G.R. No. L-26298 September 28, 1984
(1)CMS ESTATE, INC., petitioner, vs. SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.
Sison Dominguez & Cervantes for petitioner.
The Legal Counsel for respondent SSS.
CUEVAS, J.:
This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System, declaring CMS subject to compulsory coverage as of September 1, 1957 and "directing the Social Security System to effect such coverage of the petitioner's employees in its logging and real estate business conformably to the provision of Republic Act No. 1161, as amended was certified to Us by the defunct Court of Appeals 1 for further disposition considering that purely questions of law are involved.
Petitioner is a domestic corporation organized primarily for the purpose of engaging in the real estate business. On December 1, 1952, it started doing business with only six (6) employees. It's Articles of Incorporation was amended on June 4, 1956 in order to engage in the logging business. The Securities and Exchange Commission issued the certificate of filing of said amended articles on June 18, 1956. Petitioner likewise obtained an ordinary license from the Bureau of Forestry to operate a forest concession of 13,000 hectares situated in the municipality of Baganga, Province of Davao.
On January 28, 1957, petitioner entered into a contract of management with one Eufracio D. Rojas for the operation and exploitation of the forest concession The logging operation actually started on April 1, 1957 with four monthly salaried employees. As of September 1, 1957, petitioner had 89 employees and laborers in the logging operation. On December 26, 1957, petitioner revoked its contract of management with Mr. Rojas.
On August 1, 1958, petitioner became a member of the Social Security System with respect to its real estate business. On September 6, 1958, petitioner remitted to the System the sum of P203.13 representing the initial premium on the monthly salaries of the employees in its logging business. However, on October 9, 1958, petitioner demanded the refund of the said amount, claiming that it is not yet subject to compulsory coverage with respect to its logging business. The request was denied by respondent System on the ground that the logging business was a mere expansion of petitioner's activities and for purposes of the Social Security Act, petitioner should be considered a member of the System since December 1, 1952 when it commenced its real estate business.
On November 10, 1958, petitioner filed a petition with the Social Security Commission praying for the determination of the effectivity date of the compulsory coverage of petitioner's logging business.
After both parties have submitted their respective memoranda, the Commission issued on January 14, 1960, Resolution No. 91, 2 the dispositive portion of which reads as follows:
Premises considered, the instant petition is hereby denied and petitioner is hereby adjudged to be subject to compulsory coverage as of Sept. 1, 1957 and the Social Security System is hereby directed to effect such coverage of petitioner's employees in its logging and real estate business conformably to the provisions of Rep. Act No. 1161, as amended.
SO ORDERED.
Petitioner's motion for reconsideration was denied in Resolution No. 609 of the Commission.
These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits that respondent Commission erred in holding —
(1) that the contributions required of employers and employees under our Social Security Act of 1954 are not in the nature of excise taxes because the said Act was allegedly enacted by Congress in the exercise of the police power of the State, not of its taxing power;
(2) that no contractee — independent contractor relationship existed between petitioner and Eufracio D. Rojas during the time that he was operating its forest concession at Baganga, Davao;
(3) that a corporation which has been in operation for more than two years in one business is immediately covered with respect to any new and independent business it may subsequently engage in;
(4) that a corporation should be treated as a single employing unit for purposes of coverage under the Social Security Act, irrespective of its separate, unrelated and independent business established and operated at different places and on different dates; and
(5) that Section 9 of the Social Security Act on the question of compulsory membership and employers should be given a liberal interpretation.
Respondent, on the other hand, advances the following propositions, inter alia:
(1) that the Social Security Act speaks of compulsory coverage of employers and not of business;
(2) that once an employer is initially covered under the Social Security Act, any other business undertaken or established by the same employer is likewise subject in spite of the fact that the latter has not been in operation for at least two years;
(3) that petitioner's logging business while actually of a different, distinct, separate and independent nature from its real estate business should be considered as an operation under the same management;
(4) that the amendment of petitioner's articles of incorporation, so as to enable it to engage in the logging business did not alter the juridical personality of petitioner; and
(5) the petitioner's logging operation is a mere expansion of its business activities.
The Social Security Law was enacted pursuant to the policy of the government "to develop, establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the Philippines, and shall provide protection against the hazards of disability, sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus clear that said enactment implements the general welfare mandate of the Constitution and constitutes a legitimate exercise of the police power of the State. As held in the case of Philippine Blooming Mills Co., Inc., et al. vs. SSS 3 —
Membership in the SSS is not a result of bilateral, concensual agreement where the rights and obligations of the parties are defined by and subject to their will, RA 1161 requires compulsory coverage of employees and employers under the System. It is actually a legal imposition on said employers and employees, designed to provide social security to the workingmen. Membership in the SSS is therefore, in compliance with the lawful exercise of the police power of the State, to which the principle of non-impairment of the obligation of contract is not a proper defense. xxx xxx xxx
The taxing power of the State is exercised for the purpose of raising revenues. However, under our Social Security Law, the emphasis is more on the promotion of the general welfare. The Act is not part of out Internal Revenue Code nor are the contributions and premiums therein dealt with and provided for, collectible by the Bureau of Internal Revenue. The funds contributed to the System belong to the members who will receive benefits, as a matter of right, whenever the hazards provided by the law occur.
All that is required of appellant is to make monthly contributions to the System for covered employees in its employ. These contributions, contrary to appellant's contention, are not 'in the nature of taxes on employment.' Together with the contributions imposed upon employees and the Government, they are intended for the protection of said employees against the hazards of disability, sickness, old age and death in line with the constitutional mandate to promote social justice to insure the well-being and economic security of all the people. 4
Because of the broad social purpose of the Social Security Act, all doubts in construing the Act should favor coverage rather than exemption.
Prior to its amendment, Sec. 9 of the Act provides that before an employer could be compelled to become a member of the System, he must have been in operation for at least two years and has at the time of admission at least six employees. It should be pointed out that it is the employer, either natural, or judicial person, who is subject to compulsory coverage and not the business. If the intention of the legislature was to consider every venture of the employer as the basis of a separate coverage, an express provision to that effect could have been made. Unfortunately, however, none of that sort appeared provided for in the said law.
Should each business venture of the employer be considered as the basis of the coverage, an employer with more than one line of business but with less than six employees in each, would never be covered although he has in his employ a total of more than six employees which is sufficient to bring him within the ambit of compulsory coverage. This would frustrate rather than foster the policy of the Act. The legislative intent must be respected. In the absence of an express provision for a separate coverage for each kind of business, the reasonable interpretation is that once an employer is covered in a particular kind of business, he should be automatically covered with respect to any new name. Any interpretation which would defeat rather than promote the ends for which the Social Security Act was enacted should be eschewed. 5
Petitioner contends that the Commission cannot indiscriminately combine for purposes of coverage two distinct and separate businesses when one has not yet been in operation for more than two years thus rendering nugatory the period for more than two years thus rendering nugatory the period of stabilization fixed by the Act. This contention lacks merit since the amendatory law, RA 2658, which was approved on June 18, 1960, eliminated the two-year stabilization period as employers now become automatically covered immediately upon the start of the business.
Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:
Sec. 10. Effective date of coverage. — Compulsory coverage of the employer shall take effect on the first day of his operation, and that of the employee on the date of his employment. (Emphasis supplied)
As We have previously mentioned, it is the intention of the law to cover as many persons as possible so as to promote the constitutional objective of social justice. It is axiomatic that a later law prevails over a prior statute and moreover the legislative in tent must be given effect. 6
Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in an independent business of his own consisting of the operation of the timber concession of the former. Rojas was appointed as operations manager of the logging consession; 7 he has no power to appoint or hire employees; as the term implies, he only manages the employees and it is petitioner who furnishes him the necessary equipment for use in the logging business; and he is not free from the control and direction of his employer in matter connected with the performance of his work. These factors clearly indicate that Rojas is not an independent contractor but merely an employee of petitioner; and should be entitled to the compulsory coverage of the Act.
The records indubitably show that petitioner started its real estate business on December 1, 1952 while its logging operation was actually commenced on April 1, 1957. Applying the provision of Sec. 10 of the Act, petitioner is subject to compulsory coverage as of December 1, 1952 with respect to the real estate business and as of April 1, 1957 with respect to its logging operation.
WHEREFORE, premises considered, the appeal is hereby DISMISSED. With costs against petitioner.
SO ORDERED.
Makasiar (Chairman), Aquino, Abad Santos and Escolin, JJ., concur.
Concepcion, Jr. and Guerrero, JJ., are on leave.
G.R. No. L-22008 November 3, 1924
(2)THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. JULIO POMAR, defendant-appellant.
Araneta and Zaragoza for appellant. Attorney-General Villa-Real for appellee.
JOHNSON, J.:
The only question presented by this appeal is whether or not the provisions of sections 13 and 15 of Act No. 3071 are a reasonable and lawful exercise of the police power of the state.
It appears from the record that on the 26th day of October, 1923, the prosecuting attorney of the City of Manila presented a complaint in the Court of First Instance, accusing the defendant of a violation of section 13 in connection with section 15 of Act No. 3071 of the Philippine Legislature. The complaint alleged:
That on or about the 27th day of August, 1923, and sometime prior thereto, in the City of Manila, Philippine Islands, the said accused, being the manager and person in charge of La Flor de la Isabela, a tobacco factory pertaining to La Campania General de Tabacos de Filipinas, a corporation duly authorized to transact business in said city, and having, during the year 1923, in his employ and service as cigar-maker in said factory, a woman by the name of Macaria Fajardo, whom he granted vacation leave which began on the 16th day of July, 1923, by reason of her pregnancy, did then and there willfully, unlawfully, and feloniously fail and refuse to pay to said woman the sum of eighty pesos (P80), Philippine currency, to which she was entitled as her regular wages corresponding to thirty days before and thirty days after her delivery and confinement which took place on the 12th day of August, 1923, despite and over the demands made by her, the said Macaria Fajardo, upon said accused, to do so.
To said complaint, the defendant demurred, alleging that the facts therein contained did not constitute an offense. The demurrer was overruled, whereupon the defendant answered and admitted at the trial all of the allegations contained in the complaint, and contended that the provisions of said Act No. 3071, upon which the complaint was based were illegal, unconstitutional and void.
Upon a consideration of the facts charged in the complaint and admitted by the defendant, the Honorable C. A. Imperial, judge, found the defendant guilty of the alleged offense described in the complaint, and sentenced him to pay a fine of P50, in accordance with the provisions of section 15 of said Act, to suffer subsidiary imprisonment in case of insolvency, and to pay the costs.
From that sentence the defendant appealed, and now makes the following assignments of error: That the court erred in overruling the demurrer; in convicting him of the crime charged in the information; and in not declaring section 13 of Act No. 3071, unconstitutional:
Section 13 of Act No. 3071 is as follows:
Every person, firm or corporation owning or managing a factory, shop or place of labor of any description shall be obliged to grant to any woman employed by it as laborer who may be pregnant, thirty days vacation with pay before and another thirty days after confinement: Provided, That the employer shall not discharge such laborer without just cause, under the penalty of being required to pay to her wages equivalent to the total of two months counted from the day of her discharge.
Section 15 of the same Act is as follows:
Any person, firm or corporation violating any of the provisions of this Act shall be punished by a fine of not less than fifty pesos nor more than two hundred and fifty, or by imprisonment for not less than ten days nor more than six months, or both, in the discretion of the court.
In the case of firms or corporations, the presidents, directors or managers thereof or, in their default, the persons acting in their stead, shall be criminally responsible for each violation of the provisions of this Act.
Said section 13 was enacted by the Legislature of the Philippine Islands in the exercise of its supposed police power, with the praiseworthy purpose of safeguarding the health of pregnant women laborers in "factory, shop or place of labor of any description," and of insuring to them, to a certain extent, reasonable support for one month before and one month after their delivery. The question presented for decision by the appeal is whether said Act has been adopted in the reasonable and lawful exercise of the police power of the state.
In determining whether a particular law promulgated under the police power of the state is, in fact, within said power, it becomes necessary first, to determine what that power is, its limits and scope. Literally hundreds of decisions have been promulgated in which definitions of the police power have been attempted. An examination of all of said decisions will show that the definitions are generally limited to particular cases and examples, which are as varied as they are numerous.
By reason of the constant growth of public opinion in a developing civilization, the term "police power" has never been, and we do not believe can be, clearly and definitely defined and circumscribed. One hundred years ago, for example, it is doubtful whether the most eminent jurist, or court, or legislature would have for a moment thought that, by any possibility, a law providing for the destruction of a building in which alcoholic liquors were sold, was within a reasonable and lawful exercise of the police power. (Mugler vs. Kansas, 123 U. S., 623.) The development of civilization, the rapidly increasing population, the growth of public opinion, with a desire on the part of the masses and of the government to look after and care for the interests of the individuals of the state, have brought within the police power of the state many questions for regulation which formerly were not so considered. In a republican form of government public sentiment wields a tremendous influence upon what the state may or may not do, for the protection of the health and public morals of the people. Yet, neither public sentiment, nor a desire to ameliorate the public morals of the people of the state will justify the promulgation of a law which contravenes the express provisions of the fundamental law of the people — the constitutional of the state.
A definition of the police power of the state must depend upon the particular law and the particular facts to which it is to be applied. The many definitions which have been given by the highest courts may be examined, however, for the purpose of giving us a compass or guide to assist us in arriving at a correct conclusion in the particular case before us. Sir William Blackstone, one of the greatest expounders of the common law, defines the police power as "the due regulation and domestic order of the kingdom, whereby the inhabitants of a state, like members of a well-governed family, are bound to conform their general behavior to the rules of propriety, good neighborhood, and good manners, and to be decent, industrious, and inoffensive in their respective stations." (4 Blackstone's Commentaries, 162.)
Mr. Jeremy Bentham, in his General View of Public Offenses, gives us the following definition: "Police is in general a system of precaution, either for the prevention of crimes or of calamities. Its business may be distributed into eight distinct branches: (1) Police for the prevention of offenses; (2) police for the prevention of calamities; (3) police for the prevention of endemic diseased; (4) police of charity; (5) police of interior communications; (6) police of public amusements; (7) police for recent intelligence; (8) police for registration."
Mr. Justice Cooley, perhaps the greatest expounder of the American Constitution, says: "The police power is the power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the subject of the same. . . ." (Cooley's Constitutional Limitations, p. 830.)
In the case of Commonwealth of Massachusetts vs. Alger (7 Cushing, 53), we find a very comprehensive definition of the police power of the state. In that case it appears that the colony of Massachusetts in 1647 adopted an Act to preserve the harbor of Boston and to prevent encroachments therein. The defendant unlawfully erected, built, and established in said harbor, and extended beyond said lines and into and over the tide water of the Commonwealth a certain superstructure, obstruction and encumbrance. Said Act provided a penalty for its violation of a fine of not less than $1,000 nor more than $5,000 for every offense, and for the destruction of said buildings, or structures, or obstructions as a public nuisance. Alger was arrested and placed on trial for violation of said Act. His defense was that the Act of 1647 was illegal and void, because if permitted the destruction of private property without compensation. Mr. Justice Shaw, speaking for the court in that said, said: "We think it is a settled principle, growing out of the nature of well-ordered civil society, that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it may be so regulated, that it shall not be injurious to the equal environment of others having an equal right to the enjoyment of their property nor injurious to the rights of the community. All property in this commonwealth, as well that in the interior as that bordering on tide waters, is derived directly or indirectly from the government and held subject to those general regulations, which are necessary to the common good and general welfare. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment, as shall prevent them from being injurious, and to such reasonable restraints and regulations established by law, as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient." Mr. Justice Shaw further adds: ". . . The power we allude to is rather the police power, the power vested in the legislature by the constitution, to make, ordain and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the subjects of the same."
This court has, in the case of Case vs. Board of Health and Heiser (24 Phil., 250), in discussing the police power of the state, had occasion to say: ". . . It is a well settled principle, growing out of the nature of well-ordered and civilized society, that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the rights of the community. All property in the state is held subject to its general regulations, which are necessary to the common good and general welfare. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations, established by law, as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient. The state, under the police power is possessed with plenary power to deal with all matters relating to the general health, morals, and safety of the people, so long as it does not contravene any positive inhibition of the organic law and providing that such power is not exercised in such a manner as to justify the interference of the courts to prevent positive wrong and oppression."
Many other definitions have been given not only by the Supreme Court of the United States but by the Supreme Court of every state of the Union. The foregoing definitions, however, cover the general field of all of the definitions, found in jurisprudence. From all of the definitions we conclude that it is much easier to perceive and realize the existence and sources of the police power than to exactly mark its boundaries, or prescribe limits to its exercise by the legislative department of the government.
The most recent definition which has been called to our attention is that found in the case of Adkins vs. Children's Hospital of the District of Columbia (261 U. S., 525). In that case the controversy arose in this way: A children's hospital employed a number of women at various rates of wages, which were entirely satisfactory to both the hospital and the employees. A hotel company employed a woman as elevator operator at P35 per month and two meals a day under healthy and satisfactory conditions, and she did not risk to lose her position as she could not earn so much anywhere else. Her wages were less than the minimum fixed by a board created under a law for the purpose of fixing a minimum wage for women and children, with a penalty providing a punishment for a failure or refusal to pay the minimum wage fixed. The wage paid by the hotel company of P35 per month and two meals a day was less than the minimum wage fixed by said board. By reason of the order of said board, the hotel company, was about to discharge her, as it was unwilling to pay her more and could not give her employment at that salary without risking the penalty of a fine and imprisonment under the law. She brought action to enjoin the hotel company from discharging her upon the ground that the enforcement of the "Minimum Wage Act" would deprive her of her employment and wages without due process of law, and that she could not get as good a position anywhere else. The constitutionality of the Act was squarely presented to the Supreme Court of the United States for decision.
The Supreme Court of the United States held that said Act was void on the ground that the right to contract about one's own affairs was a part of the liberty of the individual under the constitution, and that while there was no such thing as absolute freedom of contract, and it was necessary subject to a great variety of restraints, yet none of the exceptional circumstances, which at times justify a limitation upon one's right to contract for his own services, applied in the particular case.
