FIRST DIVISION

ANGELINA FRANCISCO, G.R. No. 170087

Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x ---------------------------------------------------------------------------------------- x
DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of
the Court of Appeals dated October 29, 2004 [1] and October 7, 2005,[2] respectively, in CA-G.R. SP No. 78515 dismissing the
complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the
Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003,[3] in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, [4] in NLRC-NCR Case No. 30-10-0-489-01, finding
that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate
Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City
of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. [5]
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so.She never prepared any legal document and never represented the company as its
Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. [6]
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to
the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. [7]
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.[8]
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo,
the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that
petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.[9]
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total
reduction of P22,500.00 as of September 2001.Petitioner was not paid her mid-year bonus allegedly because the company was not
earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well.[10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is
no longer connected with the company.[11]
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in
1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant,
petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time
record and she came to the office any time she wanted. The company never interfered with her work except that from time to time, the
management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of
selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. The money
received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals,
and that she was not one of those reported to the BIR or SSS as one of the companys employees. [12]
Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may
be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the
years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a
list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioners
latest employer was Seiji Corporation.[13]
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and
jointly and severally pay complainant her money claims in accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation pay.
SO ORDERED.[14]
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which
reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service
in addition to full backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13 th month pay are
AFFIRMED.
SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations
Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered
dismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner
and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the
Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the
contending parties is supported by substantial evidence.[17]
We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform test to determine the existence of
an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such
end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion
of the employee in the payrolls, can help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside
from the employers power to control the employee with respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual,
whether as employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the
employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities
of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where
there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on
the various positions and responsibilities given to the worker over the period of the latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,[19] and lately in Leonardo v. Court of
Appeals, where we held that there is an employer-employee relationship when the person for whom the services are performed
reserves the right to control not only the end achieved but also the manner and means used to achieve that end.
[20]

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in
determining the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the
worker.
Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole
economic activity,[22] such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the
extent of the workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the
workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree
of dependency of the worker upon the employer for his continued employment in that line of business. [23]
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business.[24] In the United States, the touchstone of economic reality in analyzing possible employment

relationships for purposes of the Federal Labor Standards Act is dependency.[25] By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on
his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and served in
various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially
the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and
desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of
engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages,
benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to
December 18, 2000.[26] When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by
Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by
the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. [27]
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in
the latters line of business.
In Domasig v. National Labor Relations Commission,[28] we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues
it. Together with the cash vouchers covering petitioners salaries for the months stated therein, these matters constitute substantial
evidence adequate to support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the SSS is proof that the latter
were the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee
relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras
direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to
operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the
company, nor required to attend the meeting of the corporation. She was never privy to the preparation of any document for the
corporation, although once in a while she was required to sign prepared documentation for the company. [30]
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the case. [31] Regardless of this fact, we are convinced that the allegations in the first
affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn
trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. [32] A recantation does not necessarily
cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with
caution.[33]
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She
was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued
employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation
on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation,
with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means
and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of
petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to
separation pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an

employer becomes unbearable to an employee.[35] In Globe Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee
ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working
environment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the
company was not of her own making and therefore amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as
we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact
that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the
benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their
welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004
and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case is REMANDED to the
Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally terminated until
the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of
at least six months shall be considered as one whole year.
SO ORDERED.

FIRST DIVISION

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION
CARPIO, J.:

The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of the Court of Appeals in CAG.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the
National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.

The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement (Agreement) with the Mel and
Jay Management and Development Corporation (MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was
represented by SONZA, as President and General Manager, and Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in
the Agreement as AGENT, MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second
and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our
company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider
these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of
rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA

President and Gen. Manager[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave
pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between
the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and directed the parties to file their
respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and
that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after
and as a result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February
1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and
Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.[6] The pertinent
parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent, it stands to reason that
a talent as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement
of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a
radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance
with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those
generally given to employees. For one, complainant Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his
engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of
employer-employee relationship. As correctly put by the respondent, All these benefits are merely talent fees and other contractual
benefits and should not be deemed as salaries, wages and/or other remuneration accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the absence
of employer-employee relationship. As held by the Supreme Court, The line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining
it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only
to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means to
achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case. [8]
Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABSCBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the
principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true
in this case, as admittedly MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his
broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a
matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of
rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are
ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and
Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employer-employee
relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but
of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the
nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from
complainant-appellants Position Paper, his claims for compensation for services, 13 th month pay, signing bonus and travel allowance
against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his
claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant
bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus
consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13 th month pay based on an amount not lower than the amount he was receiving prior
to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One
Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are
founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant
served upon the latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that
instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by
respondent-appellee that complainant-appellant filed his complaint.Complainant-appellants claims being anchored on the alleged
breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor
law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi

Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual
question that is within the jurisdiction of the NLRC to resolve. [10] A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC.[11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence
which served as basis of the NLRCs conclusion.[12] The Court of Appeals added that it could not re-examine the parties evidence and
substitute the factual findings of the NLRC with its own. [13]

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT
AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF
CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING. [14]

The Courts Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which
upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements
of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a
television and radio station and one of its talents. There is no case law stating that a radio and television program host is an employee
of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known television and radio personality,
and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other
hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the
Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. [15] Substantial evidence means
such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. [16] A party cannot prove the absence of
substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by
which the work is accomplished.[18] The last element, the so-called control test, is the most important element.[19]

A. Selection and Engagement of Employee

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

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA,because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not
possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would
have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most important element.

B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges which he would not have enjoyed if he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABSCBNs employee, there would be no need for the parties to stipulate on benefits such as SSS, Medicare, x x x and 13 th month
pay[20] which the law automatically incorporates into every employer-employee contract.[21] Whatever benefits SONZA enjoyed arose
from contract and not because of an employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary
employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his
services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABSCBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under
labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly,
ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA. [25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of
ABS-CBN. The Labor Arbiter stated that if it were true that complainant was really an employee, he would merely resign, instead.
SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement.SONZAs letter clearly
bears this out.[26] However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA
rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor.

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

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring
talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in
several theater and television productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry,
and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent
contractor status because WIPR provided the equipment necessary to tape the show. Albertys argument is misplaced. The equipment
necessary for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular
function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals
often provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts with WIPR specifically
provided that WIPR hired her professional services as Hostess for the Program Desde Mi Pueblo. There is no evidence that WIPR
assigned Alberty tasks in addition to work related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The
control test is the most important test our courts apply in distinguishing an employee from an independent contractor. [29] This test is
based on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more
likely the worker is deemed an employee. The converse holds true as well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay programs. ABSCBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render
eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and
post-production staff meetings.[31] ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited
SONZA from criticizing in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free hand on what to
say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs
work.[33] ABS-CBN did not instruct SONZA how to perform his job.ABS-CBN merely reserved the right to modify the program
format and airtime schedule for more effective programming. [34] ABS-CBNs sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to
pay SONZAs talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZAs performance
of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABSCBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full
SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could
not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and
appeared on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of
SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until
the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved the right to delete objectionable features in their shows. Since the
management did not have control over the manner of performance of the skills of the artists, it could only control the result of the
work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABSCBN supplied the equipment, crew and airtime needed to broadcast the Mel & Jay programs. However, the equipment, crew and
airtime are not the tools and instrumentalities SONZA needed to perform his job. What SONZA principally needed were his talent or
skills and the costumes necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the
necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABSCBNs sole concern was for SONZA to display his talent during the airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an independent contractor. [40] SONZAs work as television
and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABSCBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards
of performance. SONZA claims that this indicates ABS-CBNs control not only [over] his manner of work but also the quality of his
work.
The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering talents[41] of ABSCBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of
ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan
ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP
code applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio
and television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and
not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former.[43] In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. [44]
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to
insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according
to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. [46] This practice is not
designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The
broadcast station normally spends substantial amounts of money, time and effort in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a commensurate period of time. [47] Normally, a much
higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a laboronly contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who is ostensibly under
the employ of the labor-only contractor; and (3) the principal who is deemed the real employer. Under this scheme, the labor-only
contractor is the agent of the principal. The law makes the principal responsible to the employees of the labor-only contractor as if
the principal itself directly hired or employed the employees. [48] These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as
SONZAs agent. The Agreement expressly states that MJMDC acted as the AGENT of SONZA. The records do not show that
MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It
is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN
and SONZA.

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

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the
status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and
program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into
only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in
law or in fact.

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his
counsel the opportunity to cross-examine these witnesses.SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in
the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the
position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may
have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage,
he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or
information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal
trial.[51] The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right. [52] If the Labor
Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under
the particular circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious
in nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not
strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA
as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if there is an employer-employee
relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that
every person who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.

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

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay, separation pay, service incentive leave, signing
bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and
the Court of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and implementation
of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

BITOY JAVIER
(DANILO P. JAVIER),

G.R. No. 192558

Petitioner,

Present:
CARPIO,* J.,
PERALTA,** Acting Chairperson,
ABAD,
PEREZ,*** and
MENDOZA, JJ.

- versus -

Promulgated:

FLY ACE CORPORATION/

FLORDELYN CASTILLO,
Respondents.

February 15, 2012

x ----------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision [1] of the Court of
Appeals (CA) and its June 7, 2010 Resolution,[2]in CA-G.R. SP No. 109975, which reversed the May 28, 2009 Decision [3] of the
National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that petitioner
Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and
separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard
benefits. He alleged that he was an employee of Fly Ace since September 2007, performing various tasks at the respondents
warehouse such as cleaning and arranging the canned items before their delivery to certain locations, except in instances when he
would be ordered to accompany the companys delivery vehicles, as pahinante; that he reported for work from Monday to Saturday

from 7:00 oclock in the morning to 5:00 oclock in the afternoon; that during his employment, he was not issued an identification card
and payslips by the company; that on May 6, 2008, he reported for work but he was no longer allowed to enter the company premises
by the security guard upon the instruction of Ruben Ong (Mr. Ong), his superior;[5] that after several minutes of begging to the guard
to allow him to enter, he saw Ong whom he approached and asked why he was being barred from entering the premises; that Ong
replied by saying,Tanungin mo anak mo; [6] that he then went home and discussed the matter with his family; that he discovered that
Ong had been courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to
Ong and convince him to spare her father from trouble but he refused to accede; that thereafter, Javier was terminated from his
employment without notice; and that he was neither given the opportunity to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a stevedore
or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed before the Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in December
2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed rate of 300.00 per trip, which
was later increased to 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle
of its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer needed the services of
Javier. Denying that he was their employee, Fly Ace insisted that there was no illegal dismissal. [8] Fly Ace submitted a copy of its
agreement with Milmar Hauling Services and copies of acknowledgment receipts evidencing payment to Javier for his contracted
services bearing the words, daily manpower (pakyaw/piece rate pay) and the latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the Respondent nor any document
showing that he received the benefits accorded to regular employees of the Respondents. His contention that
Respondent failed to give him said ID and payslips implies that indeed he was not a regular employee of Fly Ace
considering that complainant was a helper and that Respondent company has contracted a regular trucking for the
delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since
there is a regular hauler to deliver its products, we give credence to Respondents claim that complainant was
contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of
workers on pakiao basis has evidentiary weight because although the signature of the complainant appearing
thereon are not uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents
are not liable for salary differentials. [9]
Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed to present proof. It was of the view that a pakyaw-basis arrangement did
not preclude the existence of employer-employee relationship. Payment by result x x xis a method of compensation and does not
define the essence of the relation. It is a mere method of computing compensation, not a basis for determining the existence or absence
of an employer-employee relationship.[10] The NLRC further averred that it did not follow that a worker was a job contractor and not
an employee, just because the work he was doing was not directly related to the employers trade or business or the work may be
considered as extra helper as in this case; and that the relationship of an employer and an employee was determined by law and the
same would prevail whatever the parties may call it. In this case, the NLRC held that substantial evidence was sufficient basis for

judgment on the existence of the employer-employee relationship. Javier was a regular employee of Fly Ace because there was
reasonable connection between the particular activity performed by the employee (as a pahinante) in relation to the usual business or
trade of the employer (importation, sales and delivery of groceries). He may not be considered as an independent contractor because
he could not exercise any judgment in the delivery of company products. He was only engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of Javier who was likewise entitled to
backwages and separation pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially GRANTED. The assailed Decision
of the labor arbiter is VACATED and a new one is hereby entered holding respondent FLY ACE CORPORATION
guilty of illegal dismissal and non-payment of 13th month pay. Consequently, it is hereby ordered to pay
complainant DANILO Bitoy JAVIER the following:

1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.[11]

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and reinstated
the dismissal of Javiers complaint as ordered by the LA. The CA exercised its authority to make its own factual determination anent
the issue of the existence of an employer-employee relationship between the parties.According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a
valid cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first
be established. x x x it is incumbent upon private respondent to prove the employee-employer relationship by
substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of
petitioners, but he failed to discharge his burden. The non-issuance of a company-issued identification card to
private respondent supports petitioners contention that private respondent was not its employee.[12]

The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of evidence to bolster his contention,
pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further, it found that Javiers work was not necessary
and desirable to the business or trade of the company, as it was only when there were scheduled deliveries, which a regular hauling
service could not deliver, that Fly Ace would contract the services of Javier as an extra helper. Lastly, the CA declared that the facts
alleged by Javier did not pass the control test.

He contracted work outside the company premises; he was not required to observe definite hours of work; he was not required to
report daily; and he was free to accept other work elsewhere as there was no exclusivity of his contracted service to the company, the
same being co-terminous with the trip only.[13] Since no substantial evidence was presented to establish an employer-employee
relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.[14]

The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis,
it does not preclude his regular employment with the company. Even the acknowledgment receipts bearing his signature and the
confirming receipt of his salaries will not show the true nature of his employment as they do not reflect the necessary details of the
commissioned task. Besides, Javiers tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is
engaged in the importation and sale of grocery items. On days when there were no scheduled deliveries, he worked in petitioners
warehouse, arranging and cleaning the stored cans for delivery to clients. [15] More importantly, Javier was subject to the control and
supervision of the company, as he was made to report to the office from Monday to Saturday, from 7:00 oclock in the morning
until 5:00 oclock in the afternoon. The list of deliverable goods, together with the corresponding clients and their respective purchases
and addresses, would necessarily have been prepared by Fly Ace. Clearly, he was subjected to compliance with company rules and
regulations as regards working hours, delivery schedule and output, and his other duties in the warehouse. [16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that payment to a worker on a per trip basis is not
significant because this is merely a method of computing compensation and not a basis for determining the existence of employeremployee relationship. Javier likewise invokes the rule that, in controversies between a laborer and his master, x x x doubts reasonably
arising from the evidence should be resolved in the formers favour. The policy is reflected is no less than the Constitution, Labor Code
and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters failure to observe
substantive and procedural due process. Since his dismissal was not based on any of the causes recognized by law, and was
implemented without notice, Javier is entitled to separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove employer-employee relationship. Having a
service contract with Milmar Hauling Services for the purpose of transporting and delivering company products to customers, Fly Ace
contracted Javier as an extra helper or pahinante on a mere per trip basis. Javier, who was actually a loiterer in the area, only
accompanied and assisted the company driver when Milmar could not deliver or when the exigency of extra deliveries arises for
roughly five to six times a month. Before making a delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with
its loaded company products. With the vehicle and products in their custody, the driver and Javier would leave the company premises
using their own means, method, best judgment and discretion on how to deliver, time to deliver, where and [when] to start, and
manner of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare allegations, he presented nothing
to substantiate his status as an employee. It is a basic rule of evidence that each party must prove his affirmative allegation. 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 his opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists that in an illegal dismissal case,
the burden of proof is upon the complainant who claims to be an employee. It is essential that an employer-employee relationship be
proved by substantial evidence. Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee
relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, which are unfortunately
not supported by proof, documentary or otherwise. [23] Javier simply assumed that he was an employee of Fly Ace, absent any
competent or relevant evidence to support it. He performed his contracted work outside the premises of the respondent; he was not
even required to report to work at regular hours; he was not made to register his time in and time out every time he was contracted to
work; he was not subjected to any disciplinary sanction imposed to other employees for company violations; he was not issued a
company I.D.; he was not accorded the same benefits given to other employees; he was not registered with the Social Security
System (SSS) as petitioners employee; and, he was free to leave, accept and engage in other means of livelihood as there is no
exclusivity of his contracted services with the petitioner, his services being co-terminus with the trip only. All these lead to the
conclusion that petitioner is not an employee of the respondents. [24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and methods by which Javier would
perform his work or by which the same is to be accomplished. [25] In other words, Javier and the company driver were given a free hand
as to how they would perform their contracted services and neither were they subjected to definite hours or condition of work.

Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its principal business of
importation and sales of groceries. Even without Javier, the business could operate its usual course as it did not involve the business of
inland transportation. Lastly, the acknowledgment receipts bearing Javiers signature and words pakiao rate, referring to his earned
salaries on a per trip basis, have evidentiary weight that the LA correctly considered in arriving at the conclusion that Javier was not an
employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an employer-employee
relationship between him and Fly Ace. This is essentially a question of fact. Generally, the Court does not review errors that raise
factual questions. However, when there is conflict among the factual findings of the antecedent deciding bodies like the LA, the
NLRC and the CA, it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look into
the records of the case and re-examine the questioned findings.[26] In dealing with factual issues in labor cases, substantial evidence
that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is sufficient. [27]
As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting and deficient. The
Court is constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of the NLRC [28] allows a relaxation of the
rules of procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. Labor officials
are enjoined to use reasonable means to ascertain the facts speedily and objectively with little regard to technicalities or formalities but
nowhere in the rules are they provided a license to completely discount evidence, or the lack of it. The quantum of proof required,
however, must still be satisfied. Hence, when confronted with conflicting versions on factual matters, it is for them in the exercise of
discretion to determine which party deserves credence on the basis of evidence received, subject only to the requirement that their
decision must be supported by substantial evidence.[29] Accordingly, the petitioner needs to show by substantial evidence that he was
indeed an employee of the company against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is, therefore,
incumbent upon the Court to determine whether the party on whom the burden to prove lies was able to hurdle the same. No particular
form of evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to
prove the relationship may be admitted. Hence, while no particular form of evidence is required, a finding that such relationship exists
must still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as
its qualitative aspects.[30]Although substantial evidence is not a function of quantity but rather of quality, the x x x circumstances of
the instant case demand that something more should have been proffered. Had there been other proofs of employment, such as x x x
inclusion in petitioners payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee
relationship.[31]

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the
requisite quantum of evidence.[32] Whoever claims entitlement to the benefits provided by law should establish his or her right thereto
x x x.[33] Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of
evidence on this point, all that Javier presented were his self-serving statements purportedly showing his activities as an employee of

Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence, the Court sees no reason to depart
from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery items for delivery to clients, no other proof was submitted to fortify his
claim. The lone affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause. In said document, all
Valenzuela attested to was that he would frequently see Javier at the workplace where the latter was also hired as
stevedore.[34]Certainly, in gauging the evidence presented by Javier, the Court cannot ignore the inescapable conclusion that his mere
presence at the workplace falls short in proving employment therein. The supporting affidavit could have, to an extent, bolstered
Javiers claim of being tasked to clean grocery items when there were no scheduled delivery trips, but no information was offered in
this subject simply because the witness had no personal knowledge of Javiers employment status in the company. Verily, the Court
cannot accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the existence of
an employer-employee relationship, viz: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees conduct. Of these elements, the most important criterion is whether the
employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and
methods by which the result is to be accomplished.[35]
In this case, Javier was not able to persuade the Court that the above elements exist in his case. He could not submit
competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an employee, or that Fly Ace
could dictate what his conduct should be while at work. In other words, Javiers allegations did not establish that his relationship with
Fly Ace had the attributes of an employer-employee relationship on the basis of the above-mentioned four-fold test. Worse, Javier was
not able to refute Fly Aces assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was
also baffling to realize that Javier did not dispute Fly Aces denial of his services exclusivity to the company. In short, all that Javier
laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a stevedore, albeit on
a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary proof that Javier was indeed paid on a pakyaw basis
per the acknowledgment receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial of the
signatures affixed therein cannot automatically sway us to ignore the documents because forgery cannot be presumed and must be
proved by clear, positive and convincing evidence and the burden of proof lies on the party alleging forgery. [36]
Considering the above findings, the Court does not see the necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the settled rule that payment by the piece is just a method of
compensation and does not define the essence of the relation. [37] Payment on a piece-rate basis does not negate regular employment.
The term wage is broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of compensation
and does not define the essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the employeremployee relationship. However, in determining whether the relationship is that of employer and employee or one of an independent
contractor, each case must be determined on its own facts and all the features of the relationship are to be considered. [38] Unfortunately
for Javier, the attendant facts and circumstances of the instant case do not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.
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 will be automatically decided in favor of labor. Management also has its rights which are entitled to
respect and enforcement in the interest of simple fair play. Out of its concern for the less privileged in life, the 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 the Court 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.[39]
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7,
2010 Resolution, in CA-G.R. SP No. 109975, are herebyAFFIRMED.
SO ORDERED.

G.R. No. 87700 June 13, 1990

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES,
MARCELA PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and SAN
MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.

MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil action for
certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March 1989 in Civil Case No. 57055
of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of discretion, a labor dispute
being involved. Private respondent San Miguel Corporation (SanMig. for short), for its part, defends the Writ on the ground of
absence of any employer-employee relationship between it and the contractual workers employed by the companies Lipercon
Services, Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of personality to represent
said workers for purposes of collective bargaining. The Solicitor General agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and D'Rite (Annexes K and I,
SanMig's Comment, respectively). These companies are independent contractors duly licensed by the Department of Labor and
Employment (DOLE). SanMig entered into those contracts to maintain its competitive position and in keeping with the imperatives of
efficiency, business expansion and diversity of its operation. In said contracts, it was expressly understood and agreed that the workers
employed by the contractors were to be paid by the latter and that none of them were to be deemed employees or agents of SanMig.
There was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized representative of the
monthly paid rank-and-file employees of SanMig with whom the latter executed a Collective Bargaining Agreement (CBA) effective
1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary,
probationary, or contract employees and workers are excluded from the bargaining unit and, therefore, outside the scope of this
Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and D'Rite workers had
signed up for union membership and sought the regularization of their employment with SMC. The Union alleged that this group of
employees, while appearing to be contractual workers supposedly independent contractors, have been continuously working for
SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither casual nor seasonal as they are
performing work or activities necessary or desirable in the usual business or trade of SanMig. Thus, it was contended that there exists
a "labor-only" contracting situation. It was then demanded that the employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the Union filed a notice of strike
for unfair labor practice, CBA violations, and union busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2) notices of strike were
consolidated and several conciliation conferences were held to settle the dispute before the National Conciliation and Mediation Board
(NCMB) of DOLE (Annex G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers in various SMC plants
and offices.

On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON and/or D'RITE for the purposes of
collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
c. inciting, instigating and/or inducing the employees or workers of LIPERCON and D'RITE to demonstrate and/or
picket at the plants and offices of plaintiff within the bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the strike area and/or picket lines and/or
barricades which the defendants may set up at the plants and offices of plaintiff within the bargaining unit referred to
in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other employees and/or contract workers of
plaintiff, as well as those persons lawfully transacting business with plaintiff at the work places within the
bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and egress from, the work
places within the bargaining unit referred to in the CBA .., to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the work places within the
bargaining unit referred to in the CBA, Annex 'C' hereof, to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE. (Annex H, Petition)
Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining Order for the purpose of
maintaining the status quo, and set the application for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of lack of jurisdiction
over the case/nature of the action, which motion was opposed by SanMig. That Motion was denied by respondent Judge in an Order
dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties presented both testimonial and documentary
evidence on 25 March 1989, respondent Court issued the questioned Order (Annex A, Petition) granting the application and enjoining
the Union from Committing the acts complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the
corresponding Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer for whatever
damages petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of labor dispute. Verily, this court has
jurisdiction to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The
application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What could
be discerned is that there is no employer-employee relationship between plaintiff and the contractual workers
employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding the question of
the existence of employer-employee relationship has already been made. To finally resolve this dispute, the court
must extensively consider and delve into the manner of selection and engagement of the putative employee; the
mode of payment of wages; the presence or absence of a power of dismissal; and the Presence or absence of a power
to control the putative employee's conduct. This necessitates a full-blown trial. If the acts complained of are not
restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the other hand, a writ of injunction does
not necessarily expose defendants to irreparable damages.

Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged Writ. On 24 April 1989,
we issued a Temporary Restraining Order enjoining the implementation of the Injunction issued by respondent Court. The Union
construed this to mean that "we can now strike," which it superimposed on the Order and widely circulated to entice the Union
membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we required the parties to "RESTORE
the status quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual workers of Lipercon and
D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The Union stated that it
would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and discussion on their other demands, such as
wage distortion and appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement between SanMig
and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the
laid-off individuals ... shall be recalled effective 8 May 1989 to their former jobs or equivalent positions under the same terms and
conditions prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required the parties to submit their
memoranda simultaneously, the last of which was filed on 9 January 1990.
The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the present controversy and
properly issued the Writ of Preliminary Injunction to the resolution of that question, is the matter of whether, or not the case at bar
involves, or is in connection with, or relates to a labor dispute. An affirmative answer would bring the case within the original and
exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose out of a labor dispute
and is directly connected or interwoven with the cases pending with the NCMB-DOLE, and is thus beyond the ambit of the public
respondent's jurisdiction. That the acts complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the
private respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of any labor dispute
between itself and the Union. SanMig submits, in particular, that "respondent Court is vested with jurisdiction and judicial competence
to enjoin the specific type of strike staged by petitioner union and its officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to compel the employer to hire and
thereby create an employment relationship with contractual workers, especially were the contractual workers were
recognized by the union, under the governing collective bargaining agreement, as excluded from, and therefore
strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining representative only in the event of a deadlock in a
labor dispute over 'wages, hours of work and all other and of the employment' of the employees in the unit. The
union leaders cannot instigate a strike to compel the employer, especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter will help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does not arise out of a labor
dispute, is an abuse of right, and violates the employer's constitutional liberty to hire or not to hire. (SanMig's
Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning terms and conditions
of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and
conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual
workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless of whether the disputants stand in the
proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among
others, the terms and conditions of employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law,

the existence of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of
employer and employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of
the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter
definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their
employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute. Further,
the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining.
SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship between it and those
workers and because the demand violates the terms of their CBA. Obvious then is that representation and association, for the purpose
of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent
such representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the
controversy below is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS01- 021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only"
contracting and, therefore, a regular employer-employee relationship may, in fact, be said to exist; whether or not the Union can
lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or
not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers
outside the working unit; those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of
action in the Court below are inextricably linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not controlling as
in that case there was no controversy over terms, tenure or conditions, of employment or the representation of employees that called
for the application of labor laws. In that case, what the petitioning union demanded was not a change in working terms and conditions,
or the representation of the employees, but that its members be hired as stevedores in the place of the members of a rival union, which
petitioners wanted discharged notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling
therein, on the basis of those facts unique to that case, that such a demand could hardly be considered a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly provided for in Article
217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the suit below was instituted on 6 March
1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide the following cases involving all workers including
"1. unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other terms and conditions of
employment; ... and 5. cases arising from any violation of Article 265 of this Code, including questions involving the legality of striker
and lockouts. ..." Article 217 lays down the plain command of the law.
The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the
case within the jurisdictional boundaries of regular Courts. That claim for damages is interwoven with a labor dispute existing
between the parties and would have to be ventilated before the administrative machinery established for the expeditious settlement of
those disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly
administration of justice (Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29
July 1968, 24 SCRA 321).
We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to
determine whether it should contract out the performance of some of its work to independent contractors. However, the rights of all
workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending
interests must be placed in proper perspective and equilibrium.
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and 29 March 1989 are
SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from taking any further action in Civil Case No.
57055 except for the purpose of dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be
observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor and Employment, docketed as
NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.
SO ORDERED.