal of his
appointment as Medical Specialist 1.
6. He was, however, allowed to continue in the service, and receive his salary even
after being informed of the termination of his appointment.
7. The Chiefs of Service held an emergency meeting to discuss the petitioners
case. In the meeting, the overall consensus among the dept. heads was for
petitioners non-renewal where his poor performance, frequent tardiness and
inflexibility were pointed as among the factors responsible for the
recommendation not to renew his appointment.
8. The matter was referred to the CSC, which ruled that the temporary appointment
can be terminated any time and that any renewal of such appointment is within
the discretion of the appointing authority.
9. Consequently, petitioner was advised by hospital authorities to vacate his
cottage. Refusing to comply, petitioner filed a petition with the Merit System
Protection Board (MSPB) complaining about the alleged non-renewal of his
appointment, the MSPB, however, dismissed his complaint for lack of merit.
10. This decision was appealed to the Civil Service Commission (CSC) which
dismissed the same.
ISSUE: WON PETITIONER IS AN EMPLOYEE OF RESPONDENT HOSPITAL
HELD: A residency or resident physician position in a medical specialty is never a
permanent one. Residency connotes training and temporary status. It is the step taken
by a physician right after post-graduate internship (and after hurdling the Medical
Licensure Examinations) prior to his recognition as a specialist or sub-specialist in a
given field.
A physician who desires to specialize in Cardiology takes a required three-year
accredited residency in Internal Medicine (four years in DOH hospitals) and moves on to

a two or three-year fellowship or residency in Cardiology before he is allowed to take

the specialty examinations given by the appropriate accrediting college. In a similar
manner, the accredited Psychiatrist goes through the same stepladder process which
culminates in his recognition as a fellow or diplomate (or both) of the Psychiatry
Specialty Board. 16 This upward movement from residency to specialist rank,
institutionalized in the residency training process, guarantees minimum
standards and skills and ensures that the physician claiming to be a specialist
will not be set loose on the community without the basic knowledge and skills of
his specialty. Because acceptance and promotion requirements are stringent,
competitive, and based on merit, acceptance to a first year residency program is
no guaranty that the physician will complete the program. Attribution rates are high.
Some programs are pyramidal. Promotion to the next post-graduate year is based on
merit and performance determined by periodic evaluations and examinations of
knowledge, skills and bedside manner. Under this system, residents, specialty those
in university teaching hospitals enjoy their right to security of tenure only to the
extent that they periodically make the grade, making the situation quite unique as
far as physicians undergoing post-graduate residencies and fellowships are
concerned. While physicians (or consultants) of specialist rank are not subject to
the same stringent evaluation procedures, specialty societies require continuing
education as a requirement for accreditation for good standing, in addition to
peer review processes based on performance, mortality and morbidity audits,
feedback from residents, interns and medical students and research output. The
nature of the contracts of resident physicians meet traditional tests for
determining employer-employee relationships, but because the focus of
residency is training, they are neither here nor there. Moreover, stringent standards
and requirements for renewal of specialist-rank positions or for promotion to the next
post-graduate residency year are necessary because lives are ultimately at stake.

UERMMMC RESIDENT DOCTORS UNION V. LAGUESMA G.R. NO 125425 (1993)

WHERE the workers are not employees of the company, they are not entitled to the
constitutional right to join or form labor unions for purposes of collective bargaining.
The question of whether or not an employer-employee relationship exists is a primordial
consideration before extending labor benefits under the labor relations law. It is a
condition sine qua non for a bargaining unit that it be composed of employees, failing
which affects the legality of the union itself and means the ineligibility if union members
to present a petition for certification election, as well as to vote therein. (La Suerte Cigar
& Cigarette Factory vs. Director of the Bureau of Labor Relations, 123 SCRA 679
[1983].
The existence of an employer-employee relationship between the resident physicians of
the University of the East Ramon Magsaysay Medical Center and the hospital became
the crux of the matter in its petition for certification.
The resident physicians formed a union called the UERMMC-Resident Doctors Union
and filed the petition for certification so that it will be recognized as the exclusive
bargaining agent of all the resident physicians in the hospital for purposes of collective
bargaining.
The petition for certification was dismissed by the Undersecretary, acting under the
authority of the Secretary of Labor, on the ground that there exist no employeremployee relationship between the resident doctors and the hospital.
The case reached the Supreme Court. Said the Court:
It is clear that physicians undergo residency training in order to hone their skills and
develop or improve their knowledge in a specialized medical field or discipline. Hence,
residency is basically and simply a continuation of their medical course. However, they
are not required or mandated under any law to further undergo a residence training
program. Having passed the medical board examinations, they are already licensed
physicians and could very well engage in the general practice of medicine. It is for the
practice of highly specialized medical disciplines which necessitates further on-the-job
training thereon.
Viewed from this perspective, residency training clearly amounts to a pursuit of further
education on a specific discipline. Thus, the relationship between the teaching/training
hospital and the resident doctor is not one of employer-employee. The training/teaching
hospital may simply be likened to a medical school/university, but in this instance, the
emphasis is on the practical application and training of its students, the resident
doctors."

JO V. NLRC 324 SCRA 437 (2000)

FACTS: Private respondent, Peter Mejila working as a barber on piece-rate basis was
designated by petitioners as caretaker of their barbershop. Private respondents duties
as caretaker, in addition to his being a barber, were: 1) to report to the owners of the
barbershop whenever the aircondition units malfunction and/or whenever water or
electric power supply was interrupted; 2) to call the laundry woman to wash dirty linen;
3) to recommend applicants for interview and hiring; 4) to attend to other needs of the
shop. For this additional job, he was given an honorarium equivalent to1/3 of the net
income of the shop.
Private respondent left his job voluntarily because of his misunderstanding with his coworker and demanded separation pay and other monetary benefits. Petitioners
contends that respondent was not their employee but their partner in trade whose
compensation was based on a sharing arrangement per haircut or shaving job done.
ISSUE: Whether or not there exist an employer-employee relationship.
HELD: Yes. In determining the existence of an employer-employee relationship, the
following elements are considered: 1) selection and engagement of worker; 2) power of
dismissal; 3) the payment of wages; and 4) the power to control the workers conduct,
with the latter assuming primacy in the overall consideration. The power of control refers
to the existence of the power and not necessarily to the actual exercise thereof. It is not
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.
We entertain no doubt that private respondent was employed by petitioners as
caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private
respondent as barber by absorbing the latter in their employ. Undoubtedly, the services
performed by private respondent as barber is related to, and in the pursuit of the
principal business activity of petitioners. Later on, petitioners tapped private respondent
to serve concurrently as caretaker of the shop. Certainly, petitioners had the power to
dismiss private respondent being the ones who engaged the services of the latter. In
fact, private respondent sued petitioners for illegal dismissal, albeit contested by the
latter. As a caretaker, private respondent was paid by petitioners wages in the form of
honorarium, originally, at the rate of one-third (1/3) of the shops net income but
subsequently pegged at a fixed amount per month. As a barber, private respondent
earned two-thirds (2/3) of the fee paid per haircut or shaving job done. Furthermore, the
following facts indubitably reveal that petitioners controlled private respondents work
performance, in that: (1) private respondent had to inform petitioners of the things

needed in the shop; (2) he could only recommend the hiring of barbers and masseuses,
with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and
could leave only at 9:00 p.m. because he was the one who opened and closed it, being
the one entrusted with the key. These duties were complied with by private respondent
upon instructions of petitioners. Moreover, such task was far from being negligible as
claimed by petitioners. On the contrary, it was crucial to the business operation of
petitioners as shown in the preceding discussion. Hence, there was enough basis to
declare private respondent an employee of petitioners. Accordingly, there is no cogent
reason to disturb the findings of the labor arbiter and NLRC on the existence of
employer-employee relationship between herein private parties.

VINOYA V. NLRC 324 SCRA 469 (2000)

FACTS: Petitioner Vinoya, the complainant, worked with RFC as sales representative
until his services were terminated in 1991
1. Vinoya claimed he applied and was accepted by RFC. During his employ, he was
assigned to various supermarkets and groceries where he booked sales orders
and collected payments for RFC. After some time, he was transferred by RFC to
Peninsula Manpower Co Inc (PMCI), an agency which provides RFC with
additional contractual workers pursuant to a contract for the supply of manpower
services
2. After his transfer to PMCI, petitioner was allegedly reassigned to RFC as sales
representative. Subsequently, he was informed by RFC that his services were
terminated due to the expiration of contract of service between RFC and PMCI
3. Private respondent RFC argued that no employer-employee relationship existed
between the two parties as the petitioner was actually an employee of PMCI,
allegedly an independent contractor which has a contract of service with RFC.
RFC denied that petitioner was ever employed by RFC. RFC further contended
that the termination of its relationship with petitioner was brought about by the
expiration of the contract of service between itself and PMCI.
4. LA held in favor of petitioner on the grounds that petitioner was originally with
RFC and was merely transferred to PMCI, RFC had direct control and
supervision over petitioner, it paid Vinoyas wages and; petitioner was terminated
as per instruction of RFC
5. NLRC reversed the LA decision and opined that PMCI was an independent
contractor because it had substantial capital and as such, is the true employer of
petitioner
ISSUE: WON PETITIONER WAS AN EMPLOYEE OF RFC OR PMCI
HELD: Labor-only contracting, a prohibited act, is an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal. In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own
account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal. A person is

considered engaged in legitimate job contracting or subcontracting if the following

conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent
business and undertakes to perform the job, work or service on its own
account and under its own responsibility according to its own manner
and method, and 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;
(b) The contractor or subcontractor has substantial capital or investment;
and
(c) The agreement between the principal and contractor or subcontractor
assures the contractual employees entitlement to all labor and
occupational safety and health standards, free exercise of the right to
self-organization, security of tenure, and social and welfare benefits.
Previously, it was held that in order to be considered as a job contractor it is enough
that a contractor has substantial capital. In other words, once substantial capital is
established it is no longer necessary for the contractor to show evidence that it has
investment in the form of tools, equipment, machineries, work premises, among others.
The rational for this is that Article 106 of the Labor Code does not require that the
contractor possess both substantial capital and investment in the form of tools,
equipment, machineries, work premises, among others.
It may be inferred that it is not enough to show substantial capitalization or investment in
the form of tools, equipment, machineries and work premises, among others, to be
considered as an independent contractor. In fact, jurisprudential holdings are to the
effect that in determining the existence of an independent contractor relationship,
several factors might be considered such as, but not necessarily confined to, whether
the contractor is carrying on an independent business; the nature and extent of the
work; the skill required; the term and duration of the relationship; the right to assign the
performance of specified pieces of work; the control and supervision of the workers; the
power of the employer with respect to the hiring, firing and payment of the workers of
the contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of payment.
Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as
such, cannot be considered as the employer of petitioner.

DEVELOPMENT BANK OF THE PHILS V. NLRC 233 SCRA 250 (1994)

FACTS: Private respondents were hired as security guards by Confidential Investigaton
and Security Corp (CISCOR). In the course of their employment, the private
respondents were assigned to secure the premises of CISCORs client, DBP which, in
turn, assigned them to secure the Riverside Mills Corp, one of its properties or assets
1. Private respondents eventually resigned from CISCOR. Thereafter, they claimed
from CISCOR the return of their cash bond and payment of their 13 th month pay
and service incentive leave pay
2. For failure of CISCOR to grant their claims, private respondents filed against
CISCOR a complaint for recovery of their cash bond, payment of 13 th month pay
and their service incentive leave pay
3. CISCOR alleged that private respondents failed to secure the required clearance,
their cash bond deposit, proportionate 13th month pay and service incentive leave
pay were withheld to answer for liabilities incurred while private respondents
were guarding Riverside Mills Corp
4. CISCOR filed a motion to implead petitioner bank and averred that in view of its
contract with the petitioner whereby, for a certain service fee, CISCOR undertook
to guard petitioners premises. Under the Labor Code, both CISCOR and
petitioner are jointly and severally liable to pay the salaries and other statutory
benefits due the private respondents
5. Petitioner posits that it is not the employer of private respondents and should
thus not be held liable for the latters claims. In addition, it avers that it was not
properly impleaded as it was CISCOR and Medina who filed the motion to
implead petitioner, and not the private respondents, as complainants therein.
Petitioner even goes further by countering that, assuming arguendo, it was the
indirect employer of private respondents, Article 106 of the Labor Code 4 cannot
be applied to the present case as there was no failure on the part of CISCOR
and Medina, as direct employer, to pay the claims of private respondents, but
only a failure on the part of the latter to present the proper clearance to pave the
way for the payment of the claims.
ISSUE: WON petitioner is jointly and severally liable for the payment of the private
respondents salary
HELD: Nothing in Art 106 indicates that insolvency or unwillingness to pay by the
contractor or direct employer is a prerequisite for the joint and several liability of the
principal or indirect employer. In fact, the rule is that in job contracting, the principal is
jointly and severally liable with the contractor. The statutory basis for this joint and
several liability is set forth in Arts 107 and 109 in relation to Art 106 Labor Code. There
is no doubt that private respondents are entitled to the cash benefits due them. The
petitioner is also, no doubt, liable to pay such benefits because the law mandates the
joint and several liability of the principal and the contractor for the protection of labor.
In Eagle Security Agency Inc v. NLRC, the SC held that joint and several liability of the
contractor and the principal is mandated by the Labor Code to assure compliance of the

provisions therein including the statutory minimum wage (Art 99, Labor Code). The
contractor is made liable by virtue of his status as direct employer. The principal, on the
other hand, is made the indirect employer of the contractors employees for purposes of
paying the employees their wages should the contractor be unable to pay them. This
joint and several liability facilitates, if not guarantees, payment of the workers
performance of any work, task, job or project, thus giving the workers ample protection
as mandated by the 1987 Constitution.

UNITED SPECIAL WATCHMEN AGENCY V. CA 405 SCRA 432 (2003)

Facts: A complaint for illegal dismissal and payment of money claims was filed by
respondent employees against USWA and Banco Filipino Savings and Mortgage Bank
(BF). It stemmed from the termination of the Contract for Security Service entered into
between USWA and BF. The parties agreed that the party terminating the CONTRACT
shall give (a) THIRTY (30)-day notice prior to the date of termination to the other party.
The contract took effect on 1 June 1994. However, on 3 June 1994, or two (2) days
later, BF terminated the contract. The termination letter dated 3 June 1994, but received
on June 17, advised USWA of the termination to take effect 30 days from receipt
thereof.[3]
USWA alleged that, upon receipt of the letter, Mr. Angel Baliwag, its Operations
Manager, immediately notified all the affected employees stationed at the BF branches
about the termination of their contract. He advised them to report to the office for
reassignment. Only thirty (30) out of the sixty-seven (67) guards reported and they were
given new assignments. Out of the remaining thirty-seven (37), twenty-one (21) filed, on
4 August 1994, a complaint for illegal dismissal and payment of money claims against
USWA and BF with the Regional Arbitration Branch of the National Labor Relations
Commission (NLRC). On 29 August 1994, the complaint was amended to include all
thirty-seven (37) employees. In the course of the proceedings, five (5) of the thirtyseven employees reported to the office and were given new posts.
The employees claimed that they were put on a floating status. They denied that
USWA, represented by Mr. Baliwag, notified them of the standing offer of the agency to
reassign them to other clients after the termination of the contract with BF. Due to their
dismissal, they prayed for separation pay.
On 8 January 1998, the Labor Arbiter ordered USWA to pay the employees separation
pay, and both USWA and BF to pay the salary differential and attorneys fees. On
appeal, the NLRC, on 23 July 1998, remanded the case, finding the conclusions on the
issues of illegal dismissal and wage differential by the Arbiter without sufficient
basis. However, on 2 March 2000, a compromise settlement was reached between BF
and the employees. The Arbiter approved the settlement in its decision dated 15 March
2000, and dismissed the complaint for illegal dismissal for lack of merit. Aggrieved, the
employees filed an appeal with the NLRC. The NLRC ordered USWA to pay the
employees their separation pay in light of its conclusion that there was no proof that the
employees were notified to report for reassignment after the termination of the contract.
Issue: Whether or not USWA illegally dismissed its employees.
Ruling: It is the contention of USWA that the respondents were not illegally dismissed,
but that they refused to report to the office after the termination of the contract with BF.
Allegedly, it was the fault of the respondents that they did not have any work
assignment. There being no illegal dismissal, they argue that the NLRC erred in
awarding separation pay to the employees.

In the case at bar, it is not shown that complainants were given new assignments six (6)
months after termination of the contract between respondents bank and security
agency. Records further do not show that complainants were informed, verbally or in
writing that they will be given new guarding assignments. Respondent security agency,
through Mr. Angel Baliwag, Operations Officer, testified that he sent a letter dated 22
May 1995 to Atty. Loste, complainants counsel, requesting addresses of the
complainants but the latter stated that he does not know the addresses of complainants.
We cannot give due merit to respondents statement since the letter request was made
beyond the six (6) months allowable period to place complainants on a floating status
(pp. 6-10, TSN, taken on 30 May 1996). Moreover, we find unbelievable that respondent
agency does not have any record of the complainants addresses being their
employees.
These findings of the NLRC are supported by the evidence on record. It was
established that the respondents were put on a temporary off-detail, which exceeded
the allowable period of six (6) months, amounting to constructive dismissal.
Proceeding from the fact that the dismissal of the employees was illegal, we next
rule on the liability of USWA. Pursuant to a legitimate job contracting, USWA and BF
are jointly and severally liable in the payment of the wages of the employees, and for
violation of any provision of the Labor Code. We note that a compromise agreement of
the employees was executed between BF and the employees. However, the
compromise agreement dealt only with salary differential. It did not include nor does it
preclude the award of separation pay. In light of the illegal dismissal of the respondents,
USWA is liable to pay the respondents separation pay equivalent to one (1) month pay
for every year of service.

NEW GOLDEN BUILDERS & DEVT CORP V. CA 418 SCRA 411 (2003)
FACTS: Petitioner New Golden Builders entered into a construction contract with Prince
David Devt Copt for the construction of a residential condominium building. Petitioner,
then contracted Nilo Layno Builders to do the concrete works. Pursuant to the contract,
Nilo Layno Builders hired private respondents to perform work at the project
1. Private respondents filed a complaint against petitioner for unfair labor practice,
nonpayment of 13th month pay, nonpayment of 5 days service incentive leave
pay, illegal dismissal and severance pay
2. LA held that Nilo Layno Builders was a labor-only contractor, thus private
respondents were deemed employees of petitioner
3. Petitioner claimed that Nilo Layno Builders was an independent contractor
4. NLRC affirmed the same but added that private respondents were illegally
dismissed by petitioner
ISSUE: WON NILO LAYNO BUILDERS WAS AN INDEPENDENT CONTRACTOR
AND WON THERE EXISTED AN EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENTS
HELD: Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the
Labor Code, 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, equipments, machineries, work
premises, and other materials which are necessary in the conduct of the business.
Jurisprudential holdings are to the effect that in determining the existence of an
independent contractor relationship, several factors may be considered, such as, but
not necessarily confined to, whether or not the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and duration of
the relationship; the right to assign the performance of specified pieces of work; the
control and supervision of the work to another; the employers power with respect to the
hiring, firing and payment of the contractors workers; the control of the premises; the
duty to supply premises, tools, appliances, materials and labor; and the mode, manner
and terms of payment.
The test to determine the existence of independent contractorship is whether one
claiming to be an independent contractor has contracted to do the work according to his
own methods and without being subject to the control of the employer, except only to
the results of the work.
This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its
own employees, the private respondents, to do specialized work in the Prince David
Project of the petitioner. The means and methods adopted by the private respondents
were directed by Nilo Layno Builders except that, from time to time, the engineers of the

petitioner visited the site to check whether the work was in accord with the plans and
specifications of the principal. As admitted by Nilo G. Layno, he undertook the contract
work on his own account and responsibility, free from interference from any other
persons, except as to the results; that he was the one paying the salaries of private
respondents; and that as employer of the private respondents, he had the power to
terminate or dismiss them for just and valid cause. Indubitably, the Court finds that Nilo
Layno Builders maintained effective supervision and control over the private
complainants.
In legitimate job contracting, the law creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees are paid their wages. The principal
employer becomes jointly and severally liable with the job contractor only for the
payment of the employees wages whenever the contractor fails to pay the same. Other
than that, the principal employer is not responsible for any claim made by the
employees.
The joint and several liability of the employer or principal was enacted to ensure
compliance with the provisions of the Code, principally those on statutory minimum
wage. The contractor or subcontractor is made liable by virtue of his or her status as a
direct employer, and the principal as the indirect employer of the contractors
employees. This liability facilitates, if not guarantees, payment of the workers
compensation, thus, giving the workers ample protection as mandated by the 1987
Constitution. This is not unduly burdensome to the employer. Should the indirect
employer be constrained to pay the workers, it can recover whatever amount it had paid
in accordance with the terms of the service contract between itself and the contractor.
This liability covers the payment of service incentive leave and 13 th month pay of the
private complainants during the time they were working at petitioners Prince David
Project. So long as the work, task, job or project has been performed for petitioners
benefit or on its behalf, the liability accrues for such period even if, later on, the
employees are eventually transferred or reassigned elsewhere.

PCI AUTOMATION V. NRLC 252 SCRA 493 (1996)

FACTS: PCIB commenced its 4th GL Environment Conversion Project intended to link
all existing computer systems within PCIB and its various branches nationwide. It
entered into a computer services agreement with petitioner PCI Automation to direct,
supervise and run the development of software, computer applications and computer
system of PCIB.
1. To comply with this obligation, PCIB engaged the services of Prime Manpower
Resource Development (Prime). Under the contract, PCIB had control and
supervision over the personnel provided by Prime although it was expressly
agreed that the personnel are employees of PCIB
2. Subsequently, private respondent Santileces was hired by Prime and assigned to
petitioner as data encoder for the PCI project. However, Prime decided to
terminate private respondents services after it was informed by PCI Automation
that his services were no longer needed for the project
3. Private respondent then filed a complaint before NLRC for illegal dismissal
against Prime and PCI Automation and prayed for the payment of his 14 th month
pay, 13th month pay, separation pay, unpaid service incentive leave pay, unpaid
vacation leave, termination pay etc.
4. LA held that private respondents termination was illegal. NLRC affirmed the
same
5. Petitioner contends that private respondent, being a project employee, was
validly dismissed when the project for which he was hired was completed.
Petitioner also contends being solidarily liable with Prime for all the money claims
of private respondents because it is not the employer of private respondent. It
avers that private respondent is an employee of Prime and he was merely
assigned by Prime to the petitioner to work on the PCIB project
ISSUE: WON petitioner is solidarily liable with Prime for the money claims of private
respondent
HELD: Yes, PCI Automation is solidarily liable with Prime.
Under the law, any person (hereinafter referred to as the principal employer) who
enters into an agreement with a job contractor, either for the performance of a specified
work or for the supply of manpower, assumes responsibility over the employees of the
latter. However, for the purpose of determining the extent of the principal employers
liability, the law makes a distinction between legitimate job contracting and labor-only
contracting. Article 106 of the Labor Code states:
Article 106. Contractor or subcontractor. -Whenever an employer enters into a
contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees
directly employed by him.
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers
in the same manner and extent as if the latter were directly employed by him.
In legitimate job contracting, no employer-employee relationship exists between
the employees of the job contractor and the principal employer. Even then, the
principal employer becomes jointly and severally liable with the job contractor for
the payment of the employees wages whenever the contractor fails to pay the
same. In such case, the law creates an employer-employee relationship between
the principal employer and the job contractors employees for a limited purpose,
that is, to ensure that the employees are paid their wages. Other than the
payment of wages, the principal employer is not responsible for any claim made
by the employees.
In labor-only contracting, an employer-employee relationship is created by law between
the principal employer and the employees of the labor-only contractor. In this case, the
labor-only contractor is considered merely an agent of the principal employer. The
principal employer is responsible to the employees of the labor-only contractor as if
such employees had been directly employed by the principal employer. The principal
employer therefore becomes solidarily liable with the labor-only contractor for all the
rightful claims of the employees.
Thus, in legitimate job contracting, the principal employer is considered only an indirect
employer,] while in labor-only contracting, the principal employer is considered the direct
employer of the employees.
Considering the terms of the External Job Contract executed by Prime and PCIB, it
cannot be doubted that Prime is a labor-only contractor. Under the contract, Prime
merely acted as a placement agency providing manpower to the petitioner through
PCIB. As Prime is a labor-only contractor, the workers it supplied to the petitioner,
including private respondent, should be considered employees of the petitioner.

WILLIAM TIU V. NLRC 254 SCRA 1 (1996)

FACTS: On February 18, 1986, private respondent Hermes dela Cruz filed a complaint,
for illegal dismissal, violation of the Minimum Wage Law and non-payment of the cost of
living allowances, legal holiday pay, service incentive pay and separation pay, against
petitioner William Tiu. Petitioner denied that private respondent was his employee.
Petitioner William Tiu, as operator of the DRough Riders Transportation, is
engaged in the transportation of passengers from Cebu City to the northern
towns of Cebu.
Private respondent Hermes dela Cruz worked in petitioners bus terminals as a
dispatcher, assisting and guiding passengers and carrying their bags. The
Labor Arbiter and the NLRC found, and petitioner had admitted in his position
paper that the private respondent was paid a regular daily wage of P20.00
The said respondents were hired by the Regino Dela Cruz. De la Cruz is a mere
supervisor, while petitioner is the real employer.
ISSUE: WON petitioner LIU is solidarily liable with the money claims by the
petitioners
RULING: Petitioner does not claim that Regino dela Cruz and his dispatchers were
independent contractors.
Job contracting is permissible only if the following conditions are met:
1. the contractor 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
2. the contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.
In the absence of these requisites, what exists is a labor-only contract under
which the person acting as contractor is considered merely an agent or intermediary of
the employer who is responsible to the workers in the same manner and to the same
extent as if they had been directly employed by him.
As held in Broadway Motors, Inc. v. NLRC, citing Philippine Bank of Communications v.
NLRC, the labor-only contractor is a mere agent of the employer who is
responsible to the employees of the labor-only contractor as if such employees
had been employed by him directly.
In such a case the statute establishes an employer-employee relationship between
the employer and the employees of the labor-only contractor to prevent any
violation or circumvention of the provisions of the Labor Code, by holding both the
employer and the labor-only contractor responsible to the employees.
For this reason, we hold that Regino dela Cruz can, at most, be considered a laboronly contractor and, therefore, a mere agent of petitioner. As he is acting in behalf of
petitioner, private respondent Hermes dela Cruz is actually the employee of petitioner.

SAN MIGUEL CORP V. MAERC INTEGRATED SYSTEMS 405 SCRA 579 (2003)
FACTS: 291workers filed their complaints against San Miguel Corporation (SMC) and
Maerc Integrated Services, Inc., for illegal dismissal, underpayment of wages etc.
1. The complainants alleged that they were hired by SMC through its agent MAERC
to work inside the SMC premises and in the Philphos Warehouse owned by
MAERC.
2. They washed and segregated various kinds of empty bottles used by SMC to sell
and distribute its beer beverages to the consuming public.
3. They were paid on a per piece or pakiao basis except for a few who worked as
checkers and were paid on daily wage basis.
4. SMC cited its plans to phase out its segregation activities due to the installation
of labor and cost saving devices.
5. When the service contract was terminated, respondents filed a complaint for
illegal dismissal. .
6. The LA rendered a decision holding that MAERC was an independent contractor.
7. On appeal, the NLRC ruled that MAERC was a labor-only contractor and that
complainants were employees of SMC. The NLRC also held that whether
MAERC was a job contractor or a labor-only contractor, SMC was still solidarily
liable with MAERC for the latter's unpaid obligations.
8. The CA affirmed the decision of the NLRC.
ISSUE: WON SMC IS SOLIDARILY LIABLE WITH MAERC
HELD: In legitimate job contracting, the law creates an employer-employee relationship
for a limited purpose, i.e., to ensure that the employees are paid their wages. The
principal employer becomes jointly and severally liable with the job contractor only for
the payment of the employees' wages whenever the contractor fails to pay the same.
Other than that, the principal employer is not responsible for any claim made by the
employees.
On the other hand, in labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees had
been directly employed by the principal employer. The principal employer therefore
becomes solidarily liable with the labor-only contractor for all the rightful claims of the
employees.
This distinction between job contractor and labor-only contractor, however, will not
discharge SMC from paying the separation benefits of the workers, inasmuch as
MAERC was shown to be a labor-only contractor; in which case, petitioner's liability is
that of a direct employer and thus solidarily liable with MAERC.

RAMY GALLEGO V. BAERY PHIL G.R. NO 179807 (2009)

FACTS: Ramy Gallego was contracted in 1992 by Bayer Philippines as crop protection
technician to promote and market Bayer products by making farm visits to convince the
farmers to buy their products.
Petitioner employment came to a halt in 1996 prompting Gallego to seek another
employment, but he was reemployed in 1997 as part of the product image which
actually performing the same task as crop protection technician.
In 2001, he was directed to submit a resignation letter and ordered to return all
pieces of service equipment, which he refused.
He continued performing his duties and received compensation until January 2002,
however, in April 2002, he received a memorandum that he will be transferred to
Luzon; and that he heard that respondents spread rumors that reached the dealers
in Antique that he is no longer connected with Bayer and any transaction with him
will not be honored as of April 30, 2002.
Believing he was terminated, he instituted a complaint for illegal dismissal before the
NLRC.
Respondents Bayer and Guillermo denied the existence of employment relationship,
while, respondents Product Image and Bergonia admitted that the petitioner was
hired as contractual employee and that he has stopped reporting for work.
The Labor Arbiter declared that respondents were guilty of illegal dismissal. On
appeal by the respondents, the NLRC reversed the Arbiters decision and contended
that petitioner was not dismissed but has abandoned his employment by failure to
report on his duties. Hence, this petition for Review.
ISSUES:
(1) Was there employment relation between petitioner and respondent Bayer?
(2) Was petitioner illegally dismissed from his employment?
RULING (First Issue):
The existence of an employer-employee relationship is determined on the basis of four
standards, namely: (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or absence of power of
dismissal; and (d) the presence or absence of control of the putative employees
conduct. Most determinative among these factors is the so-called "control test." If at all,
the only control measure retained by Bayer over petitioner was to act as his de facto
supervisor in certifying to the veracity of the accomplishment reports he submitted to
Product Image. This is by no means the kind of control that establishes an employeremployee relationship as it pertains only to the results and not the manner and method
of doing the work. 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. Surely, it would be foolhardy for any company to completely give
the reins and totally ignore the operations it has contracted out. In fine, Product Image is
ineluctably the employer of petitioner.
(Second Issue):
The Court appreciates no evidence that petitioner was dismissed. What it finds is that
petitioner unilaterally stopped reporting for work before filing a complaint for illegal
dismissal, based on his belief that Guillermo and Bergonia had spread rumors that his
transactions on behalf of Bayer would no longer be honored as of April 30, 2002. This
belief remains just that it is unsubstantiated. While in cases of illegal dismissal, the
employer bears the burden of proving that the dismissal is for a valid or authorized
cause, the employee must first establish by substantial evidence the fact of dismissal

COCA-COLA BOTTLERS V. DELA CRUZ G.R. NO 184977 (2009)

FACTS: Respondents Dela Cruz filed a case for regularization with money claims
against petitioner Coca-Cola Bottlers Inc
1. Respondents alleged that they were route helpers assigned to work in
petitioners trucks. They go from the Coca-Cola sales offices or plants to
customer outlets; they were hired either directly by petitioner or by its contractors
but they do not enjoy full remuneration, benefits and privileges granted to
petitioners regular sales force. They argued that services they render are
necessary and desirable in the regular business of petitioner
2. Petitioner contended that it had entered into contracts of services with Peerless
and Excellent Partners Cooperative Inc (Excellent) to provide allied services;
under these contracts, Peerless and Excellent retained the right to select, hire,
dismiss, supervise, control and discipline and pay the salaries of all personnel
assigned to petitioner. In turn, both companies were paid a stipulated fee.
Petitioner posited that no employer-employee relationship existed between
respondents and petitioner
3. LA dismissed the case for lack of jurisdiction, citing that respondents were not
employees of petitioner as they were employees of either Peerless or Excellent.
NLRC affirmed the same
4. CA reversed the LA ruling citing that based on the contractual agreements
between Peerless and Excellent, on one hand, and the company, on the other,
the former were engaged in labor-only contracting. CA ruled that the defect in the
verification and certification was a mere formal requirement that can be excused
in the interest of substantial justice, following the ruling of this Court in Uy v.
Landbank of the Philippines.
ISSUE: WHAT IS THE EFFECT OF THE LACK OF DOLE CERTIFICATION OF
PEERLESS AND EXCELLENT AS LEGITIMATE JOB CONTRACTOR
HELD: The petitioners belated attention to the imputed defect indicates that the
petitioner did not consider this defect worth raising when things were going its way, but
considered it a serious one when things turned the other way. This opportunistic stance
is not our idea of how technical deficiencies should be viewed. Under the circumstances
of this case, the defect is a technical and minor one; the respondents did file the
required verification and certification of non-forum shopping with all the respondents
properly participating, marred only by a glitch in the evidence of their identity. In the
interest of justice, this minor defect should not defeat their petition and is one
that we can overlook in the interest of substantial justice, taking into account the
merits of the case.

COCA-COLA BOTTLERS V. AGITO G.R. NO 179546 (2009)

Facts: Petitioner is a domestic corporation duly registered with the Securities and
Exchange Commission (SEC) and engaged in manufacturing, bottling and distributing
soft drink beverages and other allied products.
On 15 April 2002, respondents filed before the NLRC two complaints against
petitioner, Interserve, Peerless Integrated Services, Inc., Better Builders, Inc.,
and Excellent Partners, Inc. for reinstatement with backwages, regularization,
nonpayment of 13th month pay, and damages.
Respondents alleged in their Position Paper that they were salesmen assigned
at the Lagro Sales Office of petitioner. They had been in the employ of
petitioner for years, but were not regularized.
Petitioner filed its Position Paper (with Motion to Dismiss), where it averred that
respondents were employees of Interserve who were tasked to perform
contracted services in accordance with the provisions of the Contract of
Services executed between petitioner and Interserve on 23 March
2002.petitioner asserted that respondents were employees of Interserve, since it
was the latter which hired them, paid their wages, and supervised their work, as
proven by: (1) respondents Personal Data Files in the records of Interserve; (2)
respondents Contract of Temporary Employment with Interserve; and (3) the
payroll records of Interserve.
Petitioner argues that there could not have been labor-only contracting, since
respondents did not perform activities that were indispensable to petitioners
principal business. And, even assuming that they did, such fact alone does not
establish an employer-employee relationship between petitioner and the
respondents, since respondents were unable to show that petitioner exercised
the power to select and hire them, pay their wages, dismiss them, and control
their conduct.
Issue: whether or not the petitioner is labor-only contractor.
Held: The law clearly establishes an employer-employee relationship between the
principal employer and the contractors employee upon a finding that the contractor
is engaged in labor-only contracting. Article 106 of the Labor Code categorically
states: There is labor-only contracting where the person supplying workers to an
employee does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such persons are performing activities which are directly related to
the principal business of such employer. Thus, performing activities directly related
to the principal business of the employer is only one of the two indicators that
labor-only contracting exists; the other is lack of substantial capital or investment.
The Court finds that both indicators exist in the case at bar.

REPUBLIC V. CA 180 SCRA 428

FACTS: The Regional Trial Court of Manila, Branch III, dismissed for lack of jurisdiction,
the petitioner's complaint in Civil Case No. 88- 44048 praying for a declaration of
illegality of the strike of the private respondents and to restrain the same. The Court of
Appeals denied the petitioner's petition for certiorari, hence, this petition for review.
This issue came about because although the NPDC was originally created in 1963
under Executive Order No. 30, as the Executive Committee for the development of the
Quezon Memorial, Luneta and other national parks, and later renamed as the National
Parks Development Committee under Executive Order No. 68, on September 21, 1967,
it was registered in the Securities and Exchange Commission (SEC) as a non-stock and
non-profit corporation, known as "The National Parks Development Committee, Inc."
However, in August, 1987, the NPDC was ordered by the SEC to show cause why its
Certificate of Registration should not be suspended for: (a) failure to submit the General
Information Sheet from 1981 to 1987; (b) failure to submit its Financial Statements from
1981 to 1986; (c) failure to register its Corporate Books; and (d) failure to operate for a
continuous period of at least five (5) years since September 27, 1967.
On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr., informed SEC that his
Office had no objection to the suspension, cancellation, or revocation of the Certificate
of Registration of NPDC.
By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC was attached
to the Ministry (later Department) of Tourism and provided with a separate budget
subject to audit by the Commission on Audit.
On September 10, 1987, the Civil Service Commission notified NPDC that pursuant to
Executive Order No. 120, all appointments and other personnel actions shall be
submitted through the Commission.
Meanwhile, the Rizal Park Supervisory Employees Association, consisting of employees
holding supervisory positions in the different areas of the parks, was organized and it
affiliated with the Trade Union of the Philippines and Allied Services (TUPAS) under
Certificate No. 1206.
Two collective bargaining agreements were entered into between NPDC and NPDCEA
(TUPAS local Chapter No. 967) and NPDC and NPDCSA (TUPAS Chapter No. 1206),
for a period of two years.
These unions staged a stake at the Rizal Park, Fort Santiago, Paco Park, and Pook ni
Mariang Makiling at Los Banos, Laguna, alleging unfair labor practices by NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch III, a
complaint against the union to declare the strike illegal and to restrain it on the ground

that the strikers, being government employees, have no right to strike although they
may form a union.
ISSUE: Whether or not the petitioner, National Parks Development Committee (NPDC),
is a government agency, or a private corporation. (If a government agency, government
employees are not allowed to strike.)
HELD: YES, NPDC is a government agency, its employees are covered by civil service
rules and regulations.
In Jesus P. Perlas, Jr. vs. People of the Philippines, , we ruled that the NPDC is an
agency of the government, not a government-owned or controlled corporation, hence,
the Sandiganbayan had jurisdiction over its acting director who committed estafa. We
held thus:
The National Parks Development Committee was created originally as an
Executive Committee for the development of the Quezon Memorial,
Luneta and other national parks (Executive Order No. 30). It was later
designated as the National Parks Development Committee (NPDC) (E.O.
No. 69). The NPDC has remained under the Office of the President (E.O.
No. 709)
Since 1977 to 1981, the annual appropriations decrees listed NPDC as a
regular government agency under the Office of the President and
allotments for its maintenance and operating expenses were issued direct
to NPDC
Since NPDC is a government agency, its employees are covered by civil service rules
and regulations (Sec. 2, Article IX, 1987 Constitution). Its employees are civil service
employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize and join
unions of their choice, there is as yet no law permitting them to strike.
In case of a labor dispute between the employees and the government, Section 15 of
Executive Order No. 180 dated June 1, 1987 provides that the Public Sector LaborManagement Council, not the Department of Labor and Employment, shall hear the
dispute.

MANILA PUBLIC SCHOOL TEACHERS ASSOC V. LAGUIO 200 SCRA 323 (1991)
FACTS: This involves 2 consolidated cases about a series of events that started with
the so-called mass action undertaken by some 800 public school teachers, among
them members of the petitioning associations.
1. Petitioners alleged that they resolved to engage in mass concerted actions, after
peaceful dialogues with the heads of the Department of Budget and
Management, HOR and Senate, as well as after exhausting all administrative
remedies for the immediate payment of due chalk, clothing allowances, 13th
month pay arising from the salary standardization law, etc.
2. On September 14, 1990, petitioners and teachers in other cities and
municipalities in Metro Manila, staged a protest rally at the DECS premises
without disrupting classes as a last call for the government to negotiate the
granting of demands. No response was made by DECS secretary despite the
demonstration so the petitioners began the ongoing protest mass actions on
September 17, 1990
3. However, they were issued a return to work order, ordering them to report for
work within 24 hours or face dismissal, and a memorandum directing DECS
officials concerned to initiate dismissal proceedings against those who did not
comply and hire their replacements. Despite this, the mass actions continued into
the week, with more teachers joining in the days that followed
4. Based on the record of the principals from various public schools in Metro
Manila, DECS secretary filed motu proprio administrative complaints against the
teachers who had taken part in the mass actions and defied the return to work
order on assorted charges like grave misconduct, gross neglect of duty, gross
violation of Civil Service Law, absence without official leave, etc. Subsequently,
DECS secretary constituted an investigating committee to determine and take
the appropriate course of action
5. Consequently, DECS secretary found the 20 teachers guilty of the charges
preferred against them and dismissed them from office effective immediately. In
other investigations that followed, 658 teachers were dismissed, others were
suspended
6. RTC held in favor of DECS secretary, citing that employees in the public (civil)
service, unlike those in the private sector, do not have the right to strike, although
guaranteed the right to self-organization, to petition Congress for the betterment
of employment terms and conditions and to negotiate with appropriate
government agencies for the improvement of such working conditions as are not
fixed by law
ISSUE: WON PETITIONERS HAVE A RIGHT TO STRIKE
HELD: Petitioners, who are public schoolteachers and thus government employees, do
not seek to establish that they have a right to strike. Rather, they tenaciously insist that
their absences during certain dates in September 1990 were a valid exercise of their
constitutional right to engage in peaceful assembly to petition the government for a

redress of grievances. They claim that their gathering was not a strike; therefore, their
participation therein did not constitute any offense. These 'mass actions' were to all
intents and purposes a strike; they constituted a concerted and unauthorized stoppage
of, or absence from, work which it was the teachers' duty to perform, undertaken for
essentially economic reasons," should not principally resolve the present case, as the
underlying facts are allegedly not identical.
It has long been settled that the mass actions of September/October 1990 staged by
Metro Manila public school teachers amounted to a strike in every sense of the term,
constituting, as they did, "concerted and unauthorized stoppage of or absence from,
work which it was the teachers" duty to perform, undertaken for essentially economic
reasons." The claim that the teachers involved in the 1990 mass actions were merely
exercising their constitutional right to peaceful assembly was already rejected in Gan vs.
Civil Service Commission.
DISSENTING:
GUTTIEREZ: Employees in the civil service may not engage in strikes, walk-outs and
temporary work stoppages like workers in the private sector. Employment in the
Government is governed by law. Government workers cannot use the same weapons
employed by workers in the private sector to secure concessions from their employers.
The terms and conditions of employment are effected through statutes and
administrative rules and regulations, not through collective bargaining agreements.
When Government consistently fails to act on these grievances, the teachers have a
right to speak in an effective manner. For speech to be effective, it must be forceful
enough to make the intended recipients listen.
To me, the issue is the freedom to effectively speak. When the members of a noble
profession are demeaned by low salaries and inattention to their needs, surely their
freedom to speak in a manner and at a time as is most effective far outweighs
conventional adherence to orthodox civil service rules on proper conduct and correct
behavior.
CRUZ: Assuming it to be correct, the prohibition on strike is no license for the
authorities to treat their employees with disdain and to flatly ignore their legitimate
complaints, with the expressed threat that they would be removed if they should be so
rash as to insist on their demands. In my view, that is what Secretary Carino has done.
Government workers, whatever their category or status, have as much right as any
person in the land to voice their protests against what they believe to be a violation of
their interests. The fact that they belong to the Civil Service has not deprived them of
their freedom of expression, which is guaranteed to every individual in this country,
including even the alien. It would be ridiculous to even suggest that by accepting public
employment, the members of the Civil Service automatically and impliedly renounce this
basic liberty. This freedom can at best be regulated only but never completely
withdrawn.

CARINO V. COMMISSION ON HUMAN RIGHTS 204 SCRA 283 (1991)

FACTS: On September 17, 1990, some 800 school teachers, among them members of
the Manila Public School Teachers Association (MPSTA) engaged in a series of mass
concerted actions to dramatize and highlight their plight resulting from the alleged failure
of the public authorities to act upon grievances that had been brought to the latters
attention.
1. Through their representatives, the teachers participating in the mass actions
were served with an order of DECS to return to work in 24 hours or face
dismissal and a memorandum directing the DECS officials concerned to initiate
dismissal proceedings against those who did not comply and to hire their
replacements. Despite this, the mass actions continued into the week
2. Among those who took part in the concerted mass actions were the 8 private
respondents who had agreed to support the non-political demands of MPSTA
3. For failure to heed the return to work order, they were administratively charged
on the basis of the principals report and given 5 days to answer the charges.
They were also preventively suspended for 90 days
4. Private respondents submitted sworn statements to CHR to complain that while
they were participating in peaceful mass actions, they suddenly learned of their
replacements as teachers, allegedly without notice and consequently for reasons
completely unknown to them
5. Through the OSG, DECS secretary sought and was granted leave to file a
motion to dismiss the case alleging that the complaint does not state any cause
of action and that the CHR has no jurisdiction over the case
ISSUE: WON CHR, like a court of justice or even a quasi-judicial agency, has the
jurisdiction or adjudicatory powers, over or the power to try and decide or hear and
determine the case at bar
HELD: The SC held that the CHR has no such power. The most that may be
conceded to the Commission in the way of adjudicative power is that it may investigate,
i.e., receive evidence and make findings of fact as regards claimed human rights
violations involving civil and political rights. But fact finding is not adjudication, and
cannot be likened to the judicial function of a court of justice, or even a quasi-judicial
agency or official. The function of receiving evidence and ascertaining there from the
facts of a controversy is not a judicial function, properly speaking. To be considered
such, the faculty of receiving evidence and making factual conclusions in a controversy
must be accompanied by the authority of applying the law to those factual conclusions
to the end that the controversy may be decided or determined authoritatively, finally and
definitively, subject to such appeals or modes of review as may be provided by law.
Having merely the power "to investigate," CHR cannot and should not "try and resolve
on the merits" (adjudicate) the matters involved in Striking Teachers More particularly,
the Commission has no power to "resolve on the merits" the question of (a) whether or
not the mass concerted actions engaged in by the teachers constitute and are

prohibited or otherwise restricted by law; (b) whether or not the act of carrying on and
taking part in those actions, and the failure of the teachers to discontinue those actions,
and return to their classes despite the order to this effect by the Secretary of Education,
constitute infractions of relevant rules and regulations warranting administrative
disciplinary sanctions, or are justified by the grievances complained of by them; and (c)
what where the particular acts done by each individual teacher and what sanctions, if
any, may properly be imposed for said acts or omissions.
These are matters undoubtedly and clearly within the original jurisdiction of the
Secretary of Education, being within the scope of the disciplinary powers granted to him
under the Civil Service Law, and also, within the appellate jurisdiction of the Civil
Service Commission.

ABANILLA V. COMMISSION ON AUDIT 468 SCRA 87 (2005)

Facts of the Case: Pursuant to Presidential Decree 198 or the Provincial Water Utilities
Act of 1973, Metropolitan Cebu Water District (MCWD), a local water district was
organized as a government-owned corporation with original charter.
Subsequently, MCWD, through its Board of Directors, issued the following Resolutions
giving benefits and privileges to its personnel, one of whom is Dulce M. Abanilla,
MCWDs General Manager, petitioner (1) granting hospitalization privileges; (2) allowing
the monetization of leave credits; (3) granting Christmas bonus; and (4) granting
longevity allowance. On January 1, 1989, MCWD and Metropolitan Cebu Water District
Employees Union, petitioner-in-intervention, executed a collective bargaining agreement
(CBA) providing for the continuous grant to all its regular rank and file employees of
existing benefits, such as cash advances, thirteenth month pay, mid-year bonus,
Christmas bonus, vacation and sick leave credits, hospitalization, medicare, uniform
privileges, and water allowance.
On January 1, 1992, the parties renewed their CBA. On November 13, 1995, an audit
team headed by Bernardita T. Jabines of the COA Regional Office No. VII at Cebu City,
one of the herein respondents, conducted an audit of the accounts and transactions of
MCWD. Thereafter, the Regional Director of COA Regional Office No. VII, also
a respondent, sent MCWD several notices disallowing the amount of P12,221,120.86
representing hospitalization benefits, mid-year bonus, 13th month pay, Christmas bonus
and longevity pay.
Issue: Whether or not COA acted with grave abuse of discretion in disallowing the
above-mentioned benefits and contravened the Labor Code provision on non-diminution
of benefits.
Ruling: Subject to the minimum requirements of wage laws and other labor and
welfare legislation, the terms and conditions of employment in the unionized private
sector are settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given delegated power,
the administrative heads of government which fix the terms and conditions of
employment.
Subject to the minimum requirements of wage laws and other labor and welfare
legislation, the terms and conditions of employment in the unionized private sector are
settled through the process of collective bargaining. In government employment,
however, it is the legislature and, where properly given delegated power, the
administrative heads of government which fix the terms and conditions of employment.
And this is effected through statutes or administrative circulars, rules, and
regulations, not through collective bargaining agreements.

While We sustain the disallowance of the above benefits by respondent COA,

however, we find that the MCWD affected personnel who received the above
mentioned benefits and privileges acted in good faith under the honest
belief that the CBA authorized such payment. Consequently, they need not
refund them. Petition denied.

LUMANTA V. NLRC 170 SCRA 79 (1989)

FACTS: Petitioner Lumanta joined by 54 other retrenched employees, filed a compliant
for unpaid retrenchment or separation pay, underpayment of wages and nonpayment of
ECOLA against private respondent Food Terminal Inc (FTI)
1. FTI argued that it was a government-owned and controlled corporation, its
employees are governed by the Civil Service Law and not by the Labor Code,
and that claims arising from employment fall within the jurisdiction of the CSC
and not DOLE
2. Petitioner further argued that although FTI is a GOCC, it still has the marks of a
private corporation: it directly hires its employees without seeking approval from
CSC and its employees are covered by SSS and not GSIS. Petitioners also
averred that being a GOCC without original charter, FTI falls outside the scope of
CSC as marked out in Sec 2(1) Art IX of the 1987 Constitution
3. LA dismissed the complaint for lack of jurisdiction. NLRC affirmed the same
ISSUE: WON A LABOR LAW CLAIM AGAINST A GOCC, SUCH AS PRIVATE
RESPONDENT FTI, FALLS WITHIN THE JURISDICTION OF DOLE
HELD: Yes.
In NASECO v. NLRC< the SC held that GOCCs with original charter refer to
corporations chartered by special law as distinguished from corporations organized
under the Corporation Code.
It is the 1987 Constitution and not the case law embodied in NHA v. Juco, which applies
in the case at bar, under the principle that jurisdiction is determined as of the time of the
filing of the complaint. At the time the complaint was filed against FTI and at the time
the decisions of LA and NLRC were rendered, the 1987 Constitution had already come
into effect.
Based on the facts presented, FTI is a GOCC without original charter therefore it is the
DOLE and not CSC, which has jurisdiction over the dispute arising from the
employment of petitioners with private respondent FTI, and that consequently, the terms
and conditions of such employment are governed by the Labor Code and not by the
Civil Service Rules and Regulations

PRUDENTIAL BANK V. REYES 352 SCRA 316 (2001)

Facts of the Case: Starts as a complaint for illegal suspension and illegal dismissal
with prayer for moral and exemplary damages, gratuity, fringe benefits and attorneys
fees filed by Clarita Tan Reyes against Prudential Bank and Trust Company before the
labor arbiter. Prior to her dismissal, private respondent Reyes held the position of
Assistant Vice President in the foreign department of the Bank, tasked with the duties,
among others, to collect checks drawn against overseas banks payable in foreign
currency and to ensure the collection of foreign bills or checks purchased, including the
signing of transmittal letters covering the same.
The Labor Arbiter ruled in favor of Reyes, the Bank appealed to the NLRC which, as
mentioned at the outset, reversed the Labor Arbiters decision in its Resolution.
Aggrieved, private respondent commenced a petition for certiorari before the Supreme
Court. The subject petition was referred to the Court of Appeals for appropriate action
and disposition per resolution of this Court.
After a review of the Committees findings, the Board of Directors of the Bank resolved
not to re-elect complainant any longer to the position of assistant president pursuant to
the Banks By-laws.
On July 19, 1991, complainant was informed of her termination of employment from the
Bank because she was found guilty of gross misconduct in deliberately withholding the
clearing of the two dollar checks. They justified the termination due to loss of trust and
confidence, the same being acts of serious misconduct in the performance of her duties
resulting in monetary loss to the Bank. In relation to the Boards decision, they decided
that her monetary and retirement benefits will be forfeited.
In her position paper, complainant alleged that the real reason for her dismissal was her
filing of the criminal cases against the bank president, the vice president and the
auditors of the Bank, such filing not being a valid ground for her
dismissal. Furthermore, she alleged that she was not afforded due process as she was
not given the chance to refute the charges mentioned in the letter of dismissal. Hence,
she was illegally dismissed.
The Court of Appeals found that the NLRC committed grave abuse of discretion in ruling
that the dismissal of Reyes is valid.
Issues:
(1) Whether or not complainant Reyes was illegally dismissed.

(2) Whether or not the amount of back wages awarded was proper.

Ruling: Respondent Bank heavily relied on the testimony and affidavit of Remittance
Clerk Joven in trying to establish loss of confidence. However, Jovens allegation that
petitioner instructed her to hold the subject two dollar checks amounting to $224,650.00
falls short of the requisite proof to warrant petitioners dismissal.
The rule that proof beyond reasonable doubt is not required to terminate an employee
on the charge of loss of confidence and that it is sufficient that there is some basis for
such loss of confidence, is not absolute. The right of an employer to dismiss employees
on the ground that it has lost its trust and confidence in him must not be exercised
arbitrarily and without just cause. For loss of trust and confidence to be valid ground for
an employees dismissal, it must be substantial and not arbitrary, and must be founded
on clearly established facts sufficient to warrant the employees separation from work .
Indeed, jurisprudence is clear on the amount of backwages recoverable in cases of
illegal dismissal. Employees illegally dismissed prior to the effectivity of Republic Act
No. 6715 on March 21, 1989 are entitled to backwages up to three (3) years without
deduction or qualification, while those illegally dismissed after are granted full
backwages inclusive of allowances and other benefits or their monetary equivalent from
the time their actual compensation was withheld from them up to the time of their actual
reinstatement. Considering that private respondent was terminated on July 19, 1991,
she is entitled to full backwages from the time her actual compensation was withheld
from her (which, as a rule, is from the time of her illegal dismissal) up to the finality of
this judgment (instead of reinstatement) considering that reinstatement is no longer
feasible as correctly pointed out by the Court of Appeals on account of the strained
relations brought about by the litigation in this case. Since reinstatement is no longer
viable, she is also entitled to separation pay equivalent to one (1) month salary for every
year of service.

SAN MIGUEL BREWERY SALES V. OPLE 170 SCRA 25

FACTS: In 1979, SMC implemented its Complementary Distribution System
(CDS)whereby wholesalers can directly get beer products from any SMC offices.
The SMB Union assailed this program because it violates the CBA particularly
the established scheme whereby route salesmen have been given specific
territories to sell beer products.
The CDS scheme would then lower the take home pay of the route salesmen.
SMB Union then sued SMC for unfair labor practices.

ISSUE: WON the CDS is a violation of the CBA.

HELD: No. The SC ruled that the CDS is an exercise of management prerogatives
whereby the management can implement schemes to optimize their profit.
Further, the CDS provides for a compensation clause as well for salesmen.
So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or

circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.
San Miguel Corporations offer to compensate the members of its sales force who will
be adversely affected by the implementation of the CDS by paying them a so-called
back adjustment commission to make up for the commissions they might lose as a
result of the CDS proves the companys good faith and lack of intention to bust their
union.

UNION CARBIDE LABOR UNION V. UNION CARBIDE 215 SCRA 554

FACTS: Complainants Agapito Duro, Alfredo Torio, and Rustico Javillonar, were
dismissed from their employment after an application for clearance to terminate them
was approved by the Secretary of Labor on December 19, 1972. Respondent's
application for clearance was premised on "willful violation of Company regulations,
gross insubordination and refusal to submit to a Company investigation . . . ."
Sometime in July 1972, there seems to be a change in the working schedule from
Monday to Friday as contained in the collective bargaining agreement aforecited to
Sunday thru Thursday. The change became effective July 5, 1972. The third shift
employees were required to start the new work schedule from Sunday thru Thursday.
On November 6, 1972, the night shift employees filed a demand to maintain the old
working schedule from Monday thru Friday. The demand was referred to the Labor
Management Relation Committee and discussed from November 15, up to November
24, 1972. In the discussions had, it was arrived at that all night shift operating personnel
were allowed to start their work Monday and on Saturday. This excepted the employees
in the maintenance and preparation crews whose work schedule is presumed to be
maintained from Sunday to Thursday. The work schedule between management
representatives and the alleged officers of the Union (Varias group) was approved and
disseminated to take effect November 26, 1972. (Exh. "2" Respondent).

In manifestation of their dissention to the new work schedule, the three respondents
Duro, Torio, and Javillonar did not report for work on November 26, 1972 which was a
Sunday since it was not a working day according to the provisions of the Collective
Bargaining Agreement. Their absence caused their suspension for fourteen (14) days.
On May 4, 1973, the Arbitrator rendered a decision ordering the reinstatement with back
wages of the complainants. On June 8, 1973, the National Labor Relations Commission
dismissed respondent company's appeal for having been filed out of time. A motion for
reconsideration which was treated as an appeal was then filed by respondent company
before the Secretary of Labor, resulting in the modification of the Arbitrator's decision by
awarding complainants separation pay. A motion for reconsideration subsequently filed
by the petitioner was denied for lack of merit. Hence, this petition.
ISSUE: WON the company can no longer change its working schedule?
HELD: NO. Section 2, Article II of the CBA expressly provides that:
Sec. 2. In the exercise of its functions of management, the COMPANY shall have the
sole and exclusive right and power, among other things, to direct the operations and the
working force of its business in all respects; to be the sole judge in determining the
capacity or fitness of an employee for the position or job to which he has been
assigned; to schedule the hours of work, shifts and work schedules; to require work to
be done in excess of eight hours or Sundays or holidays as the exigencies of the
service may require; to plan, schedule, direct, curtail and control factory operations and
schedules of production; to introduce and install new or improved methods or facilities;
to designate the work and the employees to perform it; to select and hire new
employees; to train new employees and improve the skill and ability of employees from
one job to another or form one shift to another; to classify or reclassify employees; and
to make such changes in the duties of its employees as the COMPANY may see fit or
convenient for the proper conduct of its business.
Verily and wisely, management retained the prerogative, whenever exigencies of the
service so require, to change the working hours of its employees. And as long as such
prerogative is exercised in good faith for the advancement of the employer's interest
and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold such exercise.

CHU V. NLRC 232 SCRA 764

Facts: Petitioner retired from the service of private respondent upon reaching the age of
sixty under its regular retirement program. He was granted an extension of service by
the Board of Directors of private respondent under a "Special Contract of Employment."
The contract provided, inter alia, that its term was for a period of one year commencing
on August 1, 1988; that petitioner was employed as Head of the Warehousing, Sugar,
Shipping and Marine Department; and that he was to receive a basic salary of
P6,941.00 per month.
Private respondent issued Memorandum No. 1012-PS dated December 12, 1988
and Memorandum No. 1028-PS dated January 16, 1989, both providing for a
rotation of the personnel and other organizational changes. Pursuant to the
memoranda, petitioner was transferred to the Sugar Sales Department.
Petitioner protested his transfer and requested a reconsideration thereof, which
was denied. Consequently, on February 27, 1989, petitioner filed a complaint for
illegal dismissal, contending that he was constructively dismissed from his
employment
petitioner contends that there was no valid exercise of management prerogative
because: (1) his transfer violated the "Special Contract of Employment" which
was the law between the parties; and (2) said transfer was unreasonable and
caused inconvenience to him.

Issue: whether or not there was valid exercise of management prerogative.

Held: An owner of a business enterprise is given considerable leeway in managing his
business because it is deemed important to society as a whole that he should succeed.
Our law, therefore, recognizes certain rights as inherent in the management of business
enterprises. These rights are collectively called management prerogatives or acts by
which one directing a business is able to control the variables thereof so as to enhance
the chances of making a profit. "Together, they may be taken as the freedom to
administer the affairs of a business enterprise such that the costs of running it would be
below the expected earnings or receipts. In short, the elbow room in the quest for
profits"
One of the prerogatives of management, and a very important one at that, is the right to
transfer employees in their work station. In Philippine Japan Active Carbon Corporation
v. National Labor Relations Commission, 171 SCRA 164 (1989), we held:
It is the employers prerogative, based on its assessment and perception of its
employees qualifications, aptitudes, and competence to move them around in
the various areas of its business operations in order to ascertain where they will
function with maximum benefit to the company. An employees right to security of
tenure does not give him such a vested right in his position as would deprive the
company of its prerogative to change his assignment or transfer him where he
will be most useful. When his transfer is not unreasonable, nor inconvenient, nor
prejudicial to him, and it does not involve a demotion in rank or a diminution of
his salaries, benefits, and other privileges, the employee may not complain that it
amounts to a constructive dismissal.

INTERPHIL
LABORATIES
EMPLOYEES
LABORATORIES INC 372 SCRA 658 (2001)

UNION-FFW

V.

INTERPHIL

FACTS: Interphil Laboratories Employees Union-FFW is the sole and exclusive

bargaining agent of the rank-and-file employees of respondent Interphil Laboratories
Inc, a company engaged in the business of manufacturing and packaging
pharmaceutical products. They had a CBA effective from August 1, 1990 to July 31,
1993
1. Prior to the expiration of the CBA sometime in February 1993, Salazar, the VP of
the human resources department, was approached by the union officers to
inquire about the stand of the company regarding the duration of the CBA which
was set to expire soon. Salazar informed them that it would be discussed during
the formal negotiations which would start soon
2. Salazar was again approached by the union officers regarding the same issue to
which the former gave the same response. The next day, all rank-and-file
employees refused to follow their regular 2-shift work and left their workplace
without sealing the containers and securing the raw materials they were working
on. When Salazar inquired about the reason for their refusal to follow their
normal work schedule, the employees told him to ask the union officers.
3. Salazar was then informed by the union officers that the employees would only
return to their normal work schedule if the company would agree to their
demands as to the duration and effectivity of the new CBA. Since the union was
apparently unsatisfied with the answer of the management, the overtime boycott

4.
5.
6.

7.

8.
9.

continued. In addition, the employees started to engage in a work slowdown

campaign during the time they were working, thus substantially delaying the
production
Subsequently, the petitioner union submitted its CBA and the company filed its
counter-proposal.
Respondent then filed with NLRC a petition to declare petitioner unions overtime
boycott and work slowdowas illegal strike
In February 1994, DOLE secretary issued an assumption order over the labor
dispute and ordered the respondent company to immediately accept all striking
workers under the same terms and conditions prior to the strike and for the
petitioner union to strictly and immediately company with the return to work
orders issued
Based on the report of the LA, DOLE declared the overtime boycott and work
slowdown as illegal strike and found the petitioner union guilty of unfair labor
practice for violating the existing CBA which prohibits the union or any employee
during the existence of the CBA from staging a strike or engaging in slowdown or
interruption of work
CA affirmed the same
Petitioner alleged that the provisions of their CBA on working hours clearly stated
that the normal working hours were from 7:30 am to 4:30 pm. Bu

ISSUE: WON PETITIONER IS CORRECT IN ALLEGING THAT RESPONDENT

COMPANY VIOLATED THE CBA WHEN IT SCHEDULED THE WORKING HOURS IN
SHIFTING SCHEDULE
HELD: Sec 1 of the CBA states:
A normal workday shall consist of not more than eight (8) hours. The
regular working hours for the Company shall be from 7:30 A.M. to 4:30
P.M. The schedule of shift work shall be maintained; however the
company may change the prevailing work time at its discretion, should
such change be necessary in the operations of the Company. All
employees shall observe such rules as have been laid down by the
company for the purpose of effecting control over working hours.
It is evident from the foregoing provision that the working hours may be changed, at the
discretion of the company, should such change be necessary for its operations, and that
the employees shall observe such rules as have been laid down by the company. It was
established that the employees adhered to the said work schedule since 1988. The
employees are deemed to have waived the eight-hour schedule since they followed,
without any question or complaint, the two-shift schedule while their CBA was still in
force and even prior thereto. The two-shift schedule effectively changed the working
hours stipulated in the CBA. As the employees assented by practice to this
arrangement, they cannot now be heard to claim that the overtime boycott is justified
because they were not obliged to work beyond eight hours.

RURAL BANK OF CANTILAN V. JULVE 517 SCRA 17 (2007)

FACTS: In 1997, Rural Bank of Cantilan, Inc., petitioner, hired respondent as a
management trainee. Later, he was appointed as planning and marketing officer. \
In 2001, William Hotchkiss III (also a petitioner), president of petitioner bank, issued a
memorandum addressed to all its branch managers informing them of the abolition of
the positions of planning and marketing officer and remedial officer; that this was
undertaken in accordance with the banks Personnel Streamlining Program; and that the
operations officer shall absorb the functions of the abolished offices.
On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been
appointed bookkeeper I at the banks branch in Madrid, Surigao del Sur effective
immediately with the same salary corresponding to his old position. Initially, respondent
agreed to accept the appointment, but eventually, he changed his mind and made the
following notation on Hotchkiss memorandum, thus:
I am withdrawing my signature on this appointment because I feel that this is a
demotion (on the position itself and allowances) and not a lateral transfer as what the
President told me yesterday. I believe I do not deserve a demotion.
Thank you.
Hotchkiss appointed respondent as bookkeeper I and assistant branch head of the
Madrid branch. However, he did not report for work.

Hotchkiss directed respondent to explain why he should not be sanctioned for his failure
to assume his new post at the Madrid branch.1awphi1.net
The following day, respondent submitted his written explanation, which partly reads:
I regret to say that I am not accepting the position of Asst. Branch Head of RBCI-Madrid
Branch for the very reason that the papers were not left with me by the Admin. Officer
after she let me read them. Considering that Asst. Branch Head is a newly-created
position, I requested her for a copy of the said papers first so I can thoroughly study
them before making my decision. But she immediately took them back from me after I
told her about this.
Respondent filed a complaint for constructive dismissal against petitioners,
The Labor Arbiter rendered a Decision declaring that respondent was constructively
dismissed and should be reinstated.
On appeal by petitioners, the NLRC, in its Resolution set aside the Labor Arbiters
judgment.
ISSUE: Whether the Court of Appeals erred in holding that respondent was
constructively dismissed from employment.
HELD: YES, CA erred. Respondent was not constructively dismissed. Under the
doctrine of management prerogative, every employer has the inherent right to regulate,
according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, the time, place and manner of work, work
supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and
recall of employees. The only limitations to the exercise of this prerogative are those
imposed by labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also
protects the employers right to expect from its employees not only good performance,
adequate work, and diligence, but also good conduct and loyalty. In fact, the Labor
Code does not excuse employees from complying with valid company policies and
reasonable regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines:
(a) a transfer is a movement from one position to another of equivalent rank, level or
salary without break in the service or a lateral movement from one position to another of
equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign
an employee for legitimate business purposes; (c) a transfer becomes unlawful where it
is motivated by discrimination or bad faith or is effected as a form of punishment or is a
demotion without sufficient cause; (d) the employer must be able to show that the
transfer is not unreasonable, inconvenient, or prejudicial to the employee.

Constructive dismissal is defined as "quitting when continued employment is rendered

impossible, unreasonable, or unlikely as the offer of employment involves a demotion in
rank and diminution of pay."
In light of the above guidelines, we agree with the NLRC in ruling that respondent was
not constructively dismissed from employment. Respondent contends that the abolition
of his position as planning and marketing officer and his appointment as bookkeeper I
and assistant branch head of the Madrid Branch is a demotion. However, a look at the
functions of his new position shows the contrary. The bookkeeper and assistant branch
head is not only charged with preparing financial reports and monthly bank
reconciliations, he is also the head of the Accounting Department of a branch. Under
any standard, these are supervisory and administrative tasks which entail great
responsibility. Moreover, respondents transfer did not decrease his pay.
Nor was respondents transfer motivated by ill-will or prejudice on the part of petitioners.
His position was not the only one abolished pursuant to the banks Personnel
Streamlining Program. We recall that the position of remedial officer was likewise
abolished. Petitioners reason was to acquire savings from the salaries it would pay to
full-time personnel in these positions.
Finally, we note that despite respondents refusal to accept the new appointment,
petitioners did not dismiss him. Rather, it was he who opted to terminate his
employment when he purposely failed to report for work.
SAN MIGUEL CORP V. LAYOC 537 SCRA 77 (2007)
FACTS: Respondents were among the supervisory security guards of the Beer Division
of San Miguel Corp. From the commencement of their employment, the respondents
were required to punch their time cards for purposes of determining the time they would
come in and out of the companys work place. They were also availing the benefits for
overtime, holiday and night premium duty through time card punching
1. However, in the early 1990s, SMC embarked on a decentralization program
aimed at enabling the separate divisions of SMC to pursue a more efficient and
effective management of their respective operations
2. As a result, the Beer Division implemented a no time card policy whereby
Supervisory I and II comprised of the supervising security guards of the Beer
Division no longer required to punch their time cards. Without prior consultation
with the private respondents, the time cards were ordered confiscated and the
latter were no longer allowed to render overtime work
3. In lieu of the overtime pay and premium pay, the personnel of the Beer Division
affected by the no time card policy were given a 10% across the board increase
on their basic pay while the supervisors who were assigned in the night shift
were given night shift allowance ranging from P2,000 to P2,500
4. Respondents, then, filed a complaint for unfair labor practice, violation of Art 100
Labor Code, and violation of the equal protection clause and due process of law
in relation to par 6-8 Art 32 NCC

5. Respondents alleged that SMC maliciously and fraudulently refused payment of

their overtime, holiday and night premium pay because of the new policy.
Moreover, petitioners had no written authority to stop respondents from punching
their time cards because the alleged memorandum authorizing such stoppage
did not include supervisory security guards
6. Petitioners maintained that respondents were supervisory security guards who
were exempt from the provisions of the Labor Code on hours of work, weekly rest
periods and rest days. Petitioners further asserted that the no time card policy
was a valid exercise of management prerogative and that all supervisors in the
Beer Division were covered the said policy, which classification was distinct and
separate from the other divisions within SMC
7. LA held in favor respondents and noted that petitioner SMC failed to show good
faith in the exercise of their management prerogative in altering company
practice because petitioners changed the terms and conditions of employment
from hours of work rendered to result only with respect to respondents and not
with other supervisors in other departments. NLRC affirmed the same
ISSUE: WON the circumstances in the present case constitute and exception to the
rule that supervisory employees are not entitled to overtime pay
HELD: Both petitioners and respondents agree that respondents are supervising
security guards and, thus, managerial employees. The dispute lies on whether
respondents are entitled to render overtime work and receive overtime pay despite the
institution of the "no time card policy" because (1) SMC previously allowed them to
render overtime work and paid them accordingly, and (2) supervising security guards in
other SMC divisions are allowed to render overtime work and receive the corresponding
overtime pay.
Art 82 Labor Code states that the provisions of the Labor Code on working conditions
and rest periods shall not apply to managerial employees. The other provisions in the
Title include normal hours of work (Art 83), hours worked (Arte 84), meal periods (Art
85), night shift differential (Art 86), overtime work (Art 87), under time not offset by
overtime (Art 88), emergency overtime work (Art 89), and computation of additional
compensation (Art 90). It is thus clear that, generally, managerial employees such as
respondents are not entitled to overtime pay for services rendered in excess of eight
hours a day. Respondents failed to show that the circumstances of the present case
constitute an exception to this general rule.
Respondents assert that Art 100 Labor Code prohibits the elimination or diminution of
benefits. However, contrary to the nature of benefits, petitioners did not freely give the
payment for overtime work to respondents. Petitioners paid respondents overtime pay
as compensation for services rendered in addition to the regular work hours.
Respondents rendered overtime work only when their services were needed after their
regular working hours and only upon the instructions of their superiors. Respondents
even differ as to the amount of overtime pay received on account of the difference in the
additional hours of services rendered.

The "no time card policy" affecting all of the supervisory employees of the Beer Division
is a valid exercise of management prerogative. The "no time card policy" undoubtedly
caused pecuniary loss to respondents. However, petitioners granted to respondents and
other supervisory employees a 10% across-the-board increase in pay and night shift
allowance, in addition to their yearly merit increase in basic salary, to cushion the
impact of the loss. So long as a company's management prerogatives are exercised in
good faith for the advancement of the employer's interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.

BISIG NG MANGGAGAWA SA TRYCO V. NLRC 560 SCRA 122

Facts: Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and
its principal office is located in Caloocan City. Petitioners Joselito Lariao, Vivencio
Barte, Saturnino Egera and Simplicio Aya-ay are its regular employees, occupying the
positions of helper, shipment helper and factory workers, respectively, assigned to the
Production Department. They are members of Bisig Manggagawa sa Tryco (BMT), the
exclusive bargaining representative of the rank-and-file employees. Tryco and the
petitioners signed a MOA, providing for a compressed workweek schedule to be
implemented in the company effective May 20, 1996. The MOA was entered into
pursuant to Department of Labor and Employment Department Order (D.O.) No. 21,
Series of 1990, Guidelines on the Implementation of Compressed Workweek. As
provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be
considered as the regular working hours, and no overtime pay shall be due and payable
to the employee for work rendered during those hours. The MOA specifically stated that
the employee waives the right to claim overtime pay for work rendered after 5:00 p.m.
until 6:12 p.m. from Monday to Friday considering that the compressed workweek
schedule is adopted in lieu of the regular workweek schedule which also consists of 46
hours. However, should an employee be permitted or required to work beyond 6:12
p.m., such employee shall be entitled to overtime pay. Tryco informed the Bureau of
Working Conditions of the Department of Labor and Employment of the implementation
of
a
compressed
workweek
in
the
company.

Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of
the Department of Agriculture reminding it that its production should be conducted in
San Rafael, Bulacan, not in Caloocan City.
Accordingly, Tryco issued a Memorandum dated April 7, 1997 which directed petitioner
Aya-ay to report to the company's plant site in Bulacan. When petitioner Aya-ay refused
to obey, Tryco reiterated the order on April 18, 1997. Subsequently, through a
Memorandum dated May 9, 1997, Tryco also directed petitioners Egera, Lariao and
Barte to report to the company's plant site in Bulacan. BMT opposed the transfer of its
members to San Rafael, Bulacan, contending that it constitutes unfair labor practice. In
protest, BMT declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints for illegal dismissal,
underpayment of wages, nonpayment of overtime pay and service incentive leave, and
refusal to bargain against Tryco and its President, Wilfredo C. Rivera. In their Position
Paper, petitioners alleged that the company acted in bad faith during the CBA
negotiations because it sent representatives without authority to bind the company, and
this was the reason why the negotiations failed. They added that the management
transferred petitioners Lariao, Barte, Egera and Aya-ay from Caloocan to San Rafael,
Bulacan to paralyze the union. They prayed for the company to pay them their salaries
from May 26 to 31, 1997, service incentive leave, and overtime pay, and to implement
In their defense, respondents averred that the petitioners were not dismissed but they
refused to comply with the management's directive for them to report to the company's
plant in San Rafael, Bulacan. They denied the allegation that they negotiated in bad
faith, stating that, in fact, they sent the Executive Vice-President and Legal Counsel as
the company's representatives to the CBA negotiations. They claim that the failure to
arrive at an agreement was due to the stubbornness of the union panel.
Respondents further averred that, long before the start of the negotiations, the company
had already been planning to decongest the Caloocan office to comply with the
government policy to shift the concentration of manufacturing activities from the
metropolis to the countryside. The decision to transfer the company's production
activities to San Rafael, Bulacan was precipitated by the letter-reminder of the Bureau
of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit. The Labor
Arbiter held that the transfer of the petitioners would not paralyze or render the union
ineffective for the following reasons: (1) complainants are not members of the
negotiating panel; and (2) the transfer was made pursuant to the directive of the
Department of Agriculture.
The NLRC affirmed the Labor Arbiter's Decision. Petitioners filed a petition
for certiorari with the CA. The CA dismissed the petition for certiorari and ruled that the
transfer order was a management prerogative not amounting to a constructive dismissal
or an unfair labor practice.

Issue: Whether or not the CA erred in affirming the ruling of the Labor Arbiter and the
commission that there was no illegal dismissal of the individual petitioners.
Ruling: We refuse to accept the petitioners' wild and reckless imputation that the
Bureau of Animal Industry conspired with the respondents just to effect the transfer of
the petitioners. There is not an iota of proof to support this outlandish claim. Absent any
evidence, the allegation is not only highly irresponsible but is grossly unfair to the
government agency concerned.
Furthermore, Tryco's decision to transfer its production activities to San Rafael,
Bulacan, regardless of whether it was made pursuant to the letter of the Bureau of
Animal Industry, was within the scope of its inherent right to control and manage its
enterprise effectively. While the law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to
achieve its purpose cannot be denied.
This prerogative extends to the management's right to regulate, according to its own
discretion and judgment, all aspects of employment, including the freedom to transfer
and reassign employees according to the requirements of its business. Management's
prerogative of transferring and reassigning employees from one area of operation to
another in order to meet the requirements of the business is, therefore, generally not
constitutive of constructive dismissal. Thus, the consequent transfer of Tryco's
personnel, assigned to the Production Department was well within the scope of its
management prerogative.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee,
and it does not involve a demotion in rank or diminution of salaries, benefits, and other
privileges, the employee may not complain that it amounts to a constructive
dismissal.[21] However, the employer has the burden of proving that the transfer of an
employee is for valid and legitimate grounds. The employer must show that the transfer
is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges and other benefits.
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or
diminution of salaries, benefits and other privileges of the petitioners. Petitioners,
therefore, anchor their objection solely on the ground that it would cause them great
inconvenience since they are all residents of Metro Manila and they would incur
additional expenses to travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to
warrant a claim of constructive dismissal. Objection to a transfer that is grounded solely
upon the personal inconvenience or hardship that will be caused to the employee by
reason of the transfer is not a valid reason to disobey an order of transfer.

Petitioners, however, went further and argued that the transfer orders amounted to
unfair labor practice because it would paralyze and render the union ineffective. To
begin with, we cannot see how the mere transfer of its members can paralyze the union.
The union was not deprived of the membership of the petitioners whose work
assignments were only transferred to another location.
Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable
as it is contrary to law. The compressed workweek scheme was originally conceived for
establishments wishing to save on energy costs, promote greater work efficiency and
lower the rate of employee absenteeism, among others. Workers favor the scheme
considering that it would mean savings on the increasing cost of transportation fares for
at least one (1) day a week; savings on meal and snack expenses; longer weekends, or
an additional 52 off-days a year, that can be devoted to rest, leisure, family
responsibilities. Moreover, the adoption of a compressed workweek scheme in the
company will help temper any inconvenience that will be caused the petitioners by their
transfer to a farther workplace.

WILTSHIRE FILE CO V. NLRC 193 SCRA 665

FACTS: Private respondent Vicente Ong was the Sales Manager of petitioner from
March 16,1981 up to June 18, 1985.
1. On 13 June 1985, upon private respondent's return from a business and
pleasuretrip abroad, he was informed by the President of petitioner that his
services werebeing terminated.
2. Private respondent maintains that he tried to get an explanation from
management ofhis dismissal but to no avail.
3. When private respondent again tried to speak with the President of petitioner,
thecompany's security guard handed him a letter which formally informed him
that hisservices were being terminated upon the ground of redundancy.
ISSUE: Whether or not private respondent is validly terminated.
HELD: The Court indeed found that petitioner had serious financial difficulties before,
during and after the termination of the services of private respondent. The company
showed a net loss of P4,431,321.00 in its audited financial statements. Moreover,
Wiltshire finally closed its doors and terminated all operations in the Philippines on

January 1987, barely 2 years after the termination of private respondent. The Court
considered that finally shutting down business operations constitutes strong
confirmatory evidence of petitioner's previous financial distress. It is also to be noted
that the letter informing private respondents of the termination of his services used the
word redundant, that letter also referred to the company having incurred financial
losses which in fact has compelled it to resort to retrenchment to prevent further losses.
Thus, what the letter was in effect saying was that because of financial losses,
retrenchment was necessary, which in turn resulted in the redundancy of private
respondent's position. That no other person was holding the same position that private
respondent held prior to the termination of his services, does not show that his position
had not become redundant. Redundancy, for purposes of the Labor Code, exists where
the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. A position is redundant where it is superfluous,
and superfluity of a position or positions maybe the outcome of a number of factors
such as over hiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise.

INTERNATIONAL HARVESTER V. IAC 149 SCRA 641

FACTS: Petitioner, IHMI employed respondent as assistant attorney and was promoted
as Area Credit and Collection Manager. Again, plaintiff was promoted to Staff Assistant
to the Credit and Collection Manager. Finally, respondent was appointed in the
Government Sales Department' of defendant IHMI as Government Relations Officer.
However, IHMI, informed respondent that he was being transferred to the Fleet
Account Sales Department as a Fleet Account Salesman.
Plaintiff was surprised at his sudden demotion and he asked the reason for such
action taken against him by the company.
Management answered plaintiff stating that his position as Government Relations
Officer had become redundant in view of the appointment of the International
Heavy Equipment Corporation as the Company's Dealer with the Government.
Private respondent, filed a complaint for damages for his illegal termination
against petitioner IHMI
ISSUE: Who determines the need for the existence of a department in the
employer corporation and the reduction of personnel therein?

RULING: Article 284 of the Labor Code reads:

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 closing or cessation of operation of the
estabhshment or undertaking unless the closing is for the purpose of
circumventing the provisions of this title, by preserving a written notice on
the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the
installation of labor-saving devices on redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his ond
(l) month pay or to at least one (1) month pay for every year of service,
whichever is higher ...
Well established is the rule that while it is true that to dismiss or lay off an
employee is management's prerogative, it must be done without abuse of
discretion, for what is at stake is not only petitioner's position but also his means of
livelihood
In an evident reiteration of the employer's right and prerogative to manage its affairs, the
Court in a much later case ruled:
An employer has a much wider discretion in terminating the employment
relationship of managerial personnel as compared to rank-and-file
employees. However, such prerogative of management to dismiss or layoff an employee must be made without abuse of discretion, for what is at
stake is not only the private respondent's position but also his means of
livelihood ...
A managerial employee can be suspended or dismissed without prior clearance
from the Secretary of Labor.
Reverting to the case at bar, a searching review of the records fails to show that
petitioner in demoting private respondent and later terminating his services acted
oppressively, unjustly or arbitrarily.
There is no argument against the fact that with the hiring of IHEC, it was no longer
economical to retain the services of private respondent; so much so that despite
the findings of the trial court that on many occasions, petitioner company undertook
direct sales to the Philippine Government despite engagement of the Asia Pacific
Corporation as government dealer, it is not precluded from adopting a new policy
conducive to a more economical and effective management.
Similarly, evidence on record fails to show bad faith on the part of the employer.

MAYA FARMS EMPLOYEES ORG V. NLRC 239 SCRA 508

Last In, First Out [LIFO] rule.
FACTS: This case involves termination due to redundancy.
One of the issues raised was the validity of application of the Last In, First Out
[LIFO] rule embodied in the CBA which states:
Section 2. LIFO RULE. - In all cases of lay-off or retrenchment resulting in
termination of employment in the line of work, the Last-In-First-Out (LIFO)
Rule must always be strictly observed. (Section 2, Article III, CBA).
The petitioners contended that the LIFO rule was violated by management in the
case of two (2) employees, the Asst. Superintendent for packing and Asst.
Superintendent for meat processing, respectively.
The union pointed out that the employee who was retained by management was
employed on a much later date than the other employee, and both were
Assistant Superintendents.
ISSUE:
WON employer violated the LIFO rule
HELD: The employer did not violate said rule.
The Supreme Court declared:
It is not disputed that the LIFO rule applies to termination of
employment in the line of work. Verily, what is contemplated in the LIFO

rule is that when there are two or more employees occupying the same
position in the company affected by the retrenchment program, the last
one employed will necessarily be the first to go.
Moreover, the reason why there was no violation of the LIFO rule was
amply explained by public respondent in this wise:
xxx. The LIFO rule under the CBA is explicit. It is ordained that in
cases of retrenchment resulting in termination of employment in line
of work, the employee who was employed on the latest date must
be the first one to go. The provision speaks of termination in the
line of work. This contemplates a situation where employees
occupying the same position in the company are to be affected by
the retrenchment program. Since there ought to be a reduction in
the number of personnel in such positions, the length of service of
each employee is the determining factor, such that the employee
who has a longer period of employment will be retained.
LIFO rule, exception.
The Supreme Court affirmed the ruling of the NLRC which declared that despite
the LIFO rule, the nature of work and experience were correctly taken into account by
management, thus:
We cannot sustain the unions argument. It is indeed true that Roberta
Cabrera was employed earlier (January 28, 1961) and [sic] Lydia Bandong
(July 9, 1966). However, it is maintained that in the meat processing
department, there were 3 Asst. Superintendents assigned as head of the 3
sections thereat. The reason advanced by the company in retaining
Bandong was that as Asst. Superintendent for meat processing, she could
already take care of the operations of the other sections. The nature of
work of each assistant superintendent as well as experience were taken
into account by management. Such criteria was not shown to be whimsical
nor capricious.

STAR PAPER V. SIMBOL 487 SCRA 228 (2006)

Facts: Petitioner Star Paper Corporation (the company) is a corporation engaged in
trading principally of paper products. Josephine Ongsitco is its Manager of the
Personnel and Administration Department while Sebastian Chua is its Managing
Director.The evidence for the petitioners show that respondents Ronaldo D. Simbol
(Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular
employees of the company.
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also
an employee of the company, whom he married on June 27, 1998. Prior to the
marriage, Ongsitco advised the couple that should they decide to get married, one of
them should resign pursuant to a company policy promulgated in 1995, viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative,
up to [the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another
female) developed a friendly relationship during the course of their employment
and then decided to get married, one of them should resign to preserve the policy
stated above.
Simbol resigned on June 20, 1998 pursuant to the company policy.
Comia was hired by the company on February 5, 1997. She met Howard Comia, a coemployee, whom she married on June 1, 2000. Ongsitco likewise reminded them that

pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company
allegedly could have terminated her services due to immorality but she opted to resign
on December 21, 1999.
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorneys fees. They averred that the aforementioned company
policy is illegal and contravenes Article 136 of the Labor Code.
Issue: whether or not there is a valid management policy in the case at bar.
Held: These courts also find the no-spouse employment policy invalid for failure of the
employer to present any evidence of business necessity other than the general
perception that spouses in the same workplace might adversely affect the business.
They hold that the absence of such a bona fide occupational qualification invalidates
a rule denying employment to one spouse due to the current employment of the other
spouse in the same office.30 Thus, they rule that unless the employer can prove that the
reasonable demands of the business require a distinction based on marital status and
there is no better available or acceptable policy which would better accomplish the
business purpose, an employer may not discriminate against an employee based on the
identity of the employees spouse. This is known as the bona fide occupational
qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employers no-spouse rule, the exception is interpreted strictly and narrowly by these
state courts. There must be a compelling business necessity for which no alternative
exists other than the discriminatory practice. To justify a bona fide occupational
qualification, the employer must prove two factors: (1) that the employment qualification
is reasonably related to the essential operation of the job involved; and, (2) that there is
a factual basis for believing that all or substantially all persons meeting the qualification
would be unable to properly perform the duties of the job.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two (2) or more
of its employees related between the third degree by affinity and/or consanguinity" 38 is
lame. That the second paragraph was meant to give teeth to the first paragraph of the
questioned rule is evidently not the valid reasonable business necessity required by the
law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine

Operator, to Alma Dayrit, then an employee of the Repacking Section, could be

detrimental to its business operations. Neither did petitioners explain how this detriment
will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting
Department, who married Howard Comia, then a helper in the cutter-machine. The
policy is premised on the mere fear that employees married to each other will be less
efficient.

DUNCAN ASSOC OF DETAILMAN-PGWTO AND TECSON V. GLAXO WELLCOME

PHILS G.R. NO 164774 (2006)
FACTS: Petitioner Tecson was hired by respondent Glaxo Wellcome Phils Inc., as
medical representative in October 1995.
1. The Employee Code of Conduct of Glaxo states that an employee employee is
expected to inform management of any existing or future relationship by
consanguinity or affinity with co-employees or employees of competing drug
companies. If management perceives a conflict of interest or a potential conflict
between such relationship and the employees employment with the company,
the management and the employee will explore the possibility of a "transfer to
another department in a non-counterchecking position" or preparation for
employment outside the company after six months.
2. Subsequently, Tecson entered into romantic relationship with Bettsy, an
employee of Astra Pharmaceuticals, a competitor of Glaxo. Bettsy was Astras
branch manager in Albay
3. Even before they got married, Tecson received several reminders from his
district manager regarding the conflict of interest his relationship with Bettsy
might engender. Still, Tecson married Bettsy in September 1998
4. Eventually, Tecsons superiors informed him that he and Bettsy should decide
which one of them should resign from their jobs to comply with the company
policy. Tecson requested for time to comply with the company policy.
5. In November 1999, Glaxo transferred Tecson to a different area. Tecson sough
reconsideration for his transfer and brought the matter to Glaxos grievance

committee but the latter denied his request. Tecson defied the transfer order and
continued acting as medical representative in the Camarines Sur sales area
6. Petitioner alleged that Glaxos policy against employees marrying employees of
competitor companies violates the equal protection clause of the Constitution
because it creates invalid distinctions among employees on account only of
marriage
7. Glaxo contended that the company policy prohibiting its employees from having
relationship with and/or marrying an employee of a competitor company is a valid
exercise of its management prerogatives and does not violate the equal
protection clause; and that Tecsons reassignment from the Camarines NorteCamarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur
sales area does not amount to constructive dismissal
8. Glaxo insists that as a company engaged in the promotion and sale of
pharmaceutical products, it has a genuine interest in ensuring that its employees
avoid any activity, relationship or interest that may conflict with their
responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their
actions and decisions and consequently deprive Glaxo of legitimate profits. The
policy is also aimed at preventing a competitor company from gaining access to
its secrets, procedures and policies.
ISSUES: WON GLAXOS POLICY AGAINST ITS EMPLOYEES MARRYING
EMPLOYEES FROM COMPETITOR COMPANIES IS VALID; WON TECSON WAS
COSNTRUCTIVELY DISMISSED
HELD: Yes, Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information from competitors,
especially so that it and Astra are rival companies in the highly competitive
pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxos employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. In laying
down the assailed company policy, Glaxo only aims to protect its interests against the
possibility that a competitor company will gain access to its secrets and procedures. It is
clear that Glaxo does not impose an absolute prohibition against relationships between
its employees and those of competitor companies. Its employees are free to cultivate
relationships with and marry persons of their own choosing. What the company merely
seeks to avoid is a conflict of interest between the employee and the company that may
arise out of such relationships.
No less than the Constitution recognizes the right of enterprises to adopt and enforce
such a policy to protect its right to reasonable returns on investments and to expansion
and growth. Indeed, while our laws endeavor to give life to the constitutional policy on
social justice and the protection of labor, it does not mean that every labor dispute will

be decided in favor of the workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the interest of fair play.
The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the
commands of the equal protection clause are addressed only to the state or those
acting under color of its authority. The only exception occurs when the state in any of its
manifestations or actions has been found to have become entwined or involved in the
wrongful private conduct. However, the exception is not present in this case.
Significantly, the company actually enforced the policy after repeated requests to the
employee to comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.
It is likewise erroneous to conclude that Tecson was constructively dismissed when he
was transferred to Butuan City sales area. Constructive dismissal is defined as a
quitting, an involuntary resignation resorted to when continued employment becomes
impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in
pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee. None of these conditions are present in the instant case.
The record does not show that Tescon was demoted or unduly discriminated upon by
reason of such transfer.
OLLENDORF V. ABRAHAMSON 38 PHIL 585 (1918)
FACTS: Plaintiff Ollendorf is engaged in the business of manufacturing ladies
embroidered underwear for export in the Philippines. He imports the material from
which is underwear is made and adopts decorative designs which are embroidered
upon it by Filipino needle workers from patterns selected and supplied by him. Most of
the embroiderers employed by plaintiff are under contract to work for plaintiff
exclusively.
1. In 1915, plaintiff and defendant Abrahamson entered into a contract of
employment. One of the provisions in the same stipulated that the defendant may
not enter or engage himself directly or indirectly, nor permit any other person
under his control to enter or engage in similar or competitive business to that of
Ollendorf within the Philippines for 5 years from the execution of the contract
2. While in Ollendorfs establishment, Abrahamson had the opportunity to acquaint
himself with the plaintiffs method of business and business connection. But in
1916, defendant Abrahamson left Olldendorfs company due to ill health and
went back to the US
3. Thereafter, Abrahamson returned to Manila as the manager of the Philippine
Underwear Company. This corporation does not maintain a factory in the
Philippines but sends material and embroidery designs from New York to its local
representative in the Philippines who employs Filipino needle workers to
embroider the designs and garments in their homes.
4. The only difference between the plaintiffs business and defendants company is
the method of doing the finishing workthe manufacture of the embroidered

material into finished garments. Defendant admits that both firms produce the
same class of goods and that they are exported into the same market. It also
appears that defendant has employed in his firm some of the same workers
employed by Ollendorf.
5. Plaintiff filed a complaint praying for preliminary injunction to enjoin the defendant
from engaging in a similar or competitive business to that of the plaintiff. The trial
court held in favor of the plaintiff
ISSUE: WON defendant Abrahamson violated the non-complete clause of the contract
he entered into with plaintiff Ollfendorf
HELD: The business in which defendant is engaged is not only very similar to that of
plaintiff, but that it is conducted in open competition with that business within the
meaning of the contract in question. Defendant himself expressly admitted, on crossexamination, that the firm by which he is now employed puts out the same class of
foods as that which plaintiff is engaged in producing. When two concerns operate in the
same field, produce the same class of goods and dispose them in the same market,
their businesses are of necessity competitive. Defendant having engaged in the
Philippine Islands in a business directly competitive with that of plaintiff, within five years
from the date of his contract of employment by plaintiff, under the terms of which he
expressly agreed that he would refrain from doing that very thing. As such, his conduct
constitutes a breach of that agreement.
RED LINE TRANSPORTATION CO V. BACHRACH MOTOR CO 67 PHIL 77
Facts: This is an injunction suit brought by the plaintiff, Red Line Transportation Co.,
Inc., against the defendants, Bachrach Motor Company, Inc., and Rural Transit
Company, Inc., in the Court of First Instance of Manila to restrain the said defendants,
"their managers, inspectors, chauffeurs, conductors and all other persons acting for said
defendants, from operating a transportation service by means of auto-trucks or
autobuses for the transportation of passengers and express between Ilagan and
Tuguegarao" and for the consequent "accounting of all sums of money received from
the passengers or shippers of cargo for transportation between Ilagan and Tuguegarao
since the 16th of March, 1931," and payment to the plaintiff of "the total of all amounts
so received, together with the costs of this case."

The contract (Exhibit A) allegedly violated by the defendants is here reproduced:

MUTUAL DEED OF SALE
Know all men by these presents:
That the Rural Transit Company, a corporation duly organized and existing in
accordance with the laws of the Philippine Islands, and having its principal place of
business in the City of Manila, Philippine Islands, hereinafter called party of the FIRST
PART; and ALFREDO ZURAEK individually and as attorney-in-fact for ALBERTO

ZURAEK with whom he is engaged in a partnership business for the transportation

service under the name of INTERPROVINCIAL TRANSPORTATION COMPANY, of
legal age, married and resident of the Municipality of Bayombong, Province of Nueva
Vizcaya, hereinafter called parties of the SECOND PART,
WITNESSETH:
That, for and in consideration of the sum of fifteen thousand pesos (P15,000), Philippine
Currency, to them in hand paid by the party of the FIRST PART and receipt of which is
hereby acknowledged, the parties of the SECOND PART have sold, transferred,
conveyed and assigned, and by these presents do sell, transfer, convey and assign
unto the party of the FIRST PART, all their rights and interests and participations in the
Certificates of Public Convenience that have been granted by the Public Service
Commission in their names or in the name of the INTERPROVINCIAL
TRANSPORTATION COMPANY, and those pending trial or decision and reconsidered
in Expedientes Nos. 6111, 6152, 8573, 10025, 11886, 13959, 16300, 19939 and 21503,
as well as all other cases to which they have a right, interest or participation, pending or
decided, and covering all the routes from the Municipality of Ilagan, Province of Isabela,
to any other point South of the said municipality. The parties of the SECOND PART do
hereby also sell, transfer and convey unto the party of the FIRST PART, its one
Chevrolet auto-truck. That, for and in consideration of the sum of one peso (P1),
Philippine Currency, as well as other valuable considerations and receipt of which is
hereby acknowledged, the party of the FIRST PART has sold, transferred, conveyed
and assigned, and by these presents does hereby sell, transfer, convey and assign,
unto the parties of the SECOND PART, all its rights, interests and participations in its
Certificates of Public Convenience which may have been decided by the Public Service
Commission, in Expediente No. 10836, covering the route from the Municipality of
Ilagan, Province of Isabela, to any point North of the said Municipality, as well as all
pending applications covering the said route; and does hereby also sell and assign unto
the said parties of the SECOND PART its one Durant auto-truck.
The party of the FIRST PART, its successors, or assigns, hereby agrees that it will not
directly or indirectly operate, nor file an application in the Public Service Commission, to
operate in any of the territory covered by the routes of the parties of the SECOND
PART that may be north of the said Municipality of Ilagan, Province of Isabela, and
neither will it purchase, directly or indirectly any Certificate of Public Convenience of any
operator who may have a route in the said territory. The parties of the SECOND PART,
their heirs, successors or assigns, in turn, hereby agree that they will not directly or
indirectly operate nor file an application in the Public Service Commission, to operate in
the territory, covered by the routes of the party of the FIRST PART that may be South of
the Municipality of Ilagan, Province of Isabela, and neither will they purchase, directly or
indirectly, any right to any Certificate of Public Convenience of any operator who may
have a route in the said territory. That it is also expressly agreed that the parties of the
SECOND PART hereby bind themselves to refund the sum of fifteen thousand pesos
(P15,000), Philippines Currency, to the party of the FIRST PART, in case of violation of
the above-mentioned provisions and whatever expenses and damages which the party

of the FIRST PART may suffer by reason of the said violation. The party of the FIRST
PART in turn will pay the parties of the SECOND PART any and all damages which the
latter may suffer if the former will not live up to the provisions of this contract. It is also
agreed to make their operations from the Municipality of San Jose, Province of Nueva
Ecija, to any point north of the same, up to and including the 5th day of February, 1930,
and that after the said date, the party of the FIRST PART will assume the responsibility
of employing eleven (11) employees of the parties of the SECOND PART whose total
daily salaries is around P20.25.
The parties hereby also agree that they will request the dismissal of each and every
complaint that may have been filed by either of them against the other in the Public
Service Commission, and in case the Commission refuses to dismiss the case, the fine
or penalty to be imposed be borne by the respondent in the corresponding case.
The mutual deed of sale in this Exhibit A was approved by the Public Service
Commission on January 24, 1930 (Case No. 22053, Exhibit B), in the following
language:
There appearing, upon the examination of the application herein filed and of the Deed of
Sale attached hereto, no reason why the above sale shall not be approved, and it being
apparent that with the proposed sale and exchange of certificates, the public could be
better served, the Commission thus hereby approve the said sale effective February 5,
1930, without prejudice to considering any protest that may be filed against same.
How the plaintiff and the defendant succeeded to the rights, interests and properties of
the Zuraeks operating under the name and style of Interprovincial Transportation Co.,
and the Rural Transit Company, respectively, is amply indicated in the bill of exceptions
and well narrated in the briefs filed by the parties. It appears that all the rights and
properties as public service operator of the Zuraeks, including those acquired by them
under Exhibit A, passed to the plaintiff Red Line Transportation Co., Inc., by virtue of a
deed of "Sale and Transfer of Public Utility Rights" and approved by the Public Service
Commission on September 15, 1930. The defendant Bachrach Motor Company, Inc., in
turn, acquired all the assets and certificates of public convenience of the Rural Transit
Company, Inc., at a sheriff's sale resulting from the foreclosure of its chattel mortgage
on all the properties of said Rural Transit Company, Inc.
These two cases have been brought on review from the Public Service Commission in
an endeavor to secure the revocation of the order of the commission of September 8,
1932. However, our knowledge of the record leads us to conclude that there is a
sufficient basis to sustain the order above-mentioned.
In the first place, the respondents contend that their purpose in asking for the issuance
of the order was simply to correct an involuntary error, and this argument is at least
plausible. In the second place, while the procedure was irregular, nevertheless the
petitioner was furnished with a copy of the order and thereafter was afforded an
opportunity to present its protest. In the third place, we are given to understand that the
respondents have been operating on the lines in question for a number of years, and

that this is only one of various unsuccessful attempts by the petitioner to keep the
respondents out of this territory. In the fourth place, the mortgage executed by the Rural
Transit Company in favor of the Bachrach Motor Co., Inc., included all of the right, title,
and interest of the Rural Transit Company in the business of auto-trucks and
automobiles actually existing or that in the future might exist, and there is some
authority for the proposition that a chattel mortgage is valid even as to future properties
if their existence can definitely be proven (5 R. C. L., pp. 403, 404), and Medina's
certificate of public convenience became a part of the assets of the Rural Transit
Company before the auction sale. Lastly, and most important of all, even if we should
set aside the order which is challenged, we do not see how it would favorably affect the
petitioner for all the respondents would have to do would be to retrace their steps then
moving forward again and securing the necessary confirmation of the transfer of
Medina's certificate of public convenience to them.
The sole error assigned will accordingly be overruled and the order brought here on
review confirmed, the costs of this instance to be paid by the appellant.
The Red Line Transportation Co., Inc., by the present action, now seeks to enjoin the
operation by the defendants of a transportation service under the questioned certificate
upon the ground that the said operation being north of the municipality of Ilagan,
Province of Isabela, is in violation of the terms of the deed of mutual sale originally
entered into by the respective predecessors in interest of the plaintiff and the
defendants. The defendants and registered a general denial answer and, for special
defenses, alleged (1) that the Bachrach Motor Company, Inc., by the sheriff's sale, has
taken over all the assets and certificates of public convenience of the Rural Transit
Company, Inc., including the Medina certificate authorizing the operation of a
transportation service on the Ilagan-Tuguegarao line, which acquisition was duly
approved by the Public Service Commission, and (2) that the right of the Bachrach
Motor Co., Inc., to operate the said line is res judicata, having been confirmed not only
by the Public Service Commission but also by this court. Upon such issues the Court of
First Instance, after trial, rendered a decision for the plaintiff, concluding with the
following judgment:
Wherefore, defendants in this case Bachrach Motor Co., Inc., and the Rural Transit Co.,
are hereby enjoined, together with their managers, inspectors, chauffeurs, conductors
and agents from operating a transportation service by means of auto-trucks or autobuses for the transportation of passengers and freight between Ilagan and Tuguegarao
under and by virtue of the said Medina's certificate. The defendants herein are further
ordered to make an accounting of the money collected by them for the operation of said
transportation service between said Ilagan and Tuguegarao route, above referred to,
from the 16th of March 1931, and to pay the costs of this action.
The case is before this court on appeal by the defendants from the aforesaid decision
and judgment.

Issue: Whether or not the mutual deed of sale, Exhibit A, particularly its so-called

negative agreement reading "The party of the first part (Rural Transit Company), its
successors, or assigns, hereby agrees that it will not directly or indirectly operate, nor
file an application in the Public Service Commission, to operate in any of the territory
covered by the routes of the parties of the second part (Alfredo Zuraek and Alberto
Zuraek operating under the name and style of Interprovincial Transportation Company)
that may be north of the said municipality of Ilagan, Province of Isabela, and neither will
it purchase, directly or indirectly any certificate of Public Convenience of any operator
who may have a route in the said territory", is valid. The defendants-appellants in their
various assigned errors argue for the negative of this proposition, and against the theory
adopted by the trial court. The appellee, Red Line Transportation Co., Inc., supports the
affirmative of the proposition and offers a vigorous replica to the contention of the
appellants.
Ruling: While it must be admitted that the negative agreement contained in Exhibit A is
the root of the present controversy, we are of the opinion that the present appeal may
and should properly be disposed of by determining the authority of the lower court upon
the facts and under the law to issue the writ of injunction against the defendantsappellants in this case, without overlooking the character of the stipulation upon which
the lower court based its decision in the injunction suit.

Without repeating the history of the acquisition by the parties herein of the respective
rights, interests and properties of their predecessors in interest, it should be observed
that finally a certificate of public convenience was issued by the Public Service
Commission in favor of Bachrach Motor Company, Inc. to established and maintain a
transportation service by means of auto-trucks from Solano, Nueva Vizcaya, to
Tuguegarao, Cagayan. This was on September 8, 1932. Reconsideration of the action
taken by the commission on the ground that the authority was in violation of the
negative agreement contained in the second paragraph of the original contract Exhibit A
was presented but was denied. The Red Line Transportation Co., Inc., the plaintiffappellee here, presented petitions for review in this court to revoke the order of the
commission, but we confirmed the order of the commission and this is why Bachrach
Motor Company, Inc., is now operating between Solano, Nueva Vizcaya, and
Tuguegarao, Cagayan. Under these circumstances, we are of the opinion that the Court
of First Instance of Manila is without authority to enjoin the operation of the appellants.
Primarily, the Public Service Commission is the entity invested with authority to
authorize the operation of public services and issue certificates of public convenience
therefor. The determination of that question cannot be reviewed by a Court of First
Instance, especially where, as in this case, this court had affirmed the order of the
Public Service Commission upon a proper petition for review. To permit the Court of
First Instance to enjoin the operator here is to restrain the operator from doing what the
Public Service Commission and this court have authorized to be done. While the
injunction here is against the operator, the result is the same, for what cannot be done
directly cannot be done by indirection. There is no showing here that the appellants
were operating in violation of the conditions of their certificate of public convenience.

If the injunction is, as held by the lower court, to be justified on the ground that the
operation by the appellants is in violation of the negative agreement contained in the
contract Exhibit A, it should be observed that the contract was entered into between
Rural Transit Company, Inc., predecessor in interest of Bachrach Motor Company, Inc.,
and the Zuraeks; that negative agreement does not appear to have been expressly
sanctioned by the Public Service Commission; and finally, notwithstanding the negative
agreement, the operation by the appellants appears to have been authorized, as
already stated, by the Public Service Commission and, on appeal, the action taken by
the commission was affirmed by this court. Upon the other hand, we do not
countenance with favor the agreement sought to be enforced in so far as its effect is to
deprive the Public Service Commission of its power to fix routes and schedules of public
utilities independently of contractual stipulations by and between public operators.
The law concerning contracts which tend to restrain business or trade has gone through
a long series of changes from time to time with the changing condition of trade and
commerce. But regardless of limitations as to time and place spoken of in various
decisions as proper test for validity of contracts of this nature, and whatever may have
been the development of the rule, it is settled that public welfare or public interest is the
primordial consideration. The test of validity is whether under the particular
circumstances of the case and considering the nature of the particular contract involved,
public interest and welfare are not involved and the restraint is not only reasonably
necessary for the protection of the contracting parties but will not affect public interest or
service. The agreement here sought to be enforced is virtually a division of territory
between two operators: the Rural Transit Company, Inc., to operate on territory south of
the municipality of Ilagan, Province of Isabela, and biding itself not to operate in any of
the territory covered by the routes of the Interprovincial Transportation Company; and
the latter company to operate north of the same municipality and province, and
imposing upon itself a similar obligation not to operate in any territory covered by the
routes of the Rural Transit Company, Inc. It is true that the agreement does not bind
other persons than the parties to the agreement, but if the contract is to be sustained,
then the control over them by the Public Service Commission is pro tanto impaired even
to the detriment of public convenience and interest. It should be observed that public
service companies are more strictly limited than others in entering into contracts in
restraint of the free flow of trade, commerce and communication because of their duty to
give equal service to the public. They can make no contracts inimical to that duty. As a
general proposition, all contracts and agreements, of every kind and character, made
and entered into by those engaged in an employment or business impressed with a
public character, which tend to prevent competition between those engaged in like
employment, are opposed to the public policy and are therefore unlawful. All
agreements and contracts tending to create monopolies and prevent proper competition
are by the common law illegal and void.
Judgment of the lower court is hereby reversed with costs against the appellee.

AVON COSMETICS V. LETICIA LUNA G.R. NO 153674 (2006)

FACTS: Respondent Luna has been working for Beautifont, Inc. since1972, which later
became Avon Cosmetics, Inc. (Avon). By virtue of the execution of the aforequoted
Supervisors Agreement, respondent Luna became part of the independent sales force
of petitioner Avon.
Sometime in the latter part of 1988, respondent Luna was invited by a
former Avon employee who was then currently a Sales Manager of Sandr Philippines,
Inc., a domestic corporation engaged in direct selling of vitamins and other food
supplements, to sell said products. Respondent Luna apparently accepted the invitation
as she then became a Group Franchise Director of Sandr Philippines, Inc. concurrently
with being a Group Supervisor of petitioner Avon. As Group Franchise Director,
respondent Luna began selling and/or promoting Sandr products to
other Avon employees and friends.
In a letter, petitioner Avon notified respondent Luna of the termination or cancellation of
her Supervisors Agreement with petitioner Avon. Aggrieved, respondent Luna filed a
complaint for damages before the RTC. RTC rendered judgment in favor of respondent
Luna.
Issue: WON THE CA COMMITTED SERIOUS ERROR IN DECLARING THAT THE
SUPERVISORS S AGREEMENTEXECUTED BETWEEN AVON AND RESPONDENT
LUNA ASNULL AND VOID FOR BEING AGAINST PUBLIC POLICY?
Held:

At the crux of the issue is the validity of paragraph 5 of the Supervisors Agreement, viz:
The Company and the Supervisor mutually agree: xxx 5) That the Supervisor shall sell
or offer to sell, display or promote only and exclusively products sold by the Company.
In business parlance, this is commonly termed as the "exclusivity clause." This is
defined as agreements which prohibit the obligor from engaging in "business" in
competition with the obligee. This exclusivity clause is more often the subject of critical
scrutiny when it is perceived to collide with the Constitutional proscription against
"reasonable restraint of trade or occupation." The pertinent provision of the Constitution
is quoted hereunder. Section 19 of Article XII of the 1987Constitution is relevant.
First off, restraint of trade or occupation embraces acts, contracts, agreements or
combinations which restrict competition or obstruct due course of trade. From the
wordings of the Constitution, truly then, what is brought about to lay the test on whether
a given agreement constitutes an unlawful machination or combination in restraint of
trade is whether under the particular circumstances of the case and the nature of the
particular contract involved, such contract is, or is not, against public interest.
Thus, restrictions upon trade may be upheld when not contrary to public welfare and not
greater than is necessary to afford a fair and reasonable protection to the party in
whose favor it is imposed. Even contracts which prohibit an employee from engaging in
business in competition with the employer are not necessarily void for being in restraint
of trade.
In sum, contracts requiring exclusivity are not per se void. Each contract must be
viewed vis--vis all the circumstances surrounding such agreement in deciding whether
a restrictive practice should be prohibited as imposing an unreasonable restraint on
competition.
The question that now crops up is this, when is a restraint intrade unreasonable?
Authorities are one in declaring that arestraint in trade is unreasonable when it is
contrary to publicpolicy or public welfare. Plainly put, public policy is that principleof the
law which holds that no subject or citizen can lawfully dothat which has a tendency to be
injurious to the public or againstthe public good. As applied to contracts, in the absence
of express legislation or constitutional prohibition, a court, in order to declare a contract
void as against public policy, must find thatthe contract as to the consideration or thing
to be done, has atendency to injure the public, is against the public good,
or contravenes some established interests of society, or isinconsistent with sound policy
and good morals, or tends clearlyto undermine the security of individual rights, whether
of personal liability or of private property.
From another perspective, the main objection to exclusivedealing is its tendency to
foreclose existing competitors or newentrants from competition in the covered portion of
the relevantmarket during the term of the agreement. Only thosearrangements whose
probable effect is to foreclose competitionin a substantial share of the line of commerce
affected can beconsidered as void for being against public policy. Theforeclosure effect,
if any, depends on the market share involved.The relevant market for this purpose

includes the full range of selling opportunities reasonably open to rivals, namely, all
theproduct and geographic sales they may readily compete for,using easily convertible
plants and marketing organizations.
Applying the preceding principles to the case at bar, there isnothing invalid or contrary
to public policy either in theobjectives sought to be attained by paragraph 5, i.e.,
theexclusivity clause, in prohibiting respondent Luna, and all other Avon supervisors,
from selling products other than thosemanufactured by petitioner Avon. We quote with
approval thedetermination of the U.S. Supreme Court in the case of Board of Trade of
Chicago v. U.S. that "the question to be determined iswhether the restraint imposed is
such as merely regulates and
perhaps thereby promotes competition, or whether it is such asmay suppress or even
destroy competition."
Such prohibition is neither directed to eliminate the competitionlike Sandr Phils., Inc.
nor foreclose new entrants to the market.In its Memorandum, it admits that the reason
for such exclusionis to safeguard the network that it has cultivated through theyears.
Admittedly, both companies employ the direct sellingmethod in order to peddle their
products. By direct selling,petitioner Avon and Sandre, the manufacturer, forego the use
of a middleman in selling their products, thus, controlling the priceby which they are to
be sold. The limitation does not affect thepublic at all. It is only a means by which
petitioner Avon is ableto protect its investment.
It was not by chance that Sandr Philippines, Inc. maderespondent Luna one of its
Group Franchise Directors. It doesnttake a genius to realize that by making her an
important part of its distribution arm, Sandr Philippines, Inc., a newly formeddirectselling business, would be saving time, effort and moneyas it will no longer have to
recruit, train and motivate supervisorsand dealers. Respondent Luna, who learned the
tricks of thetrade from petitioner Avon, will do it for them. This is tantamountto unjust
enrichment. Worse, the goodwill established bypetitioner Avon among its loyal
customers will be takenadvantaged of by Sandre Philippines, Inc. It is not so hard
toimagine the scenario wherein the sale of Sandr products byAvon dealers will
engender a belief in the minds of loyal Avoncustomers that the product that they are
buying had beenmanufactured by Avon. In other words, they will be misled intothinking
that the Sandr products are in fact Avon products.From the foregoing, it cannot be said
that the purpose of thesubject exclusivity clause is to foreclose the competition, that
is,the entrance of Sandr products in to the market. Therefore, itcannot be considered
void for being against public policy. Howcan the protection of one
s property be violative of publicpolicy? Sandr Philippines, Inc. is still very much free
todistribute its products in the market but it must do so at its ownexpense. The
exclusivity clause does not in any way limit itsselling opportunities, just the undue use of
the resources of petitioner Avon.
It has been argued that the Supervisors Agreement is in thenature of a contract of
adhesion; but just because it is does notnecessarily mean that it is void. A contract of

adhesion is so-called because its terms are prepared by only one party whilethe other
party merely affixes his signature signifying hisadhesion thereto. Such contract is just as
binding as ordinarycontracts. "It is true that we have, on occasion, struck downsuch
contracts as void when the weaker party is imposed uponin dealing with the dominant
bargaining party and is reduced tothe alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing. Nevertheless,contracts of
adhesion are not invalid per se and they are notentirely prohibited. The one who
adheres to the contract is inreality free to reject it entirely, if he adheres, he gives
hisconsent." In the case at bar, there was no indication thatrespondent Luna was forced
to sign the subject agreement.Being of age, financially stable and with vast
businessexperience, she is presumed to have acted with due care and tohave signed
the assailed contract with full knowledge of itsimport. Under the premises, it would be
difficult to assume thatshe was morally abused. She was free to reject the agreement
if she wanted to.

ST. LUKES MEDICAL CENTER EMPLOYEES UNION AFW VS. NLRC

FACTS: Petitioner was hired as X-Ray Technician of St. Lukes Medical Center.
April 1992, Congress passed Republic Act No. 7431 known as the
Radiologic Technology Act of 1992. Said law requires that no person
shall practice or offer to practice as a radiology and/or x-ray technologist in
the Philippines without having obtained the proper certificate of registration
from the Board of Radiologic Technology.
Failure
to
pass
the
examination,
the
Director
of
the Institute of Radiology issued a notice to petitioner informing that the
SLMC has approved her retirement in lieu of separation pay.
Petitioner filed a complaint against respondent SLMC for illegal dismissal.

ISSUE: WON petitioner Santos was illegally dismissed by private respondent

SLMC on the basis of her inability to secure a certificate of registration from the
Board of Radiologic Technology

RULING: The requirement for a certificate of registration is set forth under R.A. No.
7431 thus:
Sec. 15. Requirement for the Practice of Radiologic Technology and
X-ray Technology. Unless exempt from the examinations under

Sections 16 and 17 hereof, no person shall practice or offer to practice as a

radiologic and/or x-ray technologist in the Philippines without having
obtained the proper certificate of registration from the Board.

It is significant to note that petitioners expressly concede that the sole cause for
petitioner Santos separation from work is her failure to pass the board licensure
exam for X-ray technicians, a precondition for obtaining the certificate of
registration from the Board. It is argued, though, that petitioner Santos failure to
comply with the certification requirement did not constitute just cause for termination as
it violated her constitutional right to security of tenure. This contention is untenable.

The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of
the States inherent police power. The state is justified in prescribing the specific
requirements for x-ray technicians and/or any other professions connected with
the health and safety of its citizens. Respondent-appellee being engaged in the
hospital and health care business, is a proper subject of the cited law; thus,
having in mind the legal requirements of these laws, the latter cannot close its
eyes and [let] complainant-appellants private interest override public interest.
Indeed, complainant-appellant cannot insist on her sterling work performance without
any derogatory record to make her qualify as an x-ray technician in the absence of a
proper certificate of Registration from the Board of Radiologic Technology which can
only be obtained by passing the required examination. The law is clear that the
Certificate of Registration cannot be substituted by any other requirement to
allow a person to practice as a Radiologic Technologist and/or X-ray
Technologist (Technician).
No malice or ill-will can be imputed upon private respondent as the separation of
petitioner Santos was undertaken by it conformably to an existing statute. It is
undeniable that her continued employment without the required Board
certification exposed the hospital to possible sanctions and even to a revocation
of its license to operate.

PT&T V. LAPLANA 199 SCRA 485 (1991)

FACTS: The employee was a cashier at the Baguio City Branch of PT&T who was
directed to transfer to the companys branch office at Laoag City.
In refusing the transfer, the employee averred that she had established Baguio
City as her permanent residence and that such transfer will involve additional
expenses on her part, plus the fact that an assignment to a far place will be a big
sacrifice for her as she will be kept away from her family which might adversely
affect her efficiency.
ISUUE: WON an employee could not validly refuse the lawful transfer orders on the
ground of parental obligations, additional expenses, and the anguish he would suffer if
assigned away from his family.
HELD: In ruling for the employer, the Supreme Court held that the transfer from one
city to another within the country is valid as long as there is no bad faith on the part of
the employer. It said: Certainly the Court cannot accept the proposition that when an
employee opposes his employers decision to transfer him to another workplace, there
being no bad faith or underhanded motives on the part of either party, it is the
employees wishes that should be made to prevail.

PLDT V. PAGUIO 472 SCRA 453 (2005)

Facts: Petitioner Philippine Long Distance Telephone Company, Inc. (PLDT) has 27
Exchanges in its Greater Metro Manila (GMM) Network. Alfredo S. Paguio was the
Head of the Garnet Exchange. In 1994, PLDT assessed the performance of the 27
Exchanges comprising the GMM Network. Upon receipt of the ratings, Paguio sent
Rodolfo Santos, his immediate supervisor and the Assistant Vice-President of the GMM
East Center, a letter criticizing the PLDT criteria for performance rating as unfair
because they depended on manpower.
On January 17, 1997, Paguio was reassigned as Head for Special Assignment at the
Office of the GMM East Center and asked to turn over his functions as Garnet
Exchange Head to Tessie Go. Believing that his transfer was a disciplinary action,
Paguio requested Ferido for a formal hearing of the charges against him and asked that
his reassignment be deferred. He also filed a complaint against Santos for grave abuse
of authority and manipulation of the East Center performance but no action was taken.
Aggrieved, Paguio filed, before the Regional Arbitration Branch of the National Labor
Relations Commission (NLRC), a complaint for illegal dismissal with prayer for
reinstatement and damages. He later amended his complaint to illegal demotion with
prayer for reversion to old position, damages and attorneys fees.
Issue: whether or not there is illegal demotion.
Held: Jurisprudence abounds that, except as limited by special laws, an employer is
free to regulate, according to his own discretion and judgment, all aspects of
employment, including the transfer of employees.It is the employers prerogative, based
on its assessment and perception of its employees qualifications, aptitudes, and
competence, to deploy its employees in the various areas of its business operations in
order to ascertain where they will function with maximum benefit to the company. An
employees right to security of tenure does not give him such a vested right in his

position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful.
Nonetheless, as correctly pointed out by the Court of Appeals, there are limits to the
management prerogative. While it may be conceded that management is in the best
position to know its operational needs, the exercise of management prerogative cannot
be utilized to circumvent the law and public policy on labor and social justice. That
prerogative accorded management should not defeat the very purpose for which our
labor laws exist: to balance the conflicting interests of labor and management. By its
very nature, management prerogative must be exercised always with the principles of
fair play and justice. In particular, the employer must be able to show that the transfer is
not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges and other benefits.
The employer bears the burden of proving that the transfer of the employee has
complied with the foregoing test.
In the present case, we see no credible reason for Paguios transfer except his
criticisms of the companys performance evaluation methods. Based on the undisputed
facts, Garnet Exchange was doing well and excelled in the performance rating. In the
same way, Paguios performance was consistently rated as outstanding. There was
also no proof that Paguio refused to comply with any management policy. Patently, his
transfer could not be due to poor performance. Neither was it because he was needed
in the new post for the new assignment was functionless and it was nothing but a title.
Paguios transfer could only be caused by the managements negative reception of his
comments. It is prejudicial to Paguio because it left him out for a possible promotion as
he was assigned to a functionless position with neither office nor staff.

SOLID DEVT CORP WORKERS ASSOC V. SOLID DEVT CORP 530 SCRA 132
(2007)
FACTS: Petitioners Villena and Colcol were employed as roving doffer and trouble
shooter mechanic, respectively, by private respondent Solid Development Corp (SDC)
1. In May 1999, Gaw, the owner and president of SDC, caught Villena loafing
during office hours and when he called Villenas attention, Villena answered in a
rude manner (Bakit mo ako sinisita porke mahirap lang kami mga trabahador
ninyo. Kayo talagang mga instik. Ikaw, masyado kang sipsip sa baboy na instik)
2. Villena then was served an infraction report charging him with disrespect to a
superior officer and/or impolite/discourteous manner. He was required to submit
a written answer within 12 hours from receipt of report but the failed to reply. He
was subsequently dismissed for serious misconduct, loss of confidence and
gross habitual neglect of duty
3. Gaw, Colcols supervisor, ordered the latter to operate the carding or rolyohan
machine. Colcol refused and explained he did not know how to operate the
machine. Colcol was issued an infraction report for insubordination and poor
work performance, and was required to submit a written explanation within 12
hours from receipt. Colcol was eventually dismissed for insubordination and poor
work performance
4. Petitioners filed separate complaints for illegal dismissal with prayer for
reinstatement and money claims, they claimed they were dismissed without just
cause and without due process
5. LA held in favor of Villena and Colcol and ordered SDC to reinstate complainants
to their former position without loss of seniority rights and other privileges with full
back wages
6. NLRC reversed the LA decision, giving more credence to private respondents
assertion that Colcol received the infraction report but simply ignored it. CA
affirmed the same

ISSUE: WON PETITIONERS VILLENA AND COLCOL WERE DISMISSED FOR

CAUSE AND DUE PROCESS
HELD: Yes. It is settled that to constitute a valid dismissal from employment, two
requisites must concur: (1) the dismissal must be for any of the causes provided for in
Art 282 Labor Code; and (2) the employee must be afforded an opportunity to be heard
and to defend himself. This means that an employer can terminate the services of an
employee for just and valid causes, which must be supported by clear and convincing
evidence. It also means that, procedurally, the employee must be given notice, with
adequate opportunity to be heard, before he is notified of his actual dismissal for cause.
For serious misconduct to be a just cause for dismissal, it must (1) be serious; (2) relate
to the performance of the employees duties; and (3) show that the employee has
become unfit to continue working for the employer. Villenas act of insulting Gaw, the
companys owner and president, may be considered, from a laymans perspective, as a
serious misconduct. Moreover, it was done in relation to the performance of his duties
as would show him to be unfit to continue working for the company.
Similarly, Colcols excuse in refusing to operate the carding or rolyohan machine was
properly rejected. First, as troubleshooter or all-around mechanic, he was tasked to
maintain and repair all of the companys equipment including the carding or rolyohan
machine. Second, the machine has been used by the company for many years.
Because of these, Colcol could not have been ignorant of its proper operation.
Willful disobedience of the employers lawful orders, as a just cause for dismissal of an
employee, envisages the concurrence of at least two requisites: (1) the employees
assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties which he had been engaged to
discharge.
Likewise, there was nothing unreasonable in the order. It is the employers prerogative,
based on its assessment and perception of its employees qualifications, aptitudes and
competence, to move the employee around in the various areas of its business
operations in order to ascertain where he will function with utmost efficiency and
maximum productivity or benefit to the company. An employees right to security of
tenure does not give him such a vested right in his position as would deprive the
company of its prerogative to change his assignment or transfer him where he will be
most useful. In this case, it is presumed that private respondents have carefully
evaluated Colcols competence as troubleshooter mechanic to require him to operate
the carding or rolyohan machine.

NORKIS TRADING V. GNILO 544 SCRA 279 (2008)

FACTS: GENILO was initially hired by NORKIS as NORKIS Installment Collector.
GENILOheld various positions until he was appointed as Credit and Collection Manager
of Magna Financial Services Group, Inc.-Legaspi Branch, NORKIS sister company, in
charge of the areas of Albay and Catanduanes.
A special audit team was conducted in GENILO's office in Legaspi, Albay whenit was
found out that GENILO forwarded the monthly collection reports of the NICs under his
supervision without checking the veracity of the same. The monthly collection highlights
for the months of April to September 1999 submitted by GENILO to the top
management were all overstated appearing that the collection efficiency was higher
than it actually was; and that the top management was misled into believing
that GENILOs area of responsibility obtained a favorable collection efficiency.
GENILO was then charged by NORKIS Inquiry Assistance Panel (Panel) with
negligence of basic duties and responsibilities resulting in loss of trust and confidence
and laxity in directing and supervising his own subordinates. GENILO admitted that he
was negligent for failing to regularly check the report f each NIC under his supervision;
that he only checked at random the NIC's monthly collection highlight reports; and that
as a leader, he is responsible forthe actions of his subordinates. He however denied
being lax in supervising his subordinates, as he imposed discipline on them if the need
arose.
NORKIS through its Human Resource Manager issued a memorandum placing Genilo
under 15-day suspension without pay, travel and transportation.
Another memorandum was issued to GENILO requiring him to report to the head office
of NORKIS in Mandaluyong City for a re-training or a possible new assignment without
prejudice to his request for a reconsideration or an appeal of his suspension. He was
then assigned to the Marketing Division directly reporting to Albos.
GENILO requested Albos that he be assigned as Sales Engineer or to any position
commensurate with his qualifications. However, on July 28, 2000,GENILO was formally

appointed as Marketing Assistant to Albos, which position GENILO subsequently

assumed.
However, on October 4, 2000, GENILO filed with the Labor Arbiter a complaint for illegal
suspension, constructive dismissal, non-payment of allowance vacation/sick leave,
damages and attorney's fees against petitioners
ISSUE: Whether GENILO's transfer from the position of Credit and Collection Manager
to that of a Marketing Assistant amounts to a constructive dismissal.
HELD: YES. Well-settled is the rule that it is the prerogative of the employer to transfer
and reassign employees for valid reasons and according to the requirement of its
business. Our law recognizes certain rights, collectively called management prerogative
as inherent in the management of business enterprises.
Management has the prerogative to transfer an employee from one office to another
within the business establishment, provided that there is no demotion in rank or
diminution of his salary, benefits and other privilege sand the action is not motivated by
discrimination, made in bad faith, or effected as a form of punishment or demotion
without sufficient cause. This privilege is inherent in the right of employers to control and
manage their enterprises effectively.
It must also be noted that the right of employees to security of tenure does not give
them vested rights to their positions to the extent of depriving management of its
prerogative to change their assignments or to transfer them.
Managerial prerogatives, however, are subject to limitations provided by law, collective
bargaining agreements, and general principles of fair play and justice. The employer
bears the burden of showing that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; and does not involve a demotion in rank or a diminution of
his salaries, privileges and other benefits. Should the employer fail to overcome this
burden of proof, the employees transfer shall be tantamount to constructive dismissal.
Constructive dismissal is defined as
1) a quitting because continued employment is rendered impossible, unreasonable or
unlikely;
2) when there is a demotion in rank or a diminution of pay;
3) when an act of clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee, leaving him with no option but to forego his continued
employment.
Note that there is constructive dismissal when an employee's functions, which were
originally supervisory in nature, were reduced; and such reduction is not grounded on
valid grounds such as genuine business necessity.
There is also constructive dismissal when an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on the part of the employee as to
foreclose any choice on his part except to resign from such employment.

Transfer is defined as a movement from one position to another which is of equivalent

rank, level or salary, without break in service.
Promotion, is the advancement from one position to another with an increase in duties
and responsibilities as authorized by law, and usuallyaccompanied by an increase in
salary.
Demotion involves a situation in which an employee is relegated to a subordinate or
less important position constituting a reduction to a lower grade or rank, with a
corresponding decrease in duties and responsibilities, and usually accompanied by a
decrease in salary.
IN THE CASE OF GENILO while his transfer from Credit and Collection Manager to
Marketing Assistant did not result in the reduction of his salary, there was a reduction in
his duties and responsibilities which amounted to a demotion tantamount to a
constructive dismissal..
While NORKIS has the prerogative to transfer GENILO to another position, such
transfer should be done without diminution of rank and benefits which has been shown
to be present in GENILO's case.

PHARMACIA AND UPJOHN INC (NOW PFIZER PHILS) V. ALBAYDA G.R. NO

172724 (2010)
FACTS: Respondent Albayda worked for petitioner Pharmacia as a district sales
manager assigned in the Western Visayas area
1. Respondent received in 1999, a memorandum announcing his reassignment to
the Northern Mindanao sales area. Albayda wrote a letter requesting to remain in
his current assignment as he feared his transfer could me a means to
constructively dismiss him and also he did not want to dislocate his family who
was already based in Bacolod City. His request was denied by the company
2. Albayda requested several times to remain in his current assignment but despite
his request the company denied it. According to Pharmacia, since he had been
performing well in his current assignment, he could apply his sales expertise in
the Northern Mindanao area which was performing dismally. The company
stressed that the transfer was purely a business decision
3. Thereafter, Montilla, VP of Sales and Marketing, met with respondent to discuss
his situation. He was informed that his request to continue his assignment in the
Visayas area was denied since there are currently no vacant positions in the
area. He was given an option to either be assigned in Manila or in Cagayan de
Oro. The company even gave the respondent some time to consider his options
4. Respondent was subsequently served a final notice to work in Manila otherwise
he would be terminated on the basis of being absent without official leave
(AWOL). Despite due notice, respondent refused to report to his new
assignment. As a result, Pharmacia issued a memorandum informing him of their
decision to terminate his services
5. Albayda, then, filed a complaint for constructive dismissal. LA dismissed the case
for lack of merit. NLRC affirmed the same
6. Upon appeal, CA reversed the NLRC decision and remanded to case to NLRC
for proper determination of the petitioners claims
ISSUE: WON respondents transfer to a different sales area constitutes a valid exercise
of management prerogative
HELD: Yes.

Jurisprudence recognizes the exercise of management prerogative to transfer or assign

employees from one office or area of operation to another, provided there is no
demotion in rank or diminution of salary, benefits, and other privileges, and the action is
not motivated by discrimination, made in bad faith, or effected as a form of punishment
or demotion without sufficient cause.
To determine the validity of the transfer of employees, the employer must show that the
transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it
involve a demotion in rank or a diminution of his salaries, privileges and other benefits.
Should the employer fail to overcome this burden of proof, the employee's transfer shall
be tantamount to constructive dismissal.
In the case at bar, Pharmacias transfer of respondent was a valid exercise of a
legitimate management prerogative to maximize business opportunities, growth and
development of personnel and that the expertise of respondent was needed to build the
companys business in Cagayan de Oro City which dismally performed in 1999. The
reassignment of respondent was not a demotion as he will also be assigned as a
District Sales Manager in Mindanao or in Metro Manila and that the notice of his transfer
did not indicate that his emoluments will be reduced.
Furthermore, there is no evidence to prove that the restructuring move of respondent
company was done with ill motives or with malice and bad faith purposely to
constructively terminate respondents employment. Such misinterpretation or misguided
supposition by Albayda is belied by the fact that respondents officers had in several
communications officially sent to complainant, expressly recognized complainants
expertise and capabilities as a top sales man and manager for which reason the
respondent company needs his services and skills to energize the low-performing areas
in order to maximize business opportunities and to afford complainant an opportunity for
further growth and development. Respondent persistently refused instead of taking this
opportunity as a challenge after all, the nature of employment of a sales man or sales
manager is that it is mobile or ambulant being always seeking for possible areas to
market goods and services. He totally forgot the terms and conditions in his
employment contract which stipulated that he may be assigned to any work or
workplace for such period as may be determined by the company and whenever the
operations require such assignment.

PHIL GRAPHIC ARTS V. NLRC 166 SCRA 188 (1988)

Facts of the Case: In October 1984, the petitioner corporation was forced by economic
circumstances to require its workers to go on mandatory vacation leave in batches of
seven or nine for periods ranging from 15, 30, to 45 days. The workers were paid while
on leave but the pay was charged against their respective earned leaves.
As a result, the private respondents filed complaints for unfair labor practice and
discrimination.
On April 9, 1986, the Labor Arbiter rendered a decision the dispositive portion of which
reads:
Wherefore, for lack of merit, the complaint for unfair labor practice on grounds of
discrimination, forced leave and reduction of working days is hereby, DISMISSED.
Respondent is hereby ordered to restore and grant to all its employees the company
policy regarding groceries previously enjoyed by them.
The private respondents filed a "partial appeal" with the National Labor Relations
Commission (NLRC) questioning the Labor Arbiter's dismissal of their complaint for
unfair labor practice and the resultant forced vacation leaves which were actually
without pay.
On June 19,1986, the NLRC affirmed the arbiter's decision with modification as follows:
Be that as it may, since as intimated at the outset, the vacation leave
forced upon the complainants was visited with arbitrariness not amounting
to unfair labor practice, a refund of the amount equivalent to the earned
leave of each of the complainants treated as their pay during their
vacation is believed in order.
Issue: Whether or not forced vacation leave without pay is considered as unfair labor
practice and if not an unfair labor practice, whether or not it was tainted with
arbitrariness.

Ruling: The Court is convinced from the records now before it, that there was no unfair
labor practice. As found by the NLRC, the private respondents themselves never
questioned the existence of an economic crisis but, in fact, admitted its existence. There
is basis for the petitioner's contentions that the reduction of work schedule was
temporary, that it was taken only after notice and consultations with the workers and
supervisors, that a consensus was reached on how to deal with deteriorating economic
conditions and reduced sales and that the temporary reduction of working days was a
more humane solution instead of a retrenchment and reduction of personnel. The
petitioner further points out that this is in consonance with the collective bargaining
agreement between the employer and its employees.
The decision to resort to forced leaves was, under the circumstances, a management
prerogative. The workers' claim of non-resort to the grievance machinery is negated by
their failure to initiate steps for its employment.
ART. 261. Grievance machinery. Whenever a grievance arises from the interpretation or
implementation of a collective agreement, including disciplinary actions imposed on
members of the bargaining unit, the employer and the bargaining representative shall
meet to adjust the grievance. Where the grievance procedure as provided herein does
not apply, grievances shall be subject to negotiation, conciliation or arbitration as
provided elsewhere in this Code (Labor Code (Emphasis supplied)
As the law stands, both employers and bargaining representative of the employees are
required to go through the grievance machinery in case a grievance arises. And though
the law does not provide who, as between labor and capital, should initiate that said
grievance be brought first to the, grievance machinery, it is only logical just and
equitable that whoever is aggrieved should initiate settlement of the grievance through
the grievance machinery. To impose the compulsory procedure on employers alone
would be oppressive of capital, notwithstanding the fact that in most cases the
grievance is of the employees.
Petition GRANTED. Decision of the Labor Arbiter is REINSTATED.

LINTON COMMERCIAL V. HERRERA 535 SCRA 434 (2007)

FACTS: On 17 December 1997, Linton issued a memorandum addressed to its
employees informing them of thecompany's decision to suspend its operations from 18
December 1997 to 5 January 1998 due to the currencycrisis that affected its business
operations. Linton submitted an establishment termination report to theDepartment of
Labor and Employment (DOLE) regarding the temporary closure of the establishment
coveringthe said period. The company's operation was to resume on 6 January 1998.
On 7 January 1997, Linton issuedanother memorandum informing them that effective
12 January 1998, it would implement a newcompressed workweek of three (3) days on
a rotation basis.In other words, each worker would be workingon a rotation basis for
three working days only instead for six days a week. On the same day, Linton submitted
an
establishment
termination
report
concerning
the
rotation
of its
workers. Linton proceeded withthe implementation of the new policy without waiting for
its approval by DOLE. Aggrieved, sixty-eight (68)workers (workers) filed a Complaint for
illegal reduction of workdays.
Issue: WON there was an illegal reduction of work when Linton implemented a
compressed workweek byreducing from six to three the number of working days with
the employees working on a rotation basis.
Held: The compressed workweek arrangement was unjustified and illegal.The Bureau
of Working Conditions of the DOLE, moreover, released a bulletin providing for in
determiningwhen an employer can validly reduce the regular number of working days.
The said bulletin states that areduction of the number of regular working days is valid
where the arrangement is resorted to by theemployer to prevent serious losses due to
causes beyond his control, such as when there is a substantialslump in the demand for
his goods or services or when there is lack of raw materials. Although the bulletinstands
more as a set of directory guidelines than a binding set of implementing rules, it has one
mainconsideration, consistent with the ruling in Philippine GraphicArts Inc., in
determining the validity of reduction of working hours that the company was suffering

from losses.Certainly, management has the prerogative to come up with measures to

ensure profitability or lossminimization. However, such privilege is not absolute.
Management prerogative must be exercised in goodfaith and with due regard to the
rights of labor. As previously stated, financial losses must be shown before acompany
can validly opt to reduce the work hours of its employees. However, to date, no definite
guidelineshave yet been set to determine whether the alleged losses are sufficient to
justify the reduction of workhours.If the standards set in determining the justifiability of
financial losses under Article 283 (i.e.,retrenchment) or Article 286 (i.e., suspension of
work) of the Labor Code were to be considered, petitionerswould end up failing to meet
the standards. On the one hand,Article 286 applies only when there is a bonafide
suspension of the employer's operation of a business or undertaking for a period not
exceeding six (6)months. Records show that Linton continued its business operations
during the effectivity of the compressedworkweek, which spanned more than the
maximum period. On the other hand, for retrenchment to be justified, any claim of actual
or potential business losses must satisfy the following standards: (1) the lossesincurred
are substantial and not de minimis; (2) the losses are actual or reasonably imminent; (3)
theretrenchment is reasonably necessary and is likely to be effective in preventing the
expected losses; and (4)the alleged losses, if already incurred, or the expected
imminent losses sought to be forestalled, are provenby sufficient and convincing
evidence. Linton failed to comply with these standards