In the course of the decision in that case (Adkins vs. Children's Hospital of the District of Columbia, 261 U. S., 525), Mr. Justice Sutherland, after a statement of the fact and making reference to the particular law, said:
The statute now under consideration is attacked upon the ground that it authorizes an unconstitutional interference with the freedom of contract including within the guarantees of the due process clause of the 5th Amendment. That the right to contract about one's affairs is a part of the liberty of the individual protected by this clause is settled by the decision of this court, and is no longer open to question. Within this liberty are contracts of employment of labor. In making such contracts, generally speaking, the parties have an equal right to obtain from each other the best terms they can as the result of private bargaining. (Allgeyer vs. Louisiana, 165 U. S., 578; 591; Adair vs. United States, 208 U. S., 161; Muller vs. Oregon, 208 U. S., 412, 421.)
x x x x x x x x x
The law takes account of the necessities of only one party to the contract. It ignores the necessities of the employer by compelling him to pay not less than a certain sum, not only whether the employee is capable of earning it, but irrespective of the ability of his business to sustain the burden, generously leaving him, of course, the privilege of abandoning his business as an alternative for going on at a loss. Within the limits of the minimum sum, he is precluded, under penalty of fine and imprisonment, from adjusting compensation to the differing merits of his employees. It compels him to pay at least the sum fixed in any event, because the employee needs it, but requires no service of equivalent value from the employee. It (the law) therefore undertakes to solve but one-half of the problem. The other half is the establishment of a corresponding standard of efficiency; and this forms no part of the policy of the legislation, although in practice the former half without the latter must lead to ultimate failure, in accordance with the inexorable law that no one can continue indefinitely to take out more than he puts in without ultimately exhausting the supply. The law . . . takes no account of periods of distress and business depression, or crippling losses, which may leave the employer himself without adequate means of livelihood. To the extent that the sum fixed exceeds the fair value of the services rendered, it amounts to a compulsory exaction from the employer for the support of a partially indigent person, for whose condition there rests upon him no peculiar responsibility, and therefore, in effect, arbitrarily shifts to his shoulders a burden which, if it belongs to anybody, belongs to society as a whole.
The failure of this state which, perhaps more than any other, puts upon it the stamp of invalidity is that it exacts from the employer an arbitrary payment for a purpose and upon a basis having no casual connection with his business, or the contract, or the work the employee engages to do. The declared basis, as already pointed out, is not the value of the service rendered, but the extraneous circumstances that the employee needs to get a prescribed sum of money to insure her subsistence, health and morals. . . . The necessities of the employee are alone considered, and these arise outside of the employment, are the same when there is no employment, and as great in one occupation as in another. . . . In principle, there can be no difference between the case of selling labor and the case of selling goods. If one goes to the butcher, the baker, or grocer to buy food, he is morally entitled to obtain the worth of his money, but he is not entitle to more. If what he gets is worth what he pays, he is not justified in demanding more simply because he needs more; and the shopkeeper, having dealt fairly and honestly in that transaction, is not concerned in any peculiar sense with the question of his customer's necessities. Should a statute undertake to vest in a commission power to determine the quantity of food necessary for individual support, and require the shopkeeper, if he sell to the individual at all, to furnish that quantity at not more than a fixed maximum, it would undoubtedly fall before the constitutional test. The fallacy of any argument in support of the validity of such a statute would be quickly exposed. The argument in support of that now being considered is equally fallacious, though the weakness of it may not be so plain. . . .
It has been said that the particular statute before us is required in the interest of social justice for whose end freedom of contract may lawfully be subjected to restraint. The liberty of the individual to do as he pleases, even in innocent matters, is not absolute. That liberty must frequently yield to the common good, and the line beyond which the power of interference may not be pressed is neither definite nor unalterable, may be made to move, within limits not well defined, with changing needs and circumstances.
The late Mr. Justice Harlan, in the case of Adair vs. United States (208 U. S., 161, 174), said that the right of a person to sell his labor upon such terms as he deems proper is, in its essence, the same as the right of the purchaser of labor to prescribe the conditions upon which he will accept such labor from the person offering to sell. In all such particulars the employer and the employee have equality of right, and any legislation that disturbs that equality is an arbitrary interference with the liberty of contract, which no government can legally justify in a free land, under a constitution which provides that no person shall be deprived of his liberty without due process of law.
Mr. Justice Pitney, in the case of Coppage vs. Kansas (235 U. S., 1, 14), speaking for the Supreme Court of the United States, said: ". . . Included in the right of personal liberty and the right of private property — partaking of the nature of each — is the right to make contracts for the acquisition of property. Chief among such contracts is that of personal employment, by which labor and other services are exchange for money or other forms of property. If this right be struck down or arbitrarily interfered with, there is a substantial impairment of liberty in the long established constitutional sense. The right is as essential to the laborer as to the capitalist, to the poor as to the rich; for the vast majority of persons have no other honest way to begin to acquire property, save by working for money."
The right to liberty includes the right to enter into contracts and to terminate contracts. In the case of Gillespie vs. People (118 Ill., 176, 183-185) it was held that a statute making it unlawful to discharge an employee because of his connection with any lawful labor organization, and providing a penalty therefor, is void, since the right to terminate a contract, subject to liability to respond in a civil action for an unwarranted termination, is within the protection of the state and Federal constitutions which guarantee that no person shall be deprived of life, liberty or property without due process of law. The court said in part: ". . . One citizen cannot be compelled to give employment to another citizen, nor can anyone be compelled to be employed against his will. The Act of 1893, now under consideration, deprives the employer of the right to terminate his contract with his employee. The right to terminate such a contract is guaranteed by the organic law of the state. The legislature is forbidden to deprive the employer or employee of the exercise of that right. The legislature has no authority to pronounce the performance of an innocent act criminal when the public health, safety, comfort or welfare is not interfered with. The statute in question says that, if a man exercises his constitutional right to terminate a contract with his employee, he shall, without a hearing, be punished as for the commission of a crime. x x x x x x x x x
Liberty includes not only the right to labor, but to refuse to labor, and, consequently, the right to contract to labor or for labor, and to terminate such contracts, and to refuse to make such contracts. The legislature cannot prevent persons, who are sui juris, from laboring, or from making such contracts as they may see fit to make relative to their own lawful labor; nor has it any power by penal laws to prevent any person, with or without cause, from refusing to employ another or to terminate a contract with him, subject only to the liability to respond in a civil action for an unwarranted refusal to do that which has been agreed upon. Hence, we are of the opinion that this Act contravenes those provisions of the state and Federal constitutions, which guarantee that no person shall be deprived of life, liberty or property without due process of law.
The statute in question is exactly analogous to the "Minimum Wage Act" referred to above. In section 13 it will be seen that no person, firm, or corporation owning or managing a factory shop, or place of labor of any description, can make a contract with a woman without incurring the obligation, whatever the contract of employment might be, unless he also promise to pay to such woman employed as a laborer, who may become pregnant, her wages for thirty days before and thirty days after confinement. In other words, said section creates a term or condition in every contract made by every person, firm, or corporation with any woman who may, during the course of her employment, become pregnant, and a failure to include in said contract the terms fixed to a fine and imprisonment. Clearly, therefore, the law has deprived, every person, firm, or corporation owning or managing a factory, shop or place of labor of any description within the Philippine Islands, of his right to enter into contracts of employment upon such terms as he and the employee may agree upon. The law creates a term in every such contract, without the consent of the parties. Such persons are, therefore, deprived of their liberty to contract. The constitution of the Philippine Islands guarantees to every citizen his liberty and one of his liberties is the liberty to contract.
It is believed and confidently asserted that no case can be found, in civilized society and well- organized governments, where individuals have been deprived of their property, under the police power of the state, without compensation, except in cases where the property in question was used for the purpose of violating some legally adopted, or constitutes a nuisance. Among such cases may be mentioned: Apparatus used in counterfeiting the money of the state; firearms illegally possessed; opium possessed in violation of law; apparatus used for gambling in violation of law; buildings and property used for the purpose of violating laws prohibiting the manufacture and sale of intoxicating liquors; and all cases in which the property itself has become a nuisance and dangerous and detrimental to the public health, morals and general welfare of the state. In all of such cases, and in many more which might be cited, the destruction of the property is permitted in the exercise of the police power of the state. But it must first be established that such property was used as the instrument for the violation of a valid existing law. (Mugler vs. Kansas, 123 U. S., 623; Slaughter-House Cases, 16 Wall., [U. S.], 36; Butchers' Union, etc., Co. vs. Crescent City, etc., Co., 111 U. S., 746 John Stuart Mill — "On Liberty," 28, 29.)
Without further attempting to define what are the peculiar subjects or limits of the police power, it may safely be affirmed, that every law for the restraint and punishment of crimes, for the preservation of the public peace, health, and morals, must come within this category. But the state, when providing by legislation for the protection of the public health, the public morals, or the public safety, is subject to and is controlled by the paramount authority of the constitution of the state, and will not be permitted to violate rights secured or guaranteed by that instrument or interfere with the execution of the powers and rights guaranteed to the people under their law — the constitution. (Mugler vs. Kansas, 123 U. S., 623.)
The police power of the state is a growing and expanding power. As civilization develops and public conscience becomes awakened, the police power may be extended, as has been demonstrated in the growth of public sentiment with reference to the manufacture and sale of intoxicating liquors. But that power cannot grow faster than the fundamental law of the state, nor transcend or violate the express inhibition of the people's law — the constitution. If the people desire to have the police power extended and applied to conditions and things prohibited by the organic law, they must first amend that law.1awphil.net
It will also be noted from an examination of said section 13, that it takes no account of contracts for the employment of women by the day nor by the piece. The law is equally applicable to each case. It will hardly be contended that the person, firm or corporation owning or managing a factory, shop or place of labor, who employs women by the day or by the piece, could be compelled under the law to pay for sixty days during which no services were rendered.
It has been decided in a long line of decisions of the Supreme Court of the United States, that the right to contract about one's affairs is a part of the liberty of the individual, protected by the "due process of law" clause of the constitution. (Allgeyer vs. Louisiana, 165 U. S., 578, 591; New York Life Ins. Co. vs. Dodge, 246 U. S., 357, 373, 374; Coppage vs. Kansas, 236 U. S., 1, 10, 14; Adair vs. United States, 208 U. S., 161; Lochner vs. New York, 198 U. S.; 45, 49; Muller vs. Oregon, 208 U. S., 412, 421.)
The rule in this jurisdiction is, that the contracting parties may establish any agreements, terms, and conditions they may deem advisable, provided they are not contrary to law, morals or public policy. (Art. 1255, Civil Code.)
For all of the foregoing reasons, we are fully persuaded, under the facts and the law, that the provisions of section 13, of Act No. 3071 of the Philippine Legislature, are unconstitutional and void, in that they violate and are contrary to the provisions of the first paragraph of section 3 of the Act of Congress of the United States of August 29, 1916. (Vol. 12, Public Laws, p. 238.)
Therefore, the sentence of the lower court is hereby revoked, the complaint is hereby dismissed, and the defendant is hereby discharged from the custody of the law, with costs de oficio. So ordered.
Street, Malcolm, Avanceña, Villamor, Ostrand and Romualdez, JJ., concur.
G.R. No. 160876 January 18, 2008
(3)AZUCENA MAGALLANES, EVELYN BACOLOD and HEIRS OF JUDITH COTECSON, petitioners, vs. SUN YAT SEN ELEMENTARY SCHOOL, PAZ GO, ELENA CUBILLAN, WILLY ANG GAN TENG, BENITO ANG, and TEOTIMO TAN, respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Resolution of the Court of Appeals (Seventh Division) dated October 29, 2001 in CA-G.R. SP No. 67068; its Resolution of May 8, 2003 denying the motion for reconsideration; and its Resolution of October 10, 2003, denying the motion for reconsideration of the Resolution of May 8, 2003.
The facts of the case are:
Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented by her heirs), petitioners, Grace Gonzales, and Bella Gonzales were all employed as teachers in the Sun Yat Sen Elementary School in Surigao City.
Paz Go and Elena Cubillan are principals of the said school. Willy Ang Gan Teng and Benito Ang are its directors, while Teotimo Tan is the school treasurer. They are all respondents herein.
On May 22, 1994, respondents terminated the services of petitioners. Thus, on August 3, 1994, they filed with the Sub-Regional Arbitration Branch No. X, National Labor Relations Commission (NLRC), Butuan City, complaints against respondents for illegal dismissal, underpayment of wages, payment of backwages, 13th month pay, ECOLA, separation pay, moral damages, and attorney‘s fees. Likewise, on August 22, 1994, petitioner Cotecson filed a separate complaint praying for the same reliefs.
On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a Decision declaring that petitioners were illegally dismissed from the service and ordering respondents to reinstate them to their former or equivalent positions without loss of seniority rights, and to pay them their backwages, salary differential, 13th month pay differential, and service incentive leave benefits "as of June 20, 1995." Respondents were likewise directed to pay petitioners moral and exemplary damages.
On appeal by respondents, the NLRC, in its Decision dated February 20, 1996, reversed the Arbiter‘s judgment, holding that petitioners are contractual employees and that respondents merely allowed their contracts to lapse.
Petitioners timely filed a motion for reconsideration, but it was denied by the NLRC in its Resolution dated April 17, 1996.
Petitioners then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 50531.
On October 28, 1999, the Court of Appeals (Special Sixteenth Division) rendered its Decision,1 the dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED with respect to petitioners Cotecson, Bacolod, and Magallanes, the questioned Resolutions of the NLRC dated February 20 and April 1996 are hereby REVERSED and SET ASIDE as to them.
The Decision dated July 3, 1995 of the Labor Arbiter is hereby REINSTATED as to the said petitioners except as to the award of moral and exemplary damages which is hereby DELETED.
SO ORDERED.
The Court of Appeals (Special Sixteenth Division) ruled that in lieu of reinstatement, petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and backwages computed from the time of their illegal dismissal up to the time of the promulgation of its Decision." With respect to Bella Gonzales and Grace Gonzales, the Court of Appeals found that that they have not acquired the status of regular employees having rendered only two years of service. Consequently, their dismissal from the service is valid. Under the Manual of Regulations for Private Schools, only full-time teachers who have rendered three (3) years of consecutive service shall be considered permanent.
Respondents filed a motion for reconsideration but it was denied by the appellate court in its Resolution dated January 13, 2000.
Respondents then filed with this Court a petition for certiorari, docketed as G.R. No. 142270. However, it was dismissed for lack of merit in a Minute Resolution dated April 12, 2000. Their motion for reconsideration was denied with finality by this Court on July 19, 2000.
Meanwhile, on October 4, 2000, petitioners filed with the Labor Arbiter a motion for execution of his Decision as modified by the Court of Appeals.
In an Order dated January 8, 2001, the Labor Arbiter computed the petitioners‘ monetary awards reckoned from the time of their illegal dismissal in June 1994 up to October 29, 1999, pursuant to the Decision of the Court of Appeals (Special Sixteenth Division) in CA-G.R. SP No. 50531. Respondents interposed an appeal to the NLRC (docketed as NLRC Case No. M-006176-2001), contending that the computation should only be up to June 20, 1995 (the date indicated in the Labor Arbiter‘s Decision).
In an Order dated March 30, 2001, the NLRC modified the Labor Arbiter‘s computation and ruled that the monetary awards due to petitioners should be computed from June 1994 up to June 20, 1995.
Petitioners then filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 67068, raffled off to the Seventh Division. However, in its Resolution of October 29, 2001, the petition was dismissed outright for their failure to attach to their petition copies of the pleadings filed with the Labor Arbiter, thus:
No copies of the pleadings filed before the Labor Arbiter appear to have been attached to the petition in violation of the provisions of Section 1, Rule 65 and Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended, which requires that the petition: x x x shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution or ruling subject thereof, such material portions of the record as are referred to therein and other documents relevant or pertinent thereto x x x
WHEREFORE, the instant petition is DISMISSED OUTRIGHT pursuant to Section 3, Rule 46 of the 1997 Rules of Civil Procedure.
SO ORDERED.
Petitioners filed a motion for reconsideration, but they erroneously indicated therein the case number as CA-G.R. SP No. 50531, instead of CA-G.R. SP No. 67068. Their error was compounded by stating that the petition was with the Special Sixteenth Division, instead of the Seventh Division. As a result, the Special Sixteenth Division issued a Minute Resolution dated April 22, 2002 which merely noted the motion, thus:
The petitioners‘ motion for reconsideration dated November 22, 2001 and filed by registered mail on November 26, 2001 is merely noted since there was no October 29, 2001 resolution that was issued in this case which the motion for reconsideration seeks to be reconsidered.
On realizing their mistake, petitioners then filed with the Seventh Division a Motion to Transfer The Case to it.
In a Resolution promulgated on May 8, 2003, the Seventh Division denied petitioners‘ Motion To Transfer The Case on the ground, among others, that the motion is "non-existent" since it does not bear the correct case number, hence, could not be attached to the records of CA-G.R. SP No. 67068.
Unfazed, petitioners filed a motion for reconsideration, but it was denied by the Seventh Division in its Resolution of October 10, 2003.
At first glance, the petition before us appears to be a futile attempt to revive an extinct motion denied by the appellate court (Seventh Division) by reason of technicality. But in the interest of speedy administration of justice, we should not only delve in technicalities. We shall then address these two issues: (1) whether the Court of Appeals (Seventh Division) erred in holding that affixing a wrong docket number on a motion renders it "non-existent;" and (2) whether the issuance by the NLRC of the Order dated March 30, 2001, amending the amounts of separation pay and backwages, awarded by the Court of Appeals (Sixteenth Division) to petitioners and computed by the Labor Arbiter, is tantamount to grave abuse of discretion amounting to lack or excess of jurisdiction.
On the first issue, the Court of Appeals (Seventh Division) is correct when it ruled that petitioners‘ motion for reconsideration of its Resolution dated October 29, 2001 in CA-G.R. SP No. 67068 is "non-existent." Petitioners‘ counsel placed a wrong case number in their motion, indicating CA-G.R. SP No. 50531 (Special Sixteenth Division) instead of CA-G.R. SP No. 50531 (Seventh Division), the correct case number. In Llantero v. Court of Appeals,2 we ruled that where a pleading bears an erroneous docket number and thus "could not be attached to the correct case," the said pleading is, for all intents and purposes, "non-existent." As aptly stated by the Special Sixteenth Division, it has neither the duty nor the obligation to correct the error or to transfer the case to the Seventh Division. In Mega Land Resources and Development Corporation v. C-E Construction Corporation,3 which likewise involves a wrong docket number in a motion, we ruled that the duty to correct the mistake falls solely on the party litigant whose fault caused the anomaly. To hold otherwise would be to impose upon appellate courts the burden of being nannies to appellants, ensuring the absence of pitfalls that hinder the perfection of petitions and appeals. Strictly speaking, it is a dogma that the mistake or negligence of counsel binds the clients4 and appellate courts have no share in that burden.
However, we opt for liberality in the application of the rules to the instant case in light of the following considerations. First, the rule that negligence of counsel binds the client may be relaxed where adherence thereto would result in outright deprivation of the client‘s liberty or property or where the interests of justice so require.5 Second, this Court is not a slave of technical rules, shorn of judicial discretion – in rendering justice, it is guided by the norm that on the balance, technicalities take a backseat against substantive rights. Thus, if the application of the rules would tend to frustrate rather than promote justice, it is always within this Court‘s power to suspend the rules or except a particular case from its application.6
This case involving a labor dispute has dragged on for over a decade now. Petitioners have waited too long for what is due them under the law. One of the original petitioners, Judith Cotecson, died last September 28, 2003 and has been substituted by her heirs. It is time to write finis to this controversy. The Labor Code was promulgated to promote the welfare and well- being of the working man. Its spirit and intent mandate the speedy administration of justice, with least attention to technicalities but without sacrificing the fundamental requisites of due process.7
We recall that in CA-G.R. SP No. 50531, the Court of Appeals (Special Sixteenth Division) held that petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and backwages computed from the time of their illegal dismissal up to the time of the promulgation of this decision." This Decision was promulgated on October 28, 1999. The respondents‘ motion for reconsideration was denied by the Court of Appeals (Former Special Sixteenth Division) on January 13, 2000. On April 12, 2000, this Court dismissed respondents‘ petition for certiorari, docketed as G.R. No. 142270, and denied their motion for reconsideration with finality as early as July 19, 2000.
Clearly, the Decision in CA-G.R. SP No. 50531 had long become final and executory. The Labor Arbiter computed the monetary awards due to petitioners corresponding to the period from June 1994 to October 28, 1999, in accordance with the Decision of the Court of Appeals (Special Sixteenth Division). The award for backwages and money claims is in the total sum of P912,086.15.
It does not escape our attention that upon respondents‘ appeal from the Labor Arbiter‘s Order computing the benefits due to petitioners, the NLRC modified the final and executory Decision of the Court of Appeals (Special Sixteenth Division) when it decreed that the monetary award due to petitioners should be computed up to June 20, 1995 only (not October 28, 1999), thus, amounting to a lesser amount of P147,673.16.
We sustain petitioners‘ contention that the NLRC, in modifying the award of the Court of Appeals, committed grave abuse of discretion amounting to lack or excess of jurisdiction. Quasi- judicial agencies have neither business nor power to modify or amend the final and executory Decisions of the appellate courts. Under the principle of immutability of judgments, any alteration or amendment which substantially affects a final and executory judgment is void for lack of jurisdiction.8 We thus rule that the Order dated March 30, 2001 of the NLRC directing that the monetary award should be computed from June 1994, the date petitioners were dismissed from the service, up to June 20, 1995 only, is void.
WHEREFORE, we GRANT the petition. The challenged Resolutions dated October 29, 2001, May 8, 2003, and October 10, 2003 in CA-G.R. SP No. 67068 are REVERSED. The Order of the NLRC dated March 30, 2001 in NLRC Case No. M-006176-2001 is SET ASIDE. The Order of the Labor Arbiter dated January 8, 2001 is REINSTATED.
SO ORDERED.
Puno, C.J., Chairperson, Corona, Azcuna, Leonardo-de Castro, JJ., concur.
[G.R. No. 47800. December 2, 1940.]
(4)MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.
Maximo Calalang in his own behalf.
Solicitor General Ozaeta and Assistant Solicitor General Amparo for respondents Williams, Fragante and Bayan
City Fiscal Mabanag for the other respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No. 648; DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS AND SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO PROMULGATE RULES AND REGULATIONS. — The provisions of section 1 of Commonwealth Act No. 648 do not confer legislative power upon the Director of Public Works and the Secretary of Public Works and Communications. The authority therein conferred upon them and under which they promulgated the rules and regulations now complained of is not to determine what public policy demands but merely to carry out the legislative policy laid down by the National Assembly in said Act, to wit, "to promote safe transit upon, and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines" and to close them temporarily to any or all classes of traffic "whenever the condition of the road or the traffic thereon makes such action necessary or advisable in the public convenience and interest." The delegated power, if at all, therefore, is not the determination of what the law shall be, but merely the ascertainment of the facts and circumstances upon which the application of said law is to be predicated. To promulgate rules and regulations on the use of national roads and to determine when and how long a national road should be closed to traffic, in view of the condition of the road or the traffic thereon and the requirements of public convenience and interest, is an administrative function which cannot be directly discharged by the National Assembly. It must depend on the discretion of some other government official to whom is confided the duty of determining whether the proper occasion exists for executing the law. But it cannot be said that the exercise of such discretion is the making of the law.
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY. — Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the paramount police power of the state. Said Act, by virtue of which the rules and regulations complained of were promulgated, aims to promote safe transit upon and avoid obstructions on national roads, in the interest and convenience of the public. In enacting said law, therefore, the National Assembly was prompted by considerations of public convenience and welfare. It was inspired by a desire to relieve congestion of traffic, which is, to say the least, a menace to public safety. Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with personal liberty, with property, and with business and occupations. Persons and property may be subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S. v. Gomer Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the individual are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into slavery. The citizen should achieve the required balance of liberty and authority in his mind through education and, personal discipline, so that there may be established the resultant equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its preservation.
3. ID.; ID.; SOCIAL JUSTICE. — Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number."
D E C I S I O N
LAUREL, J.:
Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought before this court this petition for a writ of prohibition against the respondents, A. D. Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of Police of Manila.
It is alleged in the petition that the National Traffic Commission, in its resolution of July 17, 1940, resolved to recommend to the Director of Public Works and to the Secretary of Public Works and Communications that animal-drawn vehicles be prohibited from passing along Rosario Street extending from Plaza Calderon de la Barca to Dasmariñas Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending from the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from the date of the opening of the Colgante Bridge to traffic; that the Chairman of the National Traffic Commission, on July 18, 1940 recommended to the Director of Public Works the adoption of the measure proposed in the resolution aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which authorizes said Director of Public Works, with the approval of the Secretary of Public Works and Communications, to promulgate rules and regulations to regulate and control the use of and traffic on national roads; that on August 2, 1940, the Director of Public Works, in his first indorsement to the Secretary of Public Works and Communications, recommended to the latter the approval of the recommendation made by the Chairman of the National Traffic Commission as aforesaid, with the modification that the closing of Rizal Avenue to traffic to animal-drawn vehicles be limited to the portion thereof extending from the railroad crossing at Antipolo Street to Azcarraga Street; that on August 10, 1940, the Secretary of Public Works and Communications, in his second indorsement addressed to the Director of Public Works, approved the recommendation of the latter that Rosario Street and Rizal Avenue be closed to traffic of animal-drawn vehicles, between the points and during the hours as above indicated, for a period of one year from the date of the opening of the Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of Police of Manila have enforced and caused to be enforced the rules and regulations thus adopted; that as a consequence of such enforcement, all animal-drawn vehicles are not allowed to pass and pick up passengers in the places above-mentioned to the detriment not only of their owners but of the riding public as well.
It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of Public Works, with the approval of the Secretary of Public Works and Communications, is authorized to promulgate rules and regulations for the regulation and control of the use of and traffic on national roads and streets is unconstitutional because it constitutes an undue delegation of legislative power. This contention is untenable. As was observed by this court in Rubi v. Provincial Board of Mindoro (39 Phil, 660, 700), "The rule has nowhere been better stated than in the early Ohio case decided by Judge Ranney, and since followed in a multitude of cases, namely: ‘The true distinction therefore is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made.‘ (Cincinnati, W. & Z. R. Co. v. Comm‘rs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in Wayman v. Southard (10 Wheat., 1) may be committed by the Legislature to an executive department or official. The Legislature may make decisions of executive departments or subordinate officials thereof, to whom it has committed the execution of certain acts, final on questions of fact. (U.S. v. Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to give prominence to the ‘necessity‘ of the case."cralaw virtua1aw library
Section 1 of Commonwealth Act No. 548 reads as follows:jgc:chanrobles.com.ph
"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines, the Director of Public Works, with the approval of the Secretary of Public Works and Communications, shall promulgate the necessary rules and regulations to regulate and control the use of and traffic on such roads and streets. Such rules and regulations, with the approval of the President, may contain provisions controlling or regulating the construction of buildings or other structures within a reasonable distance from along the national roads. Such roads may be temporarily closed to any or all classes of traffic by the Director of Public Works and his duly authorized representatives whenever the condition of the road or the traffic thereon makes such action necessary or advisable in the public convenience and interest, or for a specified period, with the approval of the Secretary of Public Works and Communications."cralaw virtua1aw library
The above provisions of law do not confer legislative power upon the Director of Public Works and the Secretary of Public Works and Communications. The authority therein conferred upon them and under which they promulgated the rules and regulations now complained of is not to determine what public policy demands but merely to carry out the legislative policy laid down by the National Assembly in said Act, to wit, "to promote safe transit upon and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines" and to close them temporarily to any or all classes of traffic "whenever the condition of the road or the traffic makes such action necessary or advisable in the public convenience and interest." The delegated power, if at all, therefore, is not the determination of what the law shall be, but merely the ascertainment of the facts and circumstances upon which the application of said law is to be predicated. To promulgate rules and regulations on the use of national roads and to determine when and how long a national road should be closed to traffic, in view of the condition of the road or the traffic thereon and the requirements of public convenience and interest, is an administrative function which cannot be directly discharged by the National Assembly. It must depend on the discretion of some other government official to whom is confided the duty of determining whether the proper occasion exists for executing the law. But it cannot be said that the exercise of such discretion is the making of the law. As was said in Locke‘s Appeal (72 Pa. 491): "To assert that a law is less than a law, because it is made to depend on a future event or act, is to rob the Legislature of the power to act wisely for the public welfare whenever a law is passed relating to a state of affairs not yet developed, or to things future and impossible to fully know." The proper distinction the court said was this: "The Legislature cannot delegate its power to make the law; but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend. To deny this would be to stop the wheels of government. There are many things upon which wise and useful legislation must depend which cannot be known to the law-making power, and, must, therefore, be a subject of inquiry and determination outside of the halls of legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmeña, G.R. Nos. 46076 and 46077, promulgated June 12, 1939, and in Pangasinan Transportation v. The Public Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to observe that the principle of separation of powers has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate legislation," not only in the United States and England but in practically all modern governments. Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulations, and the increased difficulty of administering the laws, the rigidity of the theory of separation of governmental powers has, to a large extent, been relaxed by permitting the delegation of greater powers by the legislative and vesting a larger amount of discretion in administrative and executive officials, not only in the execution of the laws, but also in the promulgation of certain rules and regulations calculated to promote public interest.
The petitioner further contends that the rules and regulations promulgated by the respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an unlawful interference with legitimate business or trade and abridge the right to personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the paramount police power of the state.
Said Act, by virtue of which the rules and regulations complained of were promulgated, aims to promote safe transit upon and avoid obstructions on national roads, in the interest and convenience of the public. In enacting said law, therefore, the National Assembly was prompted by considerations of public convenience and welfare. It was inspired by a desire to relieve congestion of traffic. which is, to say the least, a menace to public safety. Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with personal liberty, with property, and with business and occupations. Persons and property may be subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S. v. Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the individual are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into slavery. The citizen should achieve the required balance of liberty and authority in his mind through education and personal discipline, so that there may be established the resultant equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its preservation.
The scope of police power keeps expanding as civilization advances. As was said in the case of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to exercise the police power is a continuing one, and a business lawful today may in the future, because of the changed situation, the growth of population or other causes, become a menace to the public health and welfare, and be required to yield to the public good." And in People v. Pomar (46 Phil., 440), it was observed that "advancing civilization is bringing within the police power of the state today things which were not thought of as being within such power yesterday. The development of civilization, the rapidly increasing population, the growth of public opinion, with an increasing desire on the part of the masses and of the government to look after and care for the interests of the individuals of the state, have brought within the police power many questions for regulation which formerly were not so considered."cralaw virtua1aw library
The petitioner finally avers that the rules and regulations complained of infringe upon the constitutional precept regarding the promotion of social justice to insure the well-being and economic security of all the people. The promotion of social justice, however, is to be achieved not through a mistaken sympathy towards any given group. Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex.
Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number."cralaw virtua1aw library
In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs against the petitioner. So ordered.
Avanceña, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.
(5)FERNANDO G. MANAYA, Petitioner, - versus -
ALABANG COUNTRY CLUB INCORPORATED, Respondent.
G.R. No. 168988
Present:
YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ.
Promulgated:
June 19, 2007 x------x
D E C I S I O N
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure filed by Fernando G. Manaya (petitioner) assailing: (1) the Decision[1] of the Court of Appeals in CA-G.R. SP No. 75417, dated 9 May 2005, granting the Petition of Alabang Country Club Inc. (respondent) and setting aside the Resolutions dated 30 August 2002 and 30 October 2002 of the National Labor Relations Commission (NLRC); and (2) the Resolution[2] of the Court of Appeals dated 21 July 2005 denying petitioner‘s Motion for Reconsideration of its earlier Decision.
The assailed decision of the Court of Appeals reversed the Resolution of the NLRC dismissing the appeal of the respondent for failure to perfect its appeal within the statutory period. Instead, the Court of Appeals ordered the NLRC to give due course to the appeal of the respondent.
The antecedent facts are:
Petitioner alleged that on 21 August 1989, he was initially hired by the respondent as a maintenance helper[3] receiving a salary of P198.00 per day. He was later designated as company electrician. He continued to work for the respondent until 22 August 1998 when the latter, through its Engineering and Maintenance Department Manager, Engr. Ronnie B. de la Cruz, informed him that his services were no longer required by the company.[4] Petitioner alleged that he was forcibly and illegally dismissed without cause and without due process on 22 August 1998.[5] Hence, he filed a Complaint[6] before the Labor Arbiter. He claimed that he had not committed any infraction of company policies or rules and that he was not paid his service incentive leave pay, holiday pay and 13th month pay. He further asserted that with his more or less nine years of service with the respondent, he had become a regular employee. He, therefore, demanded his reinstatement without loss of seniority rights with full backwages and all monetary benefits due him.[7]
In its Answer, respondent denied that petitioner was its employee. It countered by saying that petitioner was employed by First Staffing Network Corporation (FSNC), with which respondent had an existing Memorandum of Agreement dated 21 August 1989. Thus, by virtue of a legitimate job contracting, petitioner, as an employee of FSNC, came to work with respondent, first, as a maintenance helper, and subsequently as an electrician. Respondent prayed for the dismissal of the complaint insisting that petitioner had no cause of action against it.
In a Decision, dated 20 November 2000, the Labor Arbiter held:
WHEREFORE, premises considered, complainant Fernando G. Manaya is hereby found to be a regular employee of respondent Alabang Country Club, Inc., as aforediscussed. His dismissal from the service having been effected without just and valid cause and without the due observance of due process is hereby declared illegal. Consequently, respondent Alabang Country Club, Inc. is hereby ordered to reinstate complainant to his former position without loss of seniority rights and other benefits appurtenant thereto with full backwages in the partial amount of P160,724.48 as computed by Ms. Ma. Concepcion Manliclic and duly noted by Ms. Ma. Elena L. Estadilla, OIC-CEU, NCR-South Sector which computation has been made part of the records.
Furthermore, respondent Alabang Country Club, Inc. and First Staffing Network Corporation are hereby ordered to pay complainant, jointly and severally the following amounts by way of the following:
1. Service Incentive Leave 2,961.75 2. 13th Month Pay 15,401.10, and 3. Attorney‘s fees of ten (10%) percent of the total monetary award herein adjudged due him, within ten (10) days from receipt hereof.[8]
Respondent filed an Appeal with the NLRC which dismissed the same.[9] In a Resolution dated 30 August 2002, the NLRC held:
PREMISES CONSIDERED, instant appeal from the Decision of November 20, 2000 is hereby DISMISSED for failure to perfect appeal within the statutory period of appeal. The Decision is now final and executory.[10]
The NLRC found that respondent‘s counsel of record Atty. Angelina A. Mailon of Monsod, Valencia and Associates received a copy of the Labor Arbiter‘s Decision on or before 11 December 2000 as shown by the postal stamp or registry return card.[11] Said counsel did not file a withdrawal of appearance. Instead, a Memorandum of Appeal[12] dated 26 December 2000 was filed by the respondent‘s new counsel, Atty. Arizala of Tierra and Associates Law Office. Reckoned from 11 December 2000, the date of receipt of the Decision by respondent‘s previous counsel, the filing of the Memorandum of Appeal by its new counsel on 26 December 2000 was clearly made beyond the reglementary period. The NLRC held that the failure to perfect an appeal within the statutory period is not only mandatory but jurisdictional. The appeal having been belatedly filed, the Decision of the Labor Arbiter had become final and executory.[13]
Respondent filed a Motion for Reconsideration,[14] which the NLRC denied in a Resolution dated 30 October 2002.[15] The NLRC held that the decision of the Labor Arbiter has become final and executory on 28 November 2002; thus, Entry of Judgment, dated 8 January 2003[16] was issued.
Respondent filed a Petition for Certiorari[17] under Rule 65 of the Rules of Court before the Court of Appeals. In a Decision dated 9 May 2005,[18] the Court of Appeals granted the petition and ordered the NLRC to give due course to respondent‘s appeal of the Labor Arbiter‘s Decision. Petitioner filed a Motion for Reconsideration which was denied by the Court of Appeals in a Resolution[19] dated 21 July 2005.
Not to be dissuaded, petitioner filed the instant petition before this Court.
The issue for resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT ORDERED THE NLRC TO GIVE DUE COURSE TO THE APPEAL OF RESPONDENT ALABANG COUNTRY CLUB, INCORPORATED EVEN IF THE SAID APPEAL WAS FILED BEYOND THE REGLEMENTARY PERIOD OF TEN (10) DAYS FOR PERFECTING AN APPEAL.[20]
Essentially, the issue raised by the respondent before the NLRC in assailing the decision of the Labor Arbiter pertains to the finding of the Labor Arbiter that petitioner was a regular employee of the respondent.
In granting the petition, the Court of Appeals relied mainly on the case of Aguam v. Court of Appeals,[21] where this Court held that litigation must be decided on the merits and not on technicalities. The appellate court further justified the grant of respondent‘s petition by saying that the negligence of its counsel should not bind the respondent.[22]
The Court of Appeals gave credence to respondent‘s claim that its lawyer abandoned the case; hence, they were not effectively represented by a competent counsel. It further held that the respondent, upon its receipt of the Decision of the Labor Arbiter on 15 December 2000, filed its appeal on 26 December 2000 through a new lawyer. The appeal filed by respondent through its new lawyer on 26 December 2000 was well within the reglementary period, 25 December 2000 being a holiday.
It is axiomatic that when a client is represented by counsel, notice to counsel is notice to client. In the absence of a notice of withdrawal or substitution of counsel, the Court will rightly assume that the counsel of record continues to represent his client and receipt of notice by the former is the reckoning point of the reglementary period.[23] As heretofore adverted, the original counsel did not file any notice of withdrawal. Neither was there any intimation by respondent at that time that it was terminating the services of its counsel.
For negligence not to be binding on the client, the same must constitute gross negligence as to amount to a deprivation of property without due process.[24] This does not exist in the case at bar. Notice sent to counsel of record is binding upon the client and the neglect or failure of counsel to inform him of an adverse judgment resulting in the loss of his right to appeal is not a ground for setting aside a judgment, valid and regular on its face.[25]
Even more, it is respondent‘s duty as a client to be in touch with his counsel so as to be constantly posted about the case. It is mandated to inquire from its counsel about the status and progress of the case from time to time and cannot expect that all it has to do is sit back, relax and await the outcome of the case.[26]
On this score, we hold that the notice to respondent‘s counsel, Atty. Angelina A. Mailon on 11 December 2000 is the controlling date of the receipt of the decision.
We now come to the issue of whether or not the Court of Appeals properly gave due course to the petition of the respondent before it.
Of relevance is Section 1, Rule VI of the 2005 Revised Rules of the NLRC —
Section 1. PERIODS OF APPEAL. – Decisions, resolutions or orders of the Labor Arbiter shall be final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt thereof; and in case of decisions, resolutions or orders of the Regional Director of the Department of Labor and Employment pursuant to Article 129 of the Labor Code, within five (5) calendar days from receipt thereof. If the 10th or 5th day, as the case may be, falls on a Saturday, Sunday or holiday, the last day to perfect the appeal shall be the first working day following such Saturday, Sunday or holiday.
No motion or request for extension of the period within which to perfect an appeal shall be allowed.
Remarkably, in highly exceptional instances, we have allowed the relaxing of the rules on the application of the reglementary periods of appeal.[27] Thus:
In Ramos v. Bagasao, 96 SCRA 395, we excused the delay of four days in the filing of a notice of appeal because the questioned decision of the trial court was served upon appellant Ramos at a time when her counsel of record was already dead. Her new counsel could only file the appeal four days after the prescribed reglementary period was over. In Republic v. Court of Appeals, 83 SCRA 453, we allowed the perfection of an appeal by the Republic despite the delay of six days to prevent a gross miscarriage of justice since the Republic stood to lose hundreds of hectares of land already titled in its name and had since then been devoted for educational purposes. In Olacao v. National Labor Relations Commission, 177 SCRA 38, 41, we accepted a tardy appeal considering that the subject matter in issue had theretofore been judicially settled, with finality, in another case. The dismissal of the appeal would have had the effect of the appellant being ordered twice to make the same reparation to the appellee.[28]
We pronounced in those cases that technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.
In all these, the Court allowed liberal interpretation given the extraordinary circumstances that justify a deviation from an otherwise stringent rule.[29]
Clearly, emphasized in these cases is that the policy of liberal interpretation is qualified by the requirement that there must be exceptional circumstances to allow the relaxation of the rules.[30]
Absent exceptional circumstances, we adhere to the rule that certain procedural precepts must remain inviolable, like those setting the periods for perfecting an appeal or filing a petition for review, for it is doctrinally entrenched that the right to appeal is a statutory right and one who seeks to avail oneself of that right must comply with the statute or rules. The rules, particularly the requirements for perfecting an appeal within the reglementary period specified in the law, must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business. Furthermore, the perfection of an appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional and the failure to perfect the appeal renders the judgment of the court final and executory. Just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his/her case.[31]
In this particular case, we adhere to the strict interpretation of the rule for the following reasons:
Firstly, in this case, entry of judgment had already been made[32] which rendered the Decision of the Labor Arbiter as final and executory.
Secondly, it is a basic and irrefragable rule that in carrying out and in interpreting the provisions of the Labor Code and its implementing regulations, the workingman‘s welfare should be the primordial and paramount consideration. The interpretation herein made gives meaning and substance to the liberal and compassionate spirit of the law enunciated in Article 4 of the Labor Code that ―all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor.‖[33]
In the case of Bunagan v. Sentinel[34] we declared that:
[T]hat the perfection of an appeal within the statutory or reglementary period is not only mandatory, but jurisdictional, and failure to do so renders the questioned decision final and executory and deprives the appellate court of jurisdiction to alter the final judgment, much less to entertain the appeal. The underlying purpose of this principle is to prevent needless delay, a circumstance which would allow the employer to wear out the efforts and meager resources of the worker to the point that the latter is constrained to settle for less than what is due him. This Court has declared that although the NLRC is not bound by the technical rules of procedure and is allowed to be liberal in the interpretation of the rules in deciding labor cases, such liberality should not be applied where it would render futile the very purpose for which the principle of liberality is adopted. The liberal interpretation stems from the mandate that the workingman‘s welfare should be the primordial and paramount consideration. We see no reason in this case to waive the rules on the perfection of appeal.[35]
The Court is aware that the NLRC is not bound by the technical rules of procedure and is allowed to be liberal in the interpretation of rules in deciding labor cases. However, such liberality should not be applied in the instant case as it would render futile the very purpose for which the principle of liberality is adopted. The liberal interpretation in favor of labor stems from the mandate that the workingman‘s welfare should be the primordial and paramount consideration. x x x.[36] (Emphases supplied.)
Indeed, there is no room for liberality in the instant case ―as it would render futile the very purpose for which the principle of liberality is adopted.‖ As so rightfully enunciated, ―the liberal interpretation in favor of labor stems from the mandate that the workingman‘s welfare should be the primordial and paramount consideration.‖ This Court has repeatedly ruled that delay in the settlement of labor cases cannot be countenanced. Not only does it involve the survival of an employee and his loved ones who are dependent on him for food, shelter, clothing, medicine and education; it also wears down the meager resources of the workers to the point that, not infrequently, they either give up or compromise for less than what is due them.[37]
Without doubt, to allow the appeal of the respondent as what the Court of Appeals had done and remand the case to the NLRC would only result in delay to the detriment of the petitioner. In Narag v. National Labor Relations Commission,[38] citing Vir-Jen Shipping and Marine Services, Inc. v. National Labor Relations Commission,[39] we held that delay in most instances gives the employers more opportunity not only to prepare even ingenious defenses, what with well-paid talented lawyers they can afford, but even to wear out the efforts and meager resources of the workers, to the point that not infrequently the latter either give up or compromise for less than what is due them.[40]
Nothing is more settled in our jurisprudence than the rule that when the conflicting interest of loan and capital are weighed on the scales of social justice, the heavier influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the under- privileged worker.[41]
Thirdly, respondent has not shown sufficient justification to reverse the findings of the Labor Arbiter as affirmed by the NLRC.
Pertinent provision of the Labor Code provides:
ART. 223. APPEAL. – Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; (b) If the decision, order or award was secured through fraud or coercion, including graft an corruption; (c) If made purely on question of law; and (d) If serious errors in the finding of facts are raised which would cause grave or irreparable damage or injury to the appellant.
Under the above provision, to obtain a reversal of the decision of the Labor Arbiter, the respondent must be able to show in his appeal that any one of the above instances exists.
Respondent failed to show the existence of any of the above. A more than perfunctory reading of the Decision of the Labor Arbiter shows that the same is supported by the evidence on record.
Respondent narrates that it had a contract of services, first, with Supreme Construction (Supreme). Supreme assigned petitioner to work with the respondent starting as a painter and moving on to perform electrical jobs. Respondent terminated its contract with Supreme and entered into another contract of services with another job-contracting agency, First Staffing Network Corporation. Petitioner continued to work for the respondent which claimed that the former was supplied by FNSC to it as part of its contract to supply the manpower requirements of the respondent. Petitioner is not the employee of the respondent. He was directly hired first by Supreme then later by FNSC and deployed to work with the respondent based on the contract of services between respondent and these job-contracting agencies. All these considered, respondent insists that petitioner is therefore not its employee.
We do not agree to this submission of the respondent. The Labor Arbiter concluded otherwise and this finds support from the evidence, thus:
[R]espondent was not able to convincingly disprove complainant‘s claims that at the outset, he was directly hired by it as a maintenance helper on 21 August 1989. Although said respondent alleges that complainant was hired by its job contractor, Supreme Construction, it failed to submit in evidence the Contract of Service it had entered into in order to establish the entry of complainant as deployed by said company for his duties at Alabang Country Club, Inc. pursuant to the said Agreement. It can therefore be readily presumed that said respondent did not produce the said document because the production of the same will readily prove complainant‘s assertion of having been hired long before said contractor Supreme Construction entered into the picture. We have noted complainant‘s admission of having been later coerced to sign up with said Supreme Construction by respondent Alabang Country Club, Inc. which he did as he was told in his fear of losing his job.
As shown by respondent Alabang Country Club, Inc.‘s own evidence, it later terminated its contract of service or Memorandum of Agreement with Supreme Construction and entered into a new contract of service with respondent First Staffing Network Corporation effective on 16 June 1994. However by said respondent‘s own allegation, even with the absence of complainant‘s supposed direct employer Supreme Construction, he still remained in its employ until he signed up with respondent First Staffing Network Corporation on 11 February 1996. This indeed runs counter to the normal course of human experience such that when a contractor losses (sic) his contract of service he packs up along with all his employees, but in this case, complainant was not terminated from the service notwithstanding the expiration/termination of the contract of service of his alleged direct employer. Complainant remained working with respondent Alabang Country Club, Inc. despite the severance of the contractual relations between itself and Supreme Construction.
The initial Memorandum of Agreement entered into by respondents Alabang Country Club, Inc. and First Staffing Network Corporation was dated, 16 June 1994, and was apparently renewed thereafter providing under Article III – On Compensation thereof, the following, viz:
―3.01 For and in consideration of the performance by FIRST STAFFING of its obligations under this AGREEMENT, the CLIENT agrees to pay the former based on the schedule of billing rates which shall be specified in the Personnel Requisition Form signed by the CLIENT. The schedule of billing rates is as follows, to wit:
―BILLING RATES/HOUR PLUS 10% VALUE ADDED TAX
―Covered Pos.
A B C Waiters Accounting Supervisor Janitors Data Encoders Bag Boy Gen. Clerks Stewards Secretary Cook Helpers Receptionist Messengers Secretary Cashier‖ ―xxx.‖
Nowhere, does complainant‘s position of electrician appear as covered in the said contract. Finally, suffice it for Us to stress that the said contract covers almost all of respondent‘s Alabang Country Club, Inc.‘s workforce including those whose jobs or activities are directly related to said respondents‘ business, emphasizing in no uncertain terms that respondent First Staffing Network Corporation was not a truly bonafide job contractor, as it did not contract out specific service but merely supplied work personnel, a clear indication, that it was engaged in a ―job – only‖ contracting which is prohibited by law.
Besides, the said respondent First Staffing Network Corporation failed to prove that it is a bonafide job contractor by showing that it had an adequate capital or investment in tools, equipments and machineries and premises for that matter, and so did respondent Alabang Country Club, Inc. fail to establish the same. For that matter, respondent First Staffing Network Corporation had waived its right to present any evidence in its favor in this case.
Obviously, herein respondent Alabang Country Club, Inc. actually resorted to contracting out all the positions for its workforce in violation of law in its desire to circumvent said employees‘ rights as regular employees under the law.[42]
The existence of an employer-employee relationship between petitioner and respondent is fortified by the fact that during his stint with the respondent, petitioner was given the opportunity to attend a seminar/training on refrigeration and air conditioning from 16 January 1995 to 18 February 1995.[43] A certificate of participation signed by three of respondent‘s officials was issued to the petitioner.
Equally significant is Article 106 of the Labor Code, as amended, which provides that legitimate job contracting is permitted, but labor-only contracting is prohibited. The said provision reads:
Art. 106. CONTRACTOR OR SUBCONTRACTOR. – Whenever an employer enters into a contract with another person for the performance of the former‘s work, the employees of the contractor and of the latter‘s subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor – only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is ―labor–only‖ contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate and labor – only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. - In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor and subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor–only contracting. – Labor-only contracting is hereby declared prohibited. For this purpose, labor – only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal, or ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248(c) of the Labor Code, as amended.
―Substantial capital or investment‖ refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipments, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The ―right to control‖ shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his on methods and without being subject to the control of the employer, except only as to the results of the work.
In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees‘ wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. [44]
Despite respondent‘s disavowal of the existence of the employer-employee relationship between it and petitioner and its insistence that petitioner is an employee first, of Supreme and subsequently, of FSNC, the totality of the facts and surrounding circumstances of the case convey otherwise.
On this point, the law is clear-cut. In labor–only contracting, the statute creates an employer–employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor–only contractor as if such employees had been directly employed by the principal employer.
The Labor Code and its implementing rules empower the Labor Arbiter to be the trier of facts in labor cases. Much reliance is placed on findings of facts of the Arbiter having had the opportunity to talk to and discuss with the parties and their witnesses the factual matters of the case during the conciliation phase.[45] We, thus, give full credence to the findings of facts of the labor arbiter.
WHEREFORE, premises considered, the Petition is GRANTED. The Decision of the Court of Appeals dated 9 May 2005 and its Resolution dated 21 July 2005 is REVERSED. The Decision of the Labor Arbiter dated 20 November 2000 is REINSTATED. Let the records of the above-entitled case be remanded to the Labor Arbiter for immediate execution of the Decision. No costs.
SO ORDERED.
G.R. No. 162994 September 17, 2004
(6)DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO WELLCOME PHILIPPINES, INC., Respondent.
R E S O L U T I O N
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co- employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employee‘s employment with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxo‘s products in the Camarines Sur-Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals3 (Astra), a competitor of Glaxo. Bettsy was Astra‘s Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecson‘s superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecson‘s superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsy‘s employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsy‘s separation from her company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxo‘s milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxo‘s "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxo‘s reconsideration regarding his transfer and brought the matter to Glaxo‘s Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half (½) month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo‘s policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxo‘s right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxo‘s policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate court‘s Decision, but the motion was denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMB‘s finding that the Glaxo‘s policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and training sessions.6
Petitioners contend that Glaxo‘s policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees‘ right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited from promoting respondent‘s products which were competing with Astra‘s products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecson‘s reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based on valid grounds.11
According to Glaxo, Tecson‘s marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astra‘s products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxo‘s enforcement of the foregoing policy in Tecson‘s case was a valid exercise of its management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship with an employee of a competitor company would be detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecson‘s reassignment to another sales area and his exclusion from seminars regarding respondent‘s new products did not amount to constructive dismissal.
It claims that in view of Tecson‘s refusal to resign, he was relocated from the Camarines Sur- Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecson‘s family. Since Tecson‘s hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses.15
In addition, Glaxo avers that Tecson‘s exclusion from the seminar concerning the new anti- asthma drug was due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecson‘s receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxo‘s policy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecson‘s contract of employment with Glaxo being questioned by petitioners provides:
…
10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy.
…17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected: a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit. b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses. c. To avoid outside employment or other interests for income which would impair their effective job performance. d. To consult with Management on such activities or relationships that may lead to conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with co- employees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxo‘s policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies upon Glaxo‘s employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964.23 The Court pointed out that the policy was applied to men and women equally, and noted that the employer‘s business was highly competitive and that gaining inside information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful.25 The only exception occurs when the state29 in any of its manifestations or actions has been found to have become entwined or involved in the wrongful private conduct.27 Obviously, however, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employee‘s personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of respondent‘s Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners‘ contention that Tescon was constructively dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City- Surigao City-Agusan del Sur sales area, and when he was excluded from attending the company‘s seminar on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.30 None of these conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioner‘s transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus valid…Note that [Tecson‘s] wife holds a sensitive supervisory position as Branch Coordinator in her employer- company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astra‘s inventory…she therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioner‘s sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the other‘s market strategies in the region would be inevitable. [Management‘s] appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis…31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed by a medical representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecson‘s supervisors at Glaxo constantly reminded him about its effects on his employment with the company and on the company‘s interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecson‘s transfer, Glaxo even considered the welfare of Tecson‘s family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.
G.R. No. 71813 July 20, 1987
(7)ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA, petitioners, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO QUITCO and RICARDO DIONELE, SR., respondents.
PARAS, J.:
This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry of Labor and Employment affirming the July 16, 1982 Decision of the Labor Arbiter, which ruled in favor of granting separation pay to private respondents.
On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in Monteverde, Negros Occidental, known as Hacienda Danao-Ramona, for a period of ten (10) years, renewable, at her option, for another ten (10) years (Rollo, pp. 16-20).
On August 13, 1970, she opted to extend the lease contract for another ten (10) years (Ibid, pp. 26-27).
During the existence of the lease, she employed the herein private respondents. Private respondent Ricardo Dionele, Sr. has been a regular farm worker since 1949 and he was promoted to Cabo in 1963. On the other hand, private respondent Romeo Quitco started as a regular employee in 1968 and was promoted to Cabo in November of the same year.
Upon the expiration of her leasehold rights, petitioner dismissed private respondents and turned over the hacienda to the owners thereof on October 5, 1981, who continued the management, cultivation and operation of the farm (Rollo, pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against the petitioner at the Ministry of Labor and Employment, Bacolod City District Office, for overtime pay, illegal dismissal and reinstatement with backwages. After the parties had presented their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a Decision dated July 16, 1982 (Ibid, pp. 29- 31), ruled that the dismissal is warranted by the cessation of business, but granted the private respondents separation pay. Pertinent portion of the dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation not by reason of business reverses or losses. Accordingly, the award of termination pay in complainants' favor is warranted.
WHEREFORE, the respondent is hereby ordered to pay the complainants separation pay at the rate of half-month salary for every year of service, a fraction of six (6) months being considered one (1) year. (Rollo pp. 29-30)
On appeal on August 11, 1982, the National Labor Relations Commission, in a Resolution dated April 8, 1985 (Ibid, pp. 3940), affirmed the decision and dismissed the appeal for lack of merit.
On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but the same was denied in a Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid, pp. 3-8).
The First Division of this Court, in a Resolution dated September 16, 1985, resolved to require the respondents to comment (Ibid, p. 58). In compliance therewith, private respondents filed their Comment on October 23, 1985 (Ibid, pp. 53-55); and the Solicitor General on December 17, 1985 (Ibid, pp. 71-73-B).
On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of private and public respondents (Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986, resolved to give due course to the petition; and to require the parties to submit simultaneous memoranda (Ibid., p. 83). In compliance therewith, the Solicitor General filed his Memorandum on June 18, 1986 (Ibid, pp. 89-94); and petitioner on July 23, 1986 (Ibid, pp. 96-194).
The petition is devoid of merit.
The sole issue in this case is —
WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY.
Petitioner claims that since her lease agreement had already expired, she is not liable for payment of separation pay. Neither could she reinstate the complainants in the farm as this is a complete cessation or closure of a business operation, a just cause for employment termination under Article 272 of the Labor Code.
On the other hand, the legal basis of the Labor Arbiter in granting separation pay to the private respondents is Batas Pambansa Blg. 130, amending the Labor Code, Section 15 of which, specifically provides:
Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read as follows: x x x x x x x x x
Art. 284. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establisment or undertaking unless the closing is for the purpose of circumventing the provisions of this title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.1avvphi1
There is no question that Article 284 of the Labor Code as amended by BP 130 is the law applicable in this case.
Article 272 of the same Code invoked by the petitioner pertains to the just causes of termination. The Labor Arbiter does not argue the justification of the termination of employment but applied Article 284 as amended, which provides for the rights of the employees under the circumstances of termination.
Petitioner then contends that the aforequoted provision violates the constitutional guarantee against impairment of obligations and contracts, because when she leased Hacienda Danao- Ramona on June 27, 1960, neither she nor the lessor contemplated the creation of the obligation to pay separation pay to workers at the end of the lease.
Such contention is untenable.
This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA 368-369 [1977]) where the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The prohibition is not to read with literal exactness like a mathematical formula for it prohibits unreasonable impairment only. In spite of the constitutional prohibition the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguard said interest may modify or abrogate contracts already in effect. For not only are existing laws read into contracts in order to fix the obligations as between the parties but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All contracts made with reference to any matter that is subject to regulation under the police power must be understood as made in reference to the possible exercise of that power. Otherwise, important and valuable reforms may be precluded by the simple device of entering into contracts for the purpose of doing that which otherwise maybe prohibited. ...
In order to determine whether legislation unconstitutionally impairs contract of obligations, no unchanging yardstick, applicable at all times and under all circumstances, by which the validity of each statute may be measured or determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the people, and when the means adopted must be legitimate, i.e. within the scope of the reserved power of the state construed in harmony with the constitutional limitation of that power. (Citing Basa vs. Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas [FOITAF] [L- 27113], November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers whose employment is terminated because of the closure of establishment and reduction of personnel. Without said law, employees like private respondents in the case at bar will lose the benefits to which they are entitled — for the thirty three years of service in the case of Dionele and fourteen years in the case of Quitco. Although they were absorbed by the new management of the hacienda, in the absence of any showing that the latter has assumed the responsibilities of the former employer, they will be considered as new employees and the years of service behind them would amount to nothing.
Moreover, to come under the constitutional prohibition, the law must effect a change in the rights of the parties with reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment benefits to farm hands who were not parties to petitioner's lease contract with the owner of Hacienda Danao-Ramona. That contract cannot have the effect of annulling subsequent legislation designed to protect the interest of the working class.
In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration. (Volshel Labor Union v. Bureau of Labor Relations, 137 SCRA 43 [1985]). It is the kind of interpretation which gives meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor Code which states that "all doubts in the implementation and interpretation of the provisions of this Code including its implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor. (Sarmiento v. Employees Compensation Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees Compensation Commission, 103 SCRA 329; Acosta v. Employees Compensation Commission, 109 SCRA 209).
PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July 16, 1982 Decision of the Labor Arbiter and the April 8, 1985 Resolution of the Ministry of Labor and Employment are hereby AFFIRMED.
SO ORDERED.
G.R. No. 159832 May 5, 2006
(8)MERCEDITA ACUÑA, MYRNA RAMONES, and JULIET MENDEZ, Petitioners, vs. HON. COURT OF APPEALS and JOIN INTERNATIONAL CORPORATION and/or ELIZABETH ALAÑON, Respondents.
D E C I S I O N
QUISUMBING, J.:
This petition seeks the review and reversal of the Court of Appeals‘ Decision1 dated January 27, 2003, in CA-G.R. SP No. 70724, entitled Join International Corporation and/or Elizabeth Alañon v. National Labor Relations Commission (Third Division), Mercedita Acuña, Juliet Mendez, and Myrna Ramones, setting aside the resolutions of the NLRC and dismissing the complaint of petitioners.
Petitioners are Filipino overseas workers deployed by private respondent Join International Corporation (JIC), a licensed recruitment agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in Taiwan, Republic of China, under a uniformly-worded employment contract for a period of two years. Herein private respondent Elizabeth Alañon is the president of Join International Corporation.
Sometime in September 1999, petitioners filed with private respondents applications for employment abroad. They submitted their passports, NBI clearances, medical clearances and other requirements and each paid a placement fee of P14,850, evidenced by official receipts2 issued by private respondents.
After their papers were processed, petitioners claimed they signed a uniformly-worded employment contract3 with private respondents which stipulated that they were to work as machine operators with a monthly salary of NT$15,840.00, exclusive of overtime, for a period of two years.
On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the job site, a factory owned by 3D, they were made to sign another contract which stated that their salary was only NT$11,840.00.4 They were likewise informed that the dormitory which would serve as their living quarters was still under construction. They were requested to temporarily bear with the inconvenience but were assured that their dormitory would be completed in a short time.5
Petitioners alleged that they were brought to a "small room with a cement floor so dirty and smelling with foul odor (sic)". Forty women were jampacked in the room and each person was given a pillow. Since the ladies‘ comfort room was out of order, they had to ask permission to use the men‘s comfort room.6 Petitioners claim they were made to work twelve hours a day, from 8:00 p.m. to 8:00 a.m.
The petitioners averred that on December 16, 1999, due to unbearable working conditions, they were constrained to inform management that they were leaving. They booked a flight home, at their own expense. Before they left, they were made to sign a written waiver.7 In addition, petitioners were not paid any salary for work rendered on December 11-15, 1999.8
Immediately upon arrival in the Philippines, petitioners went to private respondents‘ office, narrated what happened, and demanded the return of their placement fees and plane fare. Private respondents refused.
On December 28, 1999, private respondents offered a settlement. Petitioner Mendez received P15,080.9 The next day, petitioners Acuña and Ramones went back and received P13,64010 and P16,200,11 respectively. They claim they signed a waiver, otherwise they would not be refunded.12
On January 14, 2000, petitioners Acuña and Mendez invoking Republic Act No. 8042,13 filed a complaint for illegal dismissal and non-payment/underpayment of salaries or wages, overtime pay, refund of transportation fare, payment of salaries/wages for 3 months, moral and exemplary damages, and refund of placement fee before the National Labor Relations Commission (NLRC). Petitioner Ramones filed her complaint on January 20, 2000.
The Labor Arbiter ruled in favor of petitioners, declaring that Myrna Ramones, Juliet Mendez and Mercedita Acuña did not resign voluntarily from their jobs. Thus, private respondents were ordered to pay jointly and severally, in Philippine Peso, at the rate of exchange prevailing at the time of payment, the following:
1. MERCEDITA ACUÑA a. Unexpired Portion NT$95,000.00 b. Salary for 4 days 2,436.92 c. Overtime pay for 4 hrs. in 4 days 1,523.07
NT$98,960.00 * d. Refund of placement fee PHP45,000.00 (Less: Amount received per Quitclaim) 13,640.00 31,360.00 e. Moral damages 25,000.00 f. Exemplary damages 40,000.00
2. JULIET C. MENDEZ a. Unexpired Portion NT$95,000.00 b. Salary for 4 days 2,436.92 c. Overtime pay for 4 hrs. in 4 days 1,523.07
NT$98,960.00 * d. Refund of placement fee PHP45,000.00 (Less: Amount received per Quitclaim) 15,080.0014 29,920.00 e. Moral damages 25,000.00 f. Exemplary damages 40,000.00
3. MYRNA R. RAMONES a. Unexpired Portion NT$95,000.00 b. Salary for 4 days 2,436.92 c. Overtime pay for 4 hrs. in 4 days 1,523.07
NT$98,960.00 * d. Refund of placement fee PHP45,000.00 (Less: Amount received per Quitclaim) 16,200.00 28,800.00 e. Moral damages 25,000.00 f. Exemplary damages 40,000.0015 The Labor Arbiter likewise ordered the payment of attorney‘s fees equivalent to ten percent (10%) of the award which totaled NT$296,880.00 and P285,080.00 The other claims were dismissed for lack of merit.
Private respondents thereafter appealed the decision to the National Labor Relations Commission. The NLRC ruled that the inclusion of Alañon as party respondent in this case had no basis since respondent JIC, being a juridical person, has a legal personality, separate and distinct from its officers.16 It partially granted the appeal and ordered that the amounts of P15,080, P13,640 and P16,200 received under the quitclaim by Mendez, Acuña and Ramones, respectively, be deducted from their respective awards. They were awarded attorney‘s fees equivalent to ten percent (10%) of their awarded labor-standards claims for unpaid wages and overtime pays. No moral and exemplary damages and placement fees were awarded.17 Private respondents‘ motion for partial reconsideration was denied.
On appeal, the Court of Appeals ruled for private respondents. It set aside the resolutions dated February 26, 2002 and December 10, 2001 of the NLRC and dismissed the complaint of petitioners.18
In their petition before us, petitioners raise the following issues:
I
Whether or not public respondent court of appeals erred and/or GRAVELY abused its discretion, amounting to lack of jurisdiction, in taking cognizance of the petition for certiorari filed by the private respondents, despite the fact that the nlrc‘s resolution of December 10, 2001 had already become final and executory, private respondents‘ motion for partial reconsideration with the nlrc having been filed out of time
II
Alternatively, whether or not public respondent court of appeals erred in setting aside the resolutions of the nlrc, and in dismissing the complaint of the petitioners.19
Prefatorily, petitioners aver that private respondents‘ Verification and Certification of the Petition for Certiorari stated that the copy of the resolution of the NLRC dated December 10, 2001 was received on January 4, 2002 and its partial motion for reconsideration filed on January 29, 2002, or 15 days beyond the reglementary period. However, a perusal of the Partial Motion for Reconsideration20 filed by private respondents show that the NLRC Resolution dated December 10, 2001 was in fact received by private respondents on January 24, 2002 and not on January 4, 2002. Hence, the appeal was properly filed within the 10-day reglementary period.
In this petition the issue left for resolution is whether petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits plus damages.
The Labor Arbiter and the NLRC found that petitioners admitted they resigned from their jobs without force, coercion, intimidation and pressure from private respondents‘ principal abroad.21
According to the Labor Arbiter, while it may be true that petitioners were not coerced into giving up their jobs, the deplorable, oppressive and sub-human working conditions drove petitioners to resign. In effect, according to the Labor Arbiter, the petitioners did not voluntarily resign.22
The NLRC also ruled that there was constructive dismissal since working under said conditions was unbearable.23
As we have held previously, constructive dismissal covers the involuntary resignation 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.24
In this case, the appellate court found that petitioners did not deny that the accommodations were not as homely as expected. In the petitioners‘ memorandum, they admitted that they were told by the principal, upon their arrival, that the dormitory was still under construction and were requested to bear with the temporary inconvenience and the dormitory would soon be finished. We likewise note that petitioners did not refute private respondents‘ assertion that they had deployed approximately sixty other workers to their principal, and to the best of their knowledge, no other worker assigned to the same principal has resigned, much less, filed a case for illegal dismissal.25
To our mind these cited circumstances do not reflect malice by private respondents nor do they show the principal‘s intention to subject petitioners to unhealthy accommodations. Under these facts, we cannot rule that there was constructive dismissal.
Private respondents also claim that petitioners were not entitled to overtime pay, since they had offered no proof that they actually rendered overtime work. Petitioners, on the other hand, say that they could not show any documentary proof since their employment records were all in the custody of the principal employer. It was sufficient, they claim, that they alleged the same with particularity.
On this matter, we rule for the petitioners. The claim for overtime pay should not have been disallowed because of the failure of the petitioners to substantiate them.26 The claim of overseas workers against foreign employers could not be subjected to same rules of evidence and procedure easily obtained by complainants whose employers are locally based.27 While normally we would require the presentation of payrolls, daily time records and similar documents before allowing claims for overtime pay, in this case, that would be requiring the near-impossible.
To our mind, it is private respondents who could have obtained the records of their principal to refute petitioners‘ claim for overtime pay. By their failure to do so, private respondents waived their defense and in effect admitted the allegations of the petitioners.
It is a time-honored rule that in controversies between a worker and his employer, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the worker‘s favor.28 The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.29 Accordingly, we rule that private respondents are solidarily liable with the foreign principal for the overtime pay claims of petitioners.
On the award of moral and exemplary damages, we hold that such award lacks legal basis. Moral and exemplary damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.30 The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence, for the law always presumes good faith.31 Petitioners allege they suffered humiliation, sleepless nights and mental anguish, thinking how they would pay the money they borrowed for their placement fees.32 Even so, they failed to prove bad faith, fraud or ill motive on the part of private respondents.33 Moral damages cannot be awarded. Without the award of moral damages, there can be no award of exemplary damages, nor attorney‘s fees.34
Quitclaims executed by the employees are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the workers‘ legal rights, considering the economic disadvantage of the employee and the inevitable pressure upon him by financial necessity.35 Nonetheless, the so-called "economic difficulties and financial crises" allegedly confronting the employee is not an acceptable ground to annul the compromise agreement36 unless it is accompanied by a gross disparity between the actual claim and the amount of the settlement.37
A perusal of the records reveals that petitioners were not in any way deceived, coerced or intimidated into signing a quitclaim waiver in the amounts of P13,640, P15,080 and P16,200 respectively. Nor was there a disparity between the amount of the quitclaim and the amount actually due the petitioners.
Conformably then the petitioners are entitled to the following amounts in Philippine Peso at the rate of exchange prevailing at the time of payment:
1. MERCEDITA ACUÑA a. Salary for 4 days NT $ 2,436.92 b. Overtime pay for 4 hours in 4 days 1,523.07 NT $ 3,959.99
2. JULIET C. MENDEZ a. Salary for 4 days
NT $ 2,436.92 b. Overtime pay for 4 hours in 4 days
1,523.07 NT $ 3,959.99
3. MYRNA R. RAMONES a. Salary for 4 days
NT $ 2,436.92 b. Overtime pay for 4 hours in 4 days
1,523.07 NT $ 3,959.99 According to the Bangko Sentral Treasury Department, the prevailing exchange rates on December 1999 was NT$1 to P1.268805. Hence, after conversion to Philippine pesos, the amount of the quitclaim paid to petitioners was actually higher than the amount due them.
WHEREFORE, the petition is DISMISSED, without prejudice to the filing of illegal recruitment complaint against the respondents pursuant to Section 6(i) of The Migrant Workers and Overseas Filipino Act of 1995 (Rep. Act No. 8042).
SO ORDERED.
LEONARDO A. QUISUMBING Associate Justice
WE CONCUR:
ANTONIO T. CARPIO Associate Justice CONCHITA CARPIO MORALES Asscociate Justice DANTE O. TINGA Associate Justice PRESBITERO J. VELASCO, JR. Asscociate Justice A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
LEONARDO A. QUISUMBING Associate Justice Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson‘s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
ARTEMIO V. PANGANIBAN Chief Justice
G.R. No. 144664 March 15, 2004
(9)ASIAN TRANSMISSION CORPORATION, petitioner, vs. The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working Conditions, respondents.
D E C I S I O N
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of Appeals denying its petition to annul 1) the March 11, 1993 "Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE) entitled "Workers‘ Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998 Decision3 of the Panel of Voluntary Arbitrators ruling that the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18, 19984 Resolution of the Panel of Voluntary Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are entitled to 200% of their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the same day, this Department is of the view that the covered employees are entitled to at least two hundred percent (200%) of their basic wage even if said holiday is unworked. The first 100% represents the payment of holiday pay on April 9, 1993 as Good Friday and the second 100% is the payment of holiday pay for the same date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday and Araw ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement (CBA) existing between petitioner and BATLU, the controversy was submitted for voluntary arbitration. x x x x On July 31, 1998, the Office of the Voluntary Arbitrator rendered a decision directing petitioner to pay its covered employees "200% and not just 100% of their regular daily wages for the unworked April 9, 1998 which covers two regular holidays, namely, Araw ng Kagitignan and Maundy Thursday." (Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Year‘s Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of December and the day designated by law for holding a general election, which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular holidays are now:
1. New Year‘s Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary Arbitrator held that Article 94 of the Labor Code provides for holiday pay for every regular holiday, the computation of which is determined by a legal formula which is not changed by the fact that there are two holidays falling on one day, like on April 9, 1998 when it was Araw ng Kagitingan and at the same time was Maundy Thursday; and that that the law, as amended, enumerates ten regular holidays for every year should not be interpreted as authorizing a reduction to nine the number of paid regular holidays "just because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also Holy Friday or Maundy Thursday."
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator, holding that the Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law governing the relations between them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they may fall in any calendar year, as paid legal holidays during the effectivity of the CBA and that "[t]here is no condition, qualification or exception for any variance from the clear intent that all holidays shall be compensated."5
The Court of Appeals further held that "in the absence of an explicit provision in law which provides for [a] reduction of holiday pay if two holidays happen to fall on the same day, any doubt in the interpretation and implementation of the Labor Code provisions on holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
I
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY THE PARTIES THEMSELVES
II
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF THE SAID EXPLANATORY BULLETIN
III
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE ADMITTING THAT THE SAID BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL, OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE MAY PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW
V
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING THAT THE SAME POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE CONTRARY
VI
WHETHER OR NOT RESPONDENTS‘ ACTS WILL DEPRIVE PETITIONER OF PROPERTY WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL PROTECTION OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the present petition for certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari. If the aggrieved party fails to do so within the reglementary period, and the decision accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration. x x x
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious effects of the judgment and the acts of the lower court or agency. In this case, appeal was not only available but also a speedy and adequate remedy.6
The records of the case show that following petitioner‘s receipt on August 18, 2000 of a copy of the August 10, 2000 Resolution of the Court of Appeals denying its Motion for Reconsideration, it filed the present petition for certiorari on September 15, 2000, at which time the Court of Appeals decision had become final and executory, the 15-day period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford protection to labor.7 Its purpose is not merely "to prevent diminution of the monthly income of the workers on account of work interruptions. In other words, although the worker is forced to take a rest, he earns what he should earn, that is, his holiday pay."8 It is also intended to enable the worker to participate in the national celebrations held during the days identified as with great historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of the Filipino people, promote national identity, and deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the contributions of the working class to the development of the nation, while the religious holidays designated in Executive Order No. 203 allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of ten paid regular holidays.9 The provision is mandatory,10 regardless of whether an employee is paid on a monthly or daily basis.11 Unlike a bonus, which is a management prerogative,12 holiday pay is a statutory benefit demandable under the law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that two holidays fall on the same date should not operate to reduce to nine the ten holiday pay benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the law is clear and unequivocal, the law must be taken to mean exactly what it says.13 In the case at bar, there is nothing in the law which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine when two holidays fall on the same day.
Petitioner‘s assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11, 1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees are entitled to an additional day‘s pay if a holiday falls on a Sunday. This Court, in answering the issue in the negative, observed that in fixing the monthly salary of its employees, Wellington took into account "every working day of the year including the holidays specified by law and excluding only Sunday." In the instant case, the issue is whether daily-paid employees are entitled to be paid for two regular holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and interpretation of its provisions, including its implementing rules and regulations, shall be resolved in favor of labor. For the working man‘s welfare should be the primordial and paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides that "Nothing in the law or the rules shall justify an employer in withdrawing or reducing any benefits, supplements or payments for unworked regular holidays as provided in existing individual or collective agreement or employer practice or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the following provision:
ARTICLE XIV PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Year‘s Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular holiday shall be entitled to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment in addition to normal vacation pay but will not entitle the employee to another vacation leave.
Under similar circumstances, the COMPANY will give a day‘s wage for November 1st and December 31st whenever declared a holiday. When required to work on said days, the employee will be paid according to Art. VI, Sec. 3B hereof.18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
Vitug, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur.
(10)ATTY. ANDREA UY and FELIX YUSAY, Petitioners, - versus - ARLENE VILLANUEVA and NATIONAL LABOR RELATIONS COMMISSION, Respondents.
G.R. No. 157851
Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ.
Promulgated:
June 29, 2007
x------x
D E C I S I O N
NACHURA, J.:
This appeal on certiorari under Rule 45 of the Rules of Court seeks the nullification of the February 28, 2002 Resolution and the February 27, 2003 Resolution denying the motion for reconsideration thereof of the Former Tenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 68680.
The antecedents of the case are as follows:
Countrywide Rural Bank of La Carlota, Inc. (Countrywide Bank) is a private banking corporation engaged in rural banking and other allied services through its branches nationwide.
Sometime in 1998, Countrywide Bank experienced liquidity problems and its treasury department was unable to comply with its branches‘ demands for fresh funds. Its various branches eventually experienced bank runs.[1]
Several of the bank‘s depositors were alarmed at the prospect of losing their deposits and investments. A group of depositors, holding about 70% of the bank‘s deposit accounts, met and agreed to organize themselves into a ―Committee of Depositors.‖ Petitioner Felix Yusay was elected by the Committee as Chairman of the Interim Board of Directors, while petitioner Atty. Andrea Uy was designated Secretary. According to petitioners, the Committee was formed for the purpose of protecting their collective interests and to increase their chances of recovering their deposits.[2]
With the consent and approval of the incumbent Board of Directors, the Committee of Depositors assumed temporary administrative control of the remaining operations of the bank.[3] The incumbent Board of Directors informed the Committee that some employees had tendered courtesy resignations, while some had expressed their willingness to resign upon official request. The Committee then accepted some of the courtesy resignations.[4]
The Bangko Sentral ng Pilipinas (BSP) subsequently placed the bank under receivership and appointed a liquidator. Meanwhile, the Philippine Deposit Insurance System (PDIC) commenced the processing of claims for return of deposits.[5]
Realizing that their bid to rehabilitate the bank had failed, the Committee of Depositors disbanded.[6]
Eventually, three cases for illegal dismissal were filed against Countrywide Bank before the National Labor Relations Commission (NLRC). These were filed by Amalia Bueno (NLRC Case No. RAB-XI-01-50037-99), Amelia Valdez and Lyn Villa (NLRC Case No. RAB-XI-01-20039- 99), and herein private respondent Arlene Villanueva (NLRC Case No. RAB-XI-01-50043- 99).[7]
Private respondent Villanueva avers that she was a regular employee of Countrywide Bank‘s Marbel, South Cotabato branch. On December 7, 1998, she received a memorandum from the Interim Board of Directors accepting her courtesy resignation. She, however, denies that she submitted a written courtesy resignation.[8]
On November 16, 1999, Labor Arbiter Arturo P. Gamolo of NLRC Sub-Regional Arbitration Branch No. XI, General Santos City rendered a Decision in RAB-XI-01-50043-99, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent Country Wide Rural Bank of La Carlota, Inc. and Individual Respondents Atty. Andrea Uy and Felix Yusay are solidarily liable to pay complainant Arlene Villanueva the sum PESOS: ONE HUNDRED THIRTEEN THOUSAND SIX HUNDRED FORTY (P113,640.00) ONLY representing her monetary awards and attorney‘s fees.[9]
On January 21, 2000, Villanueva filed a Motion for Execution of Judgment[10] to which Countrywide Bank, through the PDIC, filed an Opposition. [11]
Thereafter, Labor Arbiter Gamolo rendered a Resolution and Order for all three cases against Countrywide Bank, the dispositive portion of which reads:
Wherefore, finding the PDIC‘s opposition to complainants‘ motion for execution meritorious, complainants are hereby directed to file their respective money claims as adjudged in the decisions rendered in the above-entitled cases before the liquidation court for the latter‘s approval of inclusion in the Bank‘s Distribution Plan.
SO ORDERED.[12]
Petitioners then filed a Notice of Appeal with Memorandum of Appeal with the NLRC, 5th Division, Cagayan de Oro City.[13] On November 27, 2000, the NLRC dismissed the appeal for being filed out of time.[14] Petitioners filed a motion for reconsideration.[15] The NLRC then recalled its November 27, 2000 Resolution and set the case for clarificatory hearing.[16]
Petitioners, however, received the Resolution five days after the scheduled clarificatory hearing. They instead filed their memorandum in lieu of the clarificatory hearing.
On October 10, 2001, the NLRC rendered another Resolution reinstating its November 27, 2000 Resolution.[17]
Petitioners filed a petition for certiorari before the CA to nullify the NLRC‘s November 27, 2000 and October 10, 2001 Resolutions.
On February 28, 2002, the Tenth Division of the CA dismissed the petition for certiorari on technical grounds. In particular, the CA cited the following grounds for dismissal:
1. Failure to attach necessary pleadings and comments which are material portion of the records in able [sic] for this to [sic] judiciously evaluate the merit of the case such as: a.) memorandum of appeal filed by the petitioner on May 18, 2000; b.) Motion for Reconsideration of the petitioners dated December 21, 2000; in violation of Section 3, Rule 46 of the 1997 Rules of Civil Procedure as amended;
2. Failure to attach certified photocopy copies [sic] of the assailed resolutions and decisions of the original documents in violation of the same rules; and
3. Failure to send copy of the resolution to the public respondent.[18]
Petitioners filed a Motion for Reconsideration[19] arguing that the failure to attach the abovementioned documents was merely a procedural lapse on their part. They, likewise, attached the documents to the motion.
Their motion for reconsideration having been denied,[20] petitioners filed the present appeal on certiorari.
They argue that the CA‘s dismissal of their petition for certiorari on technical grounds deprived them of substantial justice. They assail the CA‘s Resolution dismissing their petition on technical grounds. They cite previous decisions of this Court where it held that technicalities can be relaxed in order to uphold the substantive rights of the parties.[21]
They likewise allege that the Labor Arbiter ruled in favor of respondent Villanueva based only on the pleadings filed by the latter. They allege that they were not properly served summons and notices which led to their failure to file their position paper. They also argue that they cannot be held solidarily liable to private respondent because they were mere depositors of the bank and not stockholders. Even assuming that they were stockholders, they still cannot be held individually liable for the bank‘s obligations.
On the other hand, private respondent argues that the appeal on certiorari merely reiterated arguments and issues on questions of facts that have already been passed upon by competent authority.[22] Having none of the circumstances that will warrant exemption from the requirement that a petition for review on certiorari under Rule 45 shall only raise questions of law, the petition must be dismissed. Likewise, private respondent argues that the petition has no other purpose than to delay the final execution of the decision.
While this case was pending, petitioners filed a Manifestation[23] on February 20, 2007, informing this Court that the case entitled Atty. Andrea Uy and Felix Yusay v. Amalia Bueno,[24] docketed as G.R. No. 159119 and involving the same factual antecedents as the present case, was decided by this Court‘s Second Division on March 14, 2006 in this wise:
IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals Decision dated January 24, 2003 and Resolution dated May 26, 2003 in CA-G.R. SP No. 70672, which found petitioner Atty. Andrea Uy[25] solidarily liable with Countrywide Rural Bank of [La] Carlota, Inc. in Marbel, Koronadal City, South Cotabato, are REVERSED. No costs.
SO ORDERED.[26]
In the Bueno case, the Court found that, per the records of the case, petitioner Uy was a ―mere depositor,‖[27] one of several depositors who formed themselves into a group or association indicating their intention to help rehabilitate Countrywide Rural Bank.[28] It also found no evidence that the Committee of Depositors that elected petitioner Uy as Interim President and Corporate Secretary was recognized by the Bangko Sentral ng Pilipinas, hence, had no legal authority to act for the bank.[29] As such, the Court said:
Lacking this evidence, the act of petitioner Uy in dismissing the respondent cannot be deemed an act as an officer of the bank. Consequently, it cannot be held that there existed an employer- employee relationship between petitioner Uy and respondent Bueno when the former allegedly dismissed the latter. This requirement of employer-employee relationship is jurisdictional for the provisions of the Labor Code, specifically Book VI thereof, on Post-Employment, to apply. Since the employer-employee relationship between petitioner Uy and respondent Bueno was not established, the labor arbiter never acquired jurisdiction over petitioner Uy. Consequently, whether petitioner Uy was properly served summons is immaterial. Likewise, that she terminated the services of respondent Bueno in bad faith and with malice is of no moment. Her liability, if any, should be determined in another forum.[30]
The Court noted the manifestation in a Resolution[31] dated April 23, 2007.
We find the present petition meritorious.
At the outset, we note that Countrywide Bank did not appeal the NLRC‘s rulings. As to the bank, therefore, the NLRC Decision has become final and executory.
Rule 45 of the Rules of Civil Procedure provides that only questions of law shall be raised in an appeal by certiorari before this Court. This rule, however, admits of certain exceptions, namely, (1) when the findings are grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the same are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner‘s main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.[32]
In this case, the CA committed grave abuse of discretion in dismissing the petition without first examining its merits. The policy of our judicial system is to encourage full adjudication of the merits of an appeal. In the exercise of its equity jurisdiction, this Court may reverse the dismissal of appeals that are grounded merely on technicalities.[33]
In the past, the Court has held that technicalities should not be permitted to stand in the way of equitably and completely resolving the rights and obligations of the parties. Where the ends of substantial justice would be better served, the application of technical rules of procedure may be relaxed.[34] Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice.[35]
Section 1, Rule 65 of the Rules of Court provides:
SECTION 1. Petition for certiorari. – When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46. (emphasis supplied)
Records show that in the petition for certiorari, filed before the CA, the petitioners attached photocopies of the assailed October 10, 2001 NLRC Resolution,[36] the NLRC Resolution dated November 27, 2000,[37] the Labor Arbiter‘s Decision dated November 16, 1999,[38] and the Labor Arbiter‘s Resolution and Order dated April 17, 2000.[39] Subsequently, when the CA dismissed the petition on technical grounds, petitioners filed a motion for reconsideration explaining the reason for the omission and attaching, in addition to the abovementioned documents, the other documents referred to in the CA Resolution.
The Court‘s ruling in the case of Garcia v. Philippine Airlines[40] is most instructive, to wit:
It is evident, therefore, that aside from the assailed decision, order or resolution, not every pleading or document mentioned in the petition is required to be submitted – only those that are pertinent and relevant to the judgment, order or resolution subject of the petition. The initial determination of what pleadings, documents or orders are relevant and pertinent to the petition rests on the petitioner. If, upon its initial review of the petition, the CA is of the view that additional pleadings, documents or order should have been submitted and appended to the petition, the following are its options: (a) dismiss the petition under the last paragraph of Rule 46 of the Rules of Court; (b) order the petitioner to submit the required additional pleadings, documents, or order within a specific period of time; or (c) order the petitioner to file an amended petition appending thereto the required pleadings, documents or order within a fixed period.
If the CA opts to dismiss the petition outright and the petitioner files a motion for the reconsideration of such dismissal, appending thereto the requisite pleadings, documents or order/resolution with an explanation for the failure to append the required documents to the original petition, this would constitute substantial compliance with the Rules of Court. In such case, then, the petition should be reinstated. As this Court emphasized in Cusi-Hernandez v. Diaz: x x x x
We must stress that ―cases should be determined on the merits after full opportunity to all parties for ventilation of their causes and defenses, rather than on technicality or some procedural imperfections. In that way, the ends of justice would be served better.‖ Moreover, the Court has held:
―Dismissal of appeals purely on technical grounds is frowned upon and the rules of procedure ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not override, substantial justice, and thereby defeat their very aims.‖
Rules of procedure are mere tools designed to expedite the decision or resolution of cases and other matters pending in court. A strict and rigid application of rules that would result in technicalities that tend to frustrate rather than promote substantial justice must be avoided. (citations omitted)
In putting a premium on technical rules over the just resolution of the case, therefore, the CA overlooked the right of petitioners to the full adjudication of their petition on its merits. Indeed, while labor laws mandate the speedy administration of justice with least attention to technicalities, this must be done without sacrificing the fundamental requisites of due process.[41]
We now proceed to rule on the merits of the case.
In order to sustain a finding of illegal dismissal, we must first determine the relationship between the petitioners and private respondent. Illegal dismissal presupposes that there was an employer- employee relationship between the dismissed employee and the persons complained of.
To determine whether there was an employer-employee relationship between petitioners and private respondent, the Court has consistently used the ―four-fold‖ test. The test calls for the determination of (1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages. Of the four, the control test is the most important element.[42]
In the instant case, all these elements are attributable to the bank itself and not to petitioners. There is no question that private respondent was an employee of the bank. As mentioned above, the NLRC Decision has become final and executory as to the bank. Its liability for private respondent‘s dismissal is no longer in dispute.
The same cannot be said of petitioners. Petitioners assumed only limited administrative control of the bank as part of the ―Committee of Depositors.‖ However, there is no showing that they took over the management and control of the bank.
Given that there is in fact no employer-employee relationship between petitioners and private respondents, the Labor Arbiter, and consequently, the NLRC, is without jurisdiction to adjudicate the dispute between them. The cases a Labor Arbiter can hear and decide are ―employment-related.‖[43]
Even assuming that an employer-employee relationship does exist between petitioners and private respondent, the former still cannot be held liable with Countrywide Bank for the illegal dismissal of private respondent. Corporate officers are not personally liable for the money claims of discharged corporate employees, unless they acted with evident malice and bad faith in terminating their employment.[44]
First, we agree with petitioners that they are not corporate officers of the bank.
It has been held that an ―office‖ is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an ―employee‖ usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee.[45]
Given this distinction, petitioners are neither officers nor employees of the bank. They are mere depositors who sought to manage the bank in order to save it.
Next, settled is the rule in this jurisdiction that a corporation is vested by law with a legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it.[46]
The general rule is that obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities. However, solidary liability may be incurred, but only under the following exceptional circumstances:
1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons;
2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto;
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; or
4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.[47]
Not one of these circumstances is present in this case.
Furthermore, the doctrine of piercing the veil of corporate fiction finds no application in the case. Piercing the veil of corporate fiction may only be done when ―the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime.‖[48]
The general rule is that a corporation will be looked upon as a separate legal entity, unless and until sufficient reason to the contrary appears. For the separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly and convincingly established. It cannot be presumed.[49] Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not in itself sufficient ground for disregarding the separate corporate personality.[50]
In the case at bar, petitioners are not even stockholders of the bank but mere depositors. That they assumed temporary control of the bank‘s administration did not change the character of their relationship with the bank. In fact, their bid to convert their interest in the bank to that of stockholders failed as the BSP denied their plan to rehabilitate the bank.
Finally, we have noted petitioners‘ Manifestation[51] dated January 31, 2007 and this Court‘s decision in Atty. Andrea Uy and Felix Yusay v. Amalia Bueno.[52]
In previous cases, the Court has held, ―When a court has laid down a principle of law as applicable to a certain set of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. Stare decisis et non quieta movere. Stand by the decision and disturb not what is settled. It simply means that a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It comes from the basic principle of justice that like cases ought to be decided alike. Thus, where the same question relating to the same event is brought by parties similarly situated as in a previous case already litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.‖[53]
Petitioners‘ liability, if there be any, must be determined in the proper action and at the proper forum.
WHEREFORE, premises considered, the petition is GRANTED. The February 28, 2002 Resolution in CA-G.R. SP No. 68680 of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the Labor Arbiter in RAB-XI-01-50037-99, finding petitioners solidarily liable with Countrywide Rural Bank of La Carlota is, likewise, REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO Associate Justice Chairperson
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice MINITA V. CHICO-NAZARIO Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Second Division
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.
REYNATO S. PUNO Chief Justice
(11)TELEVISION AND PRODUCTION G.R. No. 167648 EXPONENTS, INC. and/or ANTONIO P. TUVIERA, Present: Petitioners, QUISUMBING, J., Chairperson, CARPIO, - versus - CARPIO MORALES, TINGA, and VELASCO, JR., JJ.
ROBERTO C. SERVAÑA, Respondent. Promulgated:
January 28, 2008 x------x
D E C I S I O N
TINGA, J.:
This petition for review under Rule 45 assails the 21 December 2004 Decision[1] and 8 April 2005 Resolution[2] of the Court of Appeals declaring Roberto Servaña (respondent) a regular employee of petitioner Television and Production Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE to pay nominal damages for its failure to observe statutory due process in the termination of respondent‘s employment for authorized cause.
TAPE is a domestic corporation engaged in the production of television programs, such as the long-running variety program, ―Eat Bulaga!‖. Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto C. Servaña had served as a security guard for TAPE from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged that he was first connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as a regular company guard. He was detailed at Broadway Centrum in Quezon City where ―Eat Bulaga!‖ regularly staged its productions. On 2 March 2000, respondent received a memorandum informing him of his impending dismissal on account of TAPE‘s decision to contract the services of a professional security agency. At the time of his termination, respondent was receiving a monthly salary of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave benefits and other monetary considerations were withheld from him. He further contended that his dismissal was undertaken without due process and violative of existing labor laws, aggravated by nonpayment of separation pay.[3]
In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had no jurisdiction over the case in the absence of an employer-employee relationship between the parties. TAPE made the following assertions: (1) that respondent was initially employed as a security guard for Radio Philippines Network (RPN-9); (2) that he was tasked to assist TAPE during its live productions, specifically, to control the crowd; (3) that when RPN-9 severed its relationship with the security agency, TAPE engaged respondent‘s services, as part of the support group and thus a talent, to provide security service to production staff, stars and guests of ―Eat Bulaga!‖ as well as to control the audience during the one-and-a- half hour noontime program; (4) that it was agreed that complainant would render his services until such time that respondent company shall have engaged the services of a professional security agency; (5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a talent and a member of the support group, until such time that TAPE shall have engaged the services of a professional security agency; (6) that respondent was not prevented from seeking other employment, whether or not related to security services, before or after attending to his ―Eat Bulaga!‖ functions; (7) that sometime in late 1999, TAPE started negotiations for the engagement of a professional security agency, the Sun Shield Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all talents, whose functions would be rendered redundant by the engagement of the security agency, informing them of the management‘s decision to terminate their services.[4]
TAPE averred that respondent was an independent contractor falling under the talent group category and was working under a special arrangement which is recognized in the industry.[5]
Respondent for his part insisted that he was a regular employee having been engaged to perform an activity that is necessary and desirable to TAPE‘s business for thirteen (13) years.[6]
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular employee of TAPE. The Labor Arbiter relied on the nature of the work of respondent, which is securing and maintaining order in the studio, as necessary and desirable in the usual business activity of TAPE. The Labor Arbiter also ruled that the termination was valid on the ground of redundancy, and ordered the payment of respondent‘s separation pay equivalent to one (1)-month pay for every year of service. The dispositive portion of the decision reads:
WHEREFORE, complainant‘s position is hereby declared redundant. Accordingly, respondents are hereby ordered to pay complainant his separation pay computed at the rate of one (1) month pay for every year of service or in the total amount of P78,000.00.[7]
On appeal, the National Labor Relations Commission (NLRC) in a Decision[8] dated 22 April 2002 reversed the Labor Arbiter and considered respondent a mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor Arbiter‘s conclusion that complainant was a regular employee. x x x x
The primary standard to determine regularity of employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. This connection can be determined by considering the nature and work performed and its relation to the scheme of the particular business or trade in its entirety. x x x Respondent company is engaged in the business of production of television shows. The records of this case also show that complainant was employed by respondent company beginning 1995 after respondent company transferred from RPN-9 to GMA-7, a fact which complainant does not dispute. His last salary was P5,444.44 per month. In such industry, security services may not be deemed necessary and desirable in the usual business of the employer. Even without the performance of such services on a regular basis, respondent‘s company‘s business will not grind to a halt. x x x x
Complainant was indubitably a program employee of respondent company. Unlike [a] regular employee, he did not observe working hours x x x. He worked for other companies, such as M-Zet TV Production, Inc. at the same time that he was working for respondent company. The foregoing indubitably shows that complainant-appellee was a program employee. Otherwise, he would have two (2) employers at the same time.[9]
Respondent filed a motion for reconsideration but it was denied in a Resolution[10] dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter. Respondent asserted that he was a regular employee considering the nature and length of service rendered.[11]
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April 2002 of the public respondent NLRC reversing the Decision of the Labor Arbiter and its Resolution dated 28 June 2002 denying petitioner‘s motion for reconsideration are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of the Labor Arbiter is REINSTATED with MODIFICATION in that private respondents are ordered to pay jointly and severally petitioner the amount of P10,000.00 as nominal damages for non-compliance with the statutory due process.
SO ORDERED.[12]
Finding TAPE‘s motion for reconsideration without merit, the Court of Appeals issued a Resolution[13] dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as those in its petition for certiorari before the Court of Appeals. These matters may be summed up into one main issue: whether an employer-employee relationship exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered the case submitted for decision.[14]
At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a question of fact. Generally, only questions of law are entertained in appeals by certiorari to the Supreme Court. This rule, however, is not absolute. Among the several recognized exceptions is when the findings of the Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the other, are conflicting,[15] as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of employer-employee relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and method by which the work is to be accomplished.[16] The most important factor involves the control test. Under the control test, there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.[17]
In concluding that respondent was an employee of TAPE, the Court of Appeals applied the ―four-fold test‖ in this wise:
First. The selection and hiring of petitioner was done by private respondents. In fact, private respondents themselves admitted having engaged the services of petitioner only in 1995 after TAPE severed its relations with RPN Channel 9.
By informing petitioner through the Memorandum dated 2 March 2000, that his services will be terminated as soon as the services of the newly hired security agency begins, private respondents in effect acknowledged petitioner to be their employee. For the right to hire and fire is another important element of the employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee relation. . . Payment as admitted by private respondents was given by them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the ―control test‖ is the most important. x x x
The bundy cards representing the time petitioner had reported for work are evident proofs of private respondents‘ control over petitioner more particularly with the time he is required to report for work during the noontime program of ―Eat Bulaga!‖ If it were not so, petitioner would be free to report for work anytime even not during the noontime program of ―Eat Bulaga!‖ from 11:30 a.m. to 1:00 p.m. and still gets his compensation for being a ―talent.‖ Precisely, he is being paid for being the security of ―Eat Bulaga!‖ during the above-mentioned period. The daily time cards of petitioner are not just for mere record purposes as claimed by private respondents. It is a form of control by the management of private respondent TAPE.[18]
TAPE asseverates that the Court of Appeals erred in applying the ―four-fold test‖ in determining the existence of employer-employee relationship between it and respondent. With respect to the elements of selection, wages and dismissal, TAPE proffers the following arguments: that it never hired respondent, instead it was the latter who offered his services as a talent to TAPE; that the Memorandum dated 2 March 2000 served on respondent was for the discontinuance of the contract for security services and not a termination letter; and that the talent fees given to respondent were the pre-agreed consideration for the services rendered and should not be construed as wages. Anent the element of control, TAPE insists that it had no control over respondent in that he was free to employ means and methods by which he is to control and manage the live audiences, as well as the safety of TAPE‘s stars and guests.[19]
The position of TAPE is untenable. Respondent was first connected with Agro- Commercial Security Agency, which assigned him to assist TAPE in its live productions. When the security agency‘s contract with RPN-9 expired in 1995, respondent was absorbed by TAPE or, in the latter‘s language, ―retained as talent.‖[20] Clearly, respondent was hired by TAPE. Respondent presented his identification card[21] to prove that he is indeed an employee of TAPE. It has been in held that in a business establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.[22]
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to designate such amount as talent fees. Wages, as defined in the Labor Code, are remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered. It is beyond dispute that respondent received a fixed amount as monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report daily and observe definite work hours. To negate the element of control, TAPE presented a certification from M-Zet Productions to prove that respondent also worked as a studio security guard for said company. Notably, the said certificate categorically stated that respondent reported for work on Thursdays from 1992 to 1995. It can be recalled that during said period, respondent was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late 1995.[23]
TAPE further denies exercising control over respondent and maintains that the latter is an independent contractor.[24] Aside from possessing substantial capital or investment, a legitimate job contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof.[25] TAPE failed to establish that respondent is an independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is indeed an independent contractor. None of the above conditions exist in the case at bar. Private respondents failed to show that petitioner has substantial capital or investment to be qualified as an independent contractor. They likewise failed to present a written contract which specifies the performance of a specified piece of work, the nature and extent of the work and the term and duration of the relationship between herein petitioner and private respondent TAPE.[26]
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as a program employee and equating him to be an independent contractor.
Policy Instruction No. 40 defines program employees as— x x x those whose skills, talents or services are engaged by the station for a particular or specific program or undertaking and who are not required to observe normal working hours such that on some days they work for less than eight (8) hours and on other days beyond the normal work hours observed by station employees and are allowed to enter into employment contracts with other persons, stations, advertising agencies or sponsoring companies. The engagement of program employees, including those hired by advertising or sponsoring companies, shall be under a written contract specifying, among other things, the nature of the work to be performed, rates of pay and the programs in which they will work. The contract shall be duly registered by the station with the Broadcast Media Council within three (3) days from its consummation.[27]
TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the policy instruction. It did not even present its contract with respondent. Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying him as an independent contractor is misplaced. The Court of Appeals had this to say:
We cannot subscribe to private respondents‘ conflicting theories. The theory of private respondents that petitioner is an independent contractor runs counter to their very own allegation that petitioner is a talent or a program employee. An independent contractor is not an employee of the employer, while a talent or program employee is an employee. The only difference between a talent or program employee and a regular employee is the fact that a regular employee is entitled to all the benefits that are being prayed for. This is the reason why private respondents try to seek refuge under the concept of an independent contractor theory. For if petitioner were indeed an independent contractor, private respondents will not be liable to pay the benefits prayed for in petitioner‘s complaint.[28]
More importantly, respondent had been continuously under the employ of TAPE from 1995 until his termination in March 2000, or for a span of 5 years. Regardless of whether or not respondent had been performing work that is necessary or desirable to the usual business of TAPE, respondent is still considered a regular employee under Article 280 of the Labor Code which provides:
Art. 280. Regular and Casual Employment.—The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or service to be performed is seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.
As a regular employee, respondent cannot be terminated except for just cause or when authorized by law.[29] It is clear from the tenor of the 2 March 2000 Memorandum that respondent‘s termination was due to redundancy. Thus, the Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year or service, whichever is higher. x x x x
We uphold the finding of the Labor Arbiter that ―complainant [herein petitioner] was terminated upon [the] management‘s option to professionalize the security services in its operations. x x x‖ However, [we] find that although petitioner‘s services [sic] was for an authorized cause, i.e., redundancy, private respondents failed to prove that it complied with service of written notice to the Department of Labor and Employment at least one month prior to the intended date of retrenchment. It bears stressing that although notice was served upon petitioner through a Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days from the start of the agency‘s take over which was on 3 March 2000. Petitioner‘s services with private respondents were severed less than the month requirement by the law.
Under prevailing jurisprudence the termination for an authorized cause requires payment of separation pay. Procedurally, if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Deparment of Labor and Employment written notice 30 days prior to the effectivity of his separation. Where the dismissal is for an authorized cause but due process was not observed, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be liable for non-compliance with procedural requirements of due process. x x x x
Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal damages. The basis of the violation of petitioners‘ right to statutory due process by the private respondents warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. We believe this form of damages would serve to deter employer from future violations of the statutory due process rights of the employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules. Considering the circumstances in the case at bench, we deem it proper to fix it at P10,000.00.[30]
In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE.[31] Thus, the Court of Appeals ruling on this point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION in that only petitioner Television and Production Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal damages for non-compliance with the statutory due process and petitioner Antonio P. Tuviera is accordingly absolved from liability.
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING Associate Justice Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES Associate Justice Associate Justice
PRESBITERO J. VELASCO, JR. Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
LEONARDO A. QUISUMBING Associate Justice Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson‘s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
REYNATO S. PUNO Chief Justice
EN BANC [G.R. No. 154472. June 30, 2005]
(12)ALEXANDER R. LOPEZ, HERMINIO D. PEÑA, SALVADOR T. ABUEL, GEORGE F. CABRERA, JOEL M. CARREON, DAMASO M. CERVANTEX, JR., RICARDO V. CUEVAS, ROBERTO S. DAGDAG, IRENEO V. DURAY, OMER S. ESPIRIDION, MANOLO V. FORONDA, RONITO R. FRIAS, ANGEL C. GARCIA, VICTORINO A. ILAGAN, DENNIS S. LEGADOS, MIGUEL J. LOPEZ, EMMANUEL R. MERILLO, EDGAR E. NATARTE, MAMERTO S. NEPOMUCENO, MARVIN R. PADURA, ROMEO C. RAMILO, ALBERTO R. RAMOS, JR., RONALDO A. SARMIENTO, ARMANDO S. SIONGCO, JOSE TEODY P. VELASCO, RICO P. VILLANUEVA, SAMUEL L. ZAPATERO, EDGARDO D. AGUDO, ROBERTO A. ARAÑA, BENJAMIN ASUNCION, JULIAN C. BACOD, EDWIN N. BORROMEO, ALBERTO T. BULAONG, DANIEL CADAÑOM, ROBERTO S. CAYETANO, ALFREDO C. CLAVIO, EDGARDO A. DABUET, NEIL DAVID, ALEXANDER B. ESTORES, NOEL GUILLEN, RODOLFO MAGNO, REY MANLEGRO, ROMEO V. MORALES, ROSAURO NADORA, EUGENIO M. ORITO, RONILO P. PAREDES, ADGARDO R. PINEDA, CARLITO SAMARTINO, ARTURO C. SARAOS, JR., JOHNEL L. TORRIBIO, ANTONIO A. VERGARA, JIMMY C. UNGSON, NOEL D. AMOYO, VIRGILIO L. AZARCON, RICARDO M. BROTONEL, EMERALDO C. CABAYA, JULIE G. CHAN, LUIS C. CLAVIO, LUIS T. CANIZO, ERNESTO F. DAVID, EDGAR B. DE VERA, REYNALDO A. DUMLAO, ARTURO R. DYCHITAN, ROMAN S. FAJARDO, BERNARDINO B. MACALDO, ROMEO D. MANASIS, JR., MARIO R. MANGALINDAN, VICTORIANO C. MARTINEZ, LEONARDO D. MIRALLES, ROGELIO E. PACER, ROSENDO L. PANGILINAN, NOLI H. POLINAG, DIOSDADO M. PUNZALAN, REYNALDO C. GATPO, CIRILO M. SANTOS, RAMON A. ZAMBRANA, PIO L. ASTORGA, ROLANDO G. CAGALINGAN, ANGELITO A. CAUDAL, FRANCISCO S. DELOS SANTOS, CARLOS E. LOMIBAO, ROMEO S. MALABANAN, LIBERATO B. MANGENTE, JULIAN M. MARTINEZ, BERNARDO S. MEDINA, MELVIN R. MENDEZ, ALBERT C. MIRADOR, RENEE S. OCAMPO, DAVID J. PASCUA, AMORSOLO M. PILARTA, ROLANDO C. REYES, GAVINO SAN GABRIEL, JR., PERCON F. SISON, PLARIDEL L. TANGLAO, RUBEN R. TAÑEDO, JR., RENATO G. TARUC, RONALDO D.C. VENTURA, ANGEL L. VERTUCIO, ERWIN T. VIDAD, WILLIAM M. AGANAON, ALEX P. MANABAT, FRANCISCO ALMONTE, RODRIGO C. ANTONIO, DOUGLAS R. AQUINO, REMEGIO R. ATIENZA, ABRAHAM C. BALICANTE, MELENCIO M. BAGNGUIS, JR., GERARDO T. BULAONG, MELITANTE I. CASTRO, MEDARDO S. CATACUTAN, VIRGILIO T. CATUBIG, JOSE S. CHIONG, NEL T. COLOBONG, FELIPE C. COLLADO, RANDY T. CORTIGUERRA, ANTONIO D. DELA CRUZ, JESUS C. DINGLE, EDGARDO N. GARCIA, CELSO Z. GOLFO, NONITO V. FERNANDEZ, LARRY HIDALGO, FRANCISCO B. JAO, JR., CARLOS P. LAGLIVA, RICO L. LARRACAS, PEDRO V. ABARIDES, RUDY S. AGUINALDO, REGINALD F. ALCANTARA, SERAFIN ALCANTAR, JR., FELIX H. ALEJANDRO, MIGUEL ALTONAGA, JOSE T. AGUILAR, PEDRO AGUILAR, JR., NOEL A. ALIPIO, WILLIAM A. ALMAZAR, REYNALDO S.D. ALVAREZ, FLORIZEL M. AMBROCIO, JOSE A. ASPE, ROBERTO J. ARCEO, ERNESTO V. ARUTA, MILLARDO DL. ATENCIO, ERNESTO G. AVELINO, WENCESLAO C. BABEJAS, ARNOLD F. BALINGIT, HEBERT F. BARCELON, MARLON D. BORROZO, FLORENTINO BAS, JR., LEARNED A. BAUTISTA, ARMAN N. BORROMEO, CARLITO F. BARTOLO, CARLOS M. CABERTO, ARTURO S. CAJUCOM, DIEGO CALDERON, JR., WILLIAM A. CAMPOS, JORGE CANONIGO, JR., ANGELITO M. CAPARAC, EMMANUEL L. CAPIT, LAURO S. CASTRO, TOMEO B. CASTALONE, VERZNEV S. CATUBIG, ARMANDO CERVANTES, CALIXTO P. COLADA, JR., JONATHAN P. CORONEL, JOE NOEL P. CRUZ, FRANCISCO CRUZ, JR., MARIANO B. CRUZ, JR., JOSE J. DALUMPINES, SANITO S. DE JESUS, JOSE G. DE LEON, CRISANTO DE LOS REYES, EMMANUEL C. DE VERA, RODOLFO DE VERA, JR., HERMAN C. DE VILLAR, IKE S. DELFIN, PEDRO E. DESIPEDA, ERAÑO A. DIONISIO, ALFREDO L. DUGAYO, REYNALDO V. DURAY, EUGENIO C. ELEAZAR, RAFAEL U. ENCINA, ORLANDO C. ESCOLAR, ALLAN P. ESPINA, LAURO S. ESPINA, ISRAEL F. FALLURIN, ORIEL A. FESTEJO, EDGARDO V. FIGUEROA, RALPH FLORES, FERDINAND B. FUGGAN, NOEL Z. GABOT, EDUARDO M. GALANG, VICENTE D. GALLARDO, FRESCO B. GALO, ROSAURO G. GAMBOA, MARIO S. GABRIEL, ROBERTO C. GAPASIN III, ROMUALDO GAPASIN, JR., DANILO C. GARCIA, RESTITUTO S. GARCIA, NOEL B. GATDULA, BENJIE S. GERONIMO, ARTURO R. GLORIOSO, ISIDRO S. GOMED, JR., MEDEL P. GREGORIO, REY T. HECHANOVA, VONREQUITO HERBUELA, CELSO F. IGNACIO, JR., CHARLIE S. IGNACIO, ILDEFONSO F. ILDEFONSO, GAUDENICO M. INTAL, RIZALITO M. INTAL, RENATO HERRERO, BIENVENIDO L. JAO, JR., FERDINAND P. LAGMAN, RENEIL M. LAREZA, ALMARIO M. LAXA, ARTHUR G. LEVISTE, ESTEBAN T. LEGARTO, RAMON G. LIWANAG, ELISEO A. LU, RAYMUNDO LUSTICA, JR., FERNANDO D. MABANTA, NESTOR F. MAGALLANES, EDWIN A. MAGPAYO, MICHAEL I. MAGRIA, ARIEL M. MALAPAD, RAMON O. MAMUCOD, FERDINAND P. MANINGAS, RONALD D.R. MANUEL, ROLANDO F. MAPUE, CHITO C. MARCO, ERNESTO S. MARCHAN, JOSEPH B. MARIANO, FRANCIS J. MARIMON, JOHN L. MARTEJA, JOSE E. MASE, JR., BERNARDO S. MEDINA, JOEREY B. MERIDOR, SUSANO S. MIRANDA, EDGARDO C. MONTOYA, MARLON B. MORADA, ROMEO R. DEL MUNDO, REYNALDO C. NAREDO, EDGARDO R. NEPOMUCENO, RODEL S. NEPOMUCENO, ROMMEL NIYO, ROMULO P. OLARTE, GEORGE N. OLAVERE, EDUARDO ONG, MARIO S. PAGSANJAN, RENALD C. PALAD, GAUDENCIO G. PEDROCHE, RONALDO DELA CRUZ PEREÑA, EDILBERTO C. PIÑGUL, ERNESTO PINGUL, AGNESIO D. QUEBRAL, JAMES M. QUINTO, RICARDO R. RAMOS, GENEROSO REGALADO, JR., EDUARDO L. REYES, RAMON C. REYES, LARRY S. RECAMADAS, ANTONIO B. REDONDO, FEDERICO M. RIVERA, ROBERTO I. ROCOMORA, FERNANDO P. RODRIGUEZ, HERNANDO S. RODRIGUEZ, ROMMEL D. ROXAS, CHRISTOPHER R. RUSTIA, ARNULFO T. JAMISON, MARIO G. SAN PEDRO, ELMER B. SANTOS, LEONARDO SEBASTIAN, JR., CARMENCITO M. SEXON, JOSE STA. ANA SIERRA, LLOYD Z. SINADJAN, RAMON S. SISIO, RAMIRO M. SOLIS, MANUEL C. SUAREZ, BENJAMIN TALAVERA, JR., OSCAR U. TAN, RICARDO S. TAN, AUGUSTUS V. TANDOC, ROBERTO L. TAÑEDO, ERNESTO R. TIBAY, CHARLIE P. TICSAY, REY DE VERE TIONGCO, VIVENCIO B. TOLENTINO, OSMUNDO S. TORRES, HILARIO L. VALDEZ, LEONARDO C. VALDEZ, PASTOR M. VALENCIA, EFREN VELASCO, EDMUNDO D. VICTA, FERDINAND VILLANUEVA, JOSE C. VILLANUEVA, JOSE ROMMEL VILLAMOR, OLIVER P. VILLANUEVA, VICTOR P. ZAFARALLA, HORACIO L. ZAPATERO, COENE C. ZAPITER, THE HEIRS OF ESTEBAN BALDOZA, RUBEN GALANG, FAUSTO S. CRUZ, REYNALDO BORJA, CRISANTO CAGALINGAN and ADRIANO VICTORIA, petitioners, vs. METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, respondents. D E C I S I O N TINGA, J.:
Take not from the mouth of labor the bread it has earned.
Thomas Jefferson
The constitutional protection to labor, a uniform feature of the last three Constitutions including the present one, is outstanding in its uniqueness and as a mandate for judicial activism.
This petition asks for the review of the Court of Appeals‘ Decision[1] in C.A.-G.R. SP NO. 55263 entitled Alexander R. Lopez, et al. v. Metropolitan Waterworks and Sewerage System, which affirmed in toto the Civil Service Commission‘s Resolutions[2] denying petitioners‘ claim for severance, retirement and terminal leave pay.
By virtue of an Agreement,[3] petitioners were engaged by the Metropolitan Waterworks and Sewerage System (MWSS) as collectors-contractors, wherein the former agreed to collect from the concessionaires of MWSS, charges, fees, assessments of rents for water, sewer and/or plumbing services which the MWSS bills from time to time.[4]
In 1997, MWSS entered into a Concession Agreement with Manila Water Service, Inc. and Benpress-Lyonnaise, wherein the collection of bills was transferred to said private concessionaires, effectively terminating the contracts of service between petitioners and MWSS. Regular employees of the MWSS, except those who had retired or opted to remain with the latter, were absorbed by the concessionaires. Regular employees of the MWSS were paid their retirement benefits, but not petitioners. Instead, they were refused said benefits, MWSS relying on a resolution[5] of the Civil Service Commission (CSC) that contract-collectors of the MWSS are not its employees and therefore not entitled to the benefits due regular government employees.
Petitioners filed a complaint with the CSC. In its Resolution dated 1 July 1999,[6] the CSC denied their claims, stating that petitioners were engaged by MWSS through a contract of service, which explicitly provides that a bill collector-contractor is not an MWSS employee.[7] Relying on Part V of CSC Memorandum Circular No. 38, Series of 1993, the CSC stated that contract services/job orders are not considered government services, which do not have to be submitted to the CSC for approval, unlike contractual and plantilla appointments.[8] Moreover, it found that petitioners were unable to show that they have contractual appointments duly attested by the CSC.[9] In addition, the CSC stated that petitioners, not being permanent employees of MWSS and not included in the list .submitted to the concessionaire, are not entitled to severance pay.[10] Petitioners‘ claims for retirement benefits and terminal leave pay were likewise denied.
Petitioners sought reconsideration of the CSC Resolution, which was however denied by the CSC on 17 September 1999.[11] According to the CSC, petitioners failed to present any proof that their appointments were contractual appointments submitted to the CSC for its approval.[12] The CSC held, thus:
WHEREFORE, the motion for Reconsideration of Alexander Lopez, et al. is hereby denied. Accordingly, CSC Resolution No. 99-1384 dated July 1, 1999 stands. However, this is not without prejudice to whatever rights and benefits they may have under the New Labor Code and other laws, if any.[13]
Aggrieved, petitioners filed a petition for review under Rule 43 of the Rules of Court with the Court of Appeals.[14] In its Decision, the Court of Appeals narrowed down the issues presented by petitioners as follows: Whether or not the CSC erred in finding that petitioners are not contractual employees of the government and, hence, are not entitled to retirement and separation benefits.[15]
Affirming and generally reiterating the ruling of the CSC, the Court of Appeals held that the Agreement entered into by petitioners and MWSS was clear and unambiguous, and should be read and interpreted according to its literal sense.[16] Hence, as per the terms of the agreement, petitioners were not MWSS employees. The Court of Appeals held that no other evidence was adduced by petitioners to substantiate their claim that their papers were forwarded to the CSC for attestation and approval.[17] It added that in any event, as early as 26 June 1996, the CSC specifically stated that ―contract collectors are not MWSS employees and therefore not entitled to severance pay.‖[18]
The Court of Appeals held that petitioners are not similarly situated as the petitioner in the case of Chua v. Civil Service Commission[19] since the contractual appointment was submitted to and approved by the CSC, while the former were not.[20] Further, petitioners do not have creditable service for purposes of retirement, since their services were not supported by duly approved appointments.[21] Lastly, the Court of Appeals held that petitioners were exempt from compulsory membership in the GSIS. Having made no monthly contributions remitted to the said office, petitioners are not entitled to the separation and/or retirement benefits that they are claiming.[22]
Petitioners now assert that the Court of Appeals rendered a decision not in accord with law and applicable jurisprudence, based on misapprehension of facts, and/or contrary to the evidence on record.[23]
Petitioners allege that while their hiring was made to appear to be on contractual basis, the contracts evidencing such hiring were submitted to and approved by the CSC. Later contracts, however, do not appear to have been submitted to the CSC for approval. To support its claim, petitioners presented two (2) sample agreements,[24] both stamped ―approved‖ and signed by CSC Regional Directors. While styled as individual contracts/agreements, petitioners insist that the same were actually treated by the MWSS as appointment papers.[25]
Petitioners claim that they were employees of the MWSS, and that the latter exercised control over them. They cite as manifestations of control the training requirements, the mandated procedures to be followed in making collections, MWSS‘ close monitoring of their performance, as well as the latter‘s power to transfer collectors from one branch to another.[26]
Moreover, they add that with the nature and extent of their work at the MWSS, they served as collectors of MWSS only.[27] They stress that they have never provided collection services to customers as an independent business. In fact, they applied individually and were hired by MWSS one by one.[28] They were provided with uniforms and identification cards, and received basic pay termed as ―commissions‖ from which MWSS deducted withholding tax.[29] The ―commissions‖ were determined or computed by MWSS and paid to the collectors by payroll every fifteenth (15th) and last day of every month. In addition to the commission, collectors were given, among others, performance, mid-year and anniversary bonuses, hazard pay, thirteenth (13th) month pay, traveling allowance, cash gift, meal allowance and productivity pay.[30]
Petitioners claim that bill collectors were historically regarded as employees of National Waterworks and Sewerage Authority (NAWASA), the forerunner of MWSS.[31] They cite the case of National Waterworks and Sewerage Authority v. NWSA Consolidated Labor Unions, et al.,[32] wherein this Court supposedly declared the bill collectors of NAWASA as its employees and the commissions received by said collectors as salary.[33] Likewise, they claim that by MWSS‘ own acts, petitioners were its employees. To support this contention, they point to the identification cards (I.D.s) and certifications of employment issued by MWSS in their favor.[34] There were also ―Records of Appointment‖, which referred to the contract-collectors as employees with corresponding service records.[35]
In view of the cited documents, petitioners assert that MWSS is estopped from denying their employment with the agency.[36] Should there be doubt as to their status as employees, petitioners invoke the rule of liberal construction in favor of labor, and the constitutional policy of protection to labor.[37]
To further strengthen their case, petitioners refer to CSC Resolution 92-2008 dated 8 December 1992, which states in part:
. . . . The fact that they were being hired directly and paid on commission basis by MWSS itself is indicative that they are government employees and should be entitled to the incentive awards.
WHEREFORE, foregoing premises considered, the Commission resolves to rule that the Contractual-Collectors of the Metropolitan Waterworks and Sewerage System (MWSS) are entitled to loyalty awards.[38]
The same resolution was made the basis of the MWSS‘ memorandum declaring contract- collectors government employees or personnel entitled to salary increases pursuant to the Salary Standardization Law I & II.[39]
Thus, petitioners claim that by MWSS‘ and CSC‘s own acts and declarations, they were made to believe that they were employees of MWSS and as such were government employees.[40]
Petitioners invoke the case of Chua v. Civil Service Commission, et al.[41] wherein Chua, a co- terminus employee of the National Irrigation Administration, sought to recover early retirement benefits but was denied the same. This Court, having observed that Chua was hired and re-hired in four (4) successive projects during a span of fifteen (15) years, was deemed a regular employee for purposes of retirement pay. Petitioners argue that in the same manner, in view of their considerable length of service to MWSS, they are entitled to their claimed benefits.[42]
In addition to the retirement/separation/terminal leave pay prayed for, petitioners claim moral damages for the alleged serious disturbance they suffered as a result of the denial of their claims. They also pray for the award of attorney‘s fees.[43]
For its part, the MWSS avers that the Court of Appeals did not err in sustaining the resolutions of the CSC denying petitioners‘ claim for entitlement to severance, retirement and terminal leave pay.
MWSS denies the existence of employer-employee relationship between itself and petitioners. Citing CSC Memorandum Circular No. 38 Series of 1993, MWSS avers that it has the authority to contract the services of another who is considered not its employee.[44] With respect to the matter of payment of wages, MWSS states that the commission given to petitioners does not fall within the definition of compensation as provided in Presidential Degree No. 1146 (P.D. 1146),[45] or in the definition of the term under the Revised Administrative Code either.[46]
It adds that the issuance of I.D.s., certificates of recognition and loyalty awards as well as the grounds for termination of the Agreement could hardly be considered as control as the same had no relation to the means and methods to be employed by petitioners in collecting payments for MWSS.[47] As for the training and orientation undergone by petitioners, MWSS claims that it is but logical for any entity which has contracted the services of another to orient the latter before actual performance of the service, more so if the entity‘s function is impressed with public service. The fact that collectors were given a regular time for remittance should likewise not be considered as a form of control. MWSS states that none of these requirements invades the collector‘s prerogative to adopt their own method/strategy in the matter of collection.[48]
On the grant of thirteenth (13th) month pay and other benefits to petitioners, MWSS claims that these were mere acts of benevolence and generosity.[49]
Pertinently, therefore, the issue to be resolved is whether or not petitioners were employees of the MWSS and, consequently, entitled to the benefits they claim.
We find for the petitioners.
The Court has invariably affirmed that it will not hesitate to tilt the scales of justice to the labor class for no less than the Constitution dictates that ―the State . . . shall protect the rights of workers and promote their welfare.‖[50] It is committed to this policy and has always been quick to rise to defense in the rights of labor, as in this case.[51]
Protection to labor, it has been said, extends to all of labor¾local and overseas, organized and unorganized, in the public and private sectors.[52] Besides, there is no reason not to apply this principle in favor of workers in the government. The government, including government-owned and controlled corporations, as employers, should set the example in upholding the rights and interests of the working class.
The MWSS is a government owned and controlled corporation with its own charter, Republic Act No. 6234.[53] As such, it is covered by the civil service[54] and falls under the jurisdiction of the Civil Service Commission.[55]
CSC Memorandum Circular No. 38, Series of 1993, categorically made the distinction between contract of services/job orders and contractual and plantilla appointment, declaring that services rendered under contracts of services and job orders are non-government services which do not have to be submitted to the CSC for approval. This was followed by CSC Memorandum Circular No. 4, Series of 1994, which allowed the crediting of services for purposes of retirement only for such services supported by duly approved appointments. Subsequently, the CSC issued other resolutions applying the above-mentioned circulars, stating that while some functions may have been contracted out by a government agency, the persons contracted are not entitled to the benefits due to regular government employees.[56]
For purposes of determining the existence of employer-employee relationship, the Court has consistently adhered to the four-fold test, namely: (1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.[57] Of the four, the control test is the most important element.
A review of the circumstances surrounding the case reveals that petitioners are employees of MWSS. Despite the obvious attempt of MWSS to categorize petitioners as mere service providers, not employees, by entering into contracts for services, its actuations show that they are its employees, pure and simple. MWSS wielded its power of selection when it contracted with the individual petitioners, undertaking separate contracts or agreements. The same goes true for the power to dismiss. Although termed as causes for termination of the Agreement, a review of the same shows that the grounds indicated therein can similarly be grounds for termination of employment.
Under the Agreement, MWSS may terminate it if the ―Collector-Contractor‖ does or fails to do any of the following:
Article VII – Duration, Termination and Penal Clauses.
. . . .
(a) Fails to collect at least eighty percent (80%) of bills issued within three (3) months from commencement of this Agreement or ninety percent (90%) within six (6) months after effectivity of this Agreement;
(b) Erases, alters, or changes any figure on the bills or remittance receipt for purposes of defrauding either the concessioner or the MWSS. In case of termination of his services for any irregularity, there shall be no prejudice against any criminal action for which he may be liable;
(c) Is discourteous, dishonest, arrogant or his conduct is inimial [sic] to the good name or image of the MWSS;
(d) Fails to remit collections daily or to return uncollected bills daily; and
(e) Fails to comply with any of the undertakings as provided for in this Agreement, and the Manual of Procedures mentioned in Article II hereof. [58] (Emphasis Supplied)
On the other hand, the Labor Code enumerates the just causes for termination of employment, thus:
Art.282. Termination by Employer. – An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Obviously, failure to collect the payments of customers or remit the collections constitutes neglect of duty. Making erasures, alterations or changing of figures in the fees or collection receipts amounts to fraud. Lack of courtesy, dishonesty and arrogance are practically the same as misconduct.
On the issue of remuneration, MWSS claims that the compensation received by petitioners does not fall under the definition of wages as provided in Section 2(i) of P.D. 1146,[59] which is ―the basic pay or salary received by an employee, pursuant to his employment appointments, excluding per diems, bonuses, overtime pay and allowances;‖ thus petitioners are not its employees. This assertion, however, simply begs the question. The provision is a simple statement of meaning, operating on the a priori premise or presumption that the recipient is already classified as an employee, and does not lay down any basis or standard for determining who are employees and who are not.
On the other hand, relevant and appropriate is the definition of wages in the Labor Code, namely, that it is the remuneration, however designated, for work done or to be done, or for services rendered or to be rendered.[60] The ―commissions‖ due petitioners were based on the bills collected as per the schedule indicated in the Agreement.[61] Significantly, MWSS granted petitioners benefits usually given to employees, to wit: COLA, meal, emergency, and traveling allowances, hazard pay, cash gift, and other bonuses.[62] In an unabashed bid to claim credit for itself, MWSS professes that these additional benefits were its acts of benevolence and generosity.[63] We are not impressed.
Petitioners rendered services to MWSS for which they were paid and given similar benefits due the other employees of MWSS. It is hard to imagine that MWSS was simply moved by the spirit of benevolence and generosity when it granted liberal benefits to petitioners. More so since MWSS is a government owned and controlled corporation created for the ―proper operation and maintenance of waterworks system to insure an uninterrupted and adequate supply and distribution of potable water for domestic and other purposes and the proper operation and maintenance of sewerage systems.‖[64] Its main function is to provide basic services to the public. The disposition of MWSS‘ income is limited to the payment of its contractual and statutory obligations, expansion and development, and for the enhancement of its efficient operation.[65] It was not in a position to distribute hard-earned income of the State merely to give expression to its supposed altruistic impulse, or to disburse funds not otherwise authorized by law or its charter. If MWSS was impelled by some force to give the benefits to petitioners, it must have been the force of good business sense. Obviously, the additional benefits were granted with the same motivation as good managers anywhere else have—to foster a good working relationship with the bill-collectors and incentivize them to raise the high level of their performance even higher.
Now the aspect of control. MWSS makes an issue out of the proviso in the Agreement that specifically denies the existence of employer-employee relationship between it and petitioners. It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in an agreement and providing therein that the employee is ―not an MWSS employee‖[66] when the terms of the agreement and the surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be.[67]
In addition, the control test merely calls for the existence of the right to control, and not the exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee, it is enough that the former has a right to wield the power.[68] While petitioners were contract-collectors of MWSS, they were under the latter‘s direction as to where and how to perform their collection and were even subject to disciplinary measures. Trainings were in fact conducted to ensure that petitioners are conversant of the procedures of the MWSS.
Contrary to MWSS‘ assertion that petitioners were ―free to adopt (their) own method/strategy in the matter of collection‖,[69] the Agreement clearly provided that the procedure and/or manner of the collection of bills to be followed shall be in accordance with the provisions of the Manual of Procedures. Art. VI of the Agreement states:
Art. II - Procedure of Collection
The procedure and/or manner of the collection of bills to be followed shall be in accordance with Provisions of the Manual of Procedures adopted on November 1, 1968, which is made an integral part of this Agreement as Annex ―A.‖ [70]
Other manifestations of control are evident from the records. The power to transfer or reassign employees is a management prerogative exclusively enjoyed by employers. In this case, MWSS had free reign over the transfer of bill collectors from one branch to another.[71] MWSS also monitored the performance of the petitioners and determined their efficiency ratings.[72]
MWSS contends that petitioners were free to engage in other occupations and were not limited by the Agreement. Suffice it to say, however, that the control measures installed by MWSS were restrictive enough to limit or even render illusory the other employment options of petitioners as their tasks took up most of their time, they being required to report and remit to MWSS almost twice daily. Interestingly in that regard, under the Agreement petitioners were ―allowed‖ to render overtime work, and were given additional ―incentive commission‖ for work so rendered as long as the same was authorized.[73] Verily, the need to secure MWSS‘ authorization before petitioners can render overtime work debunks its claim that they were allowed to work as and when they please. All these indicate that MWSS controlled the working hours of petitioners.
Furthermore, petitioners did not have their own offices nor their own supplies and equipment. MWSS provides them with company stationeries, office space and equipment.[74] Likewise, MWSS comported itself as the employer of petitioners, providing them with I.D.s. and certifications which declared them as employees of MWSS.[75] It also deducted and remitted petitioners‘ withholding taxes and Medicare contributions.[76]
Presaging and lending precedental lift to the present adjudication is the recent ruling in Manila Water Company, Inc. v. Peña.[77] In that case, Manila Water Company (Manila Water), a concessionaire of MWSS, individually hired some of the former MWSS bill collectors to perform collection services for three (3) months. Subsequently, the bill collectors formed a corporation, Association Collectors Group, Inc. (ACGI) which was contracted by Manila Water to collect charges. Later, Manila Water asked the collectors to transfer to a newly formed corporation, First Classic Courier Services. Manila Water later terminated its contract with ACGI, as a result of which collectors who opted to remain with ACGI became unemployed. These bill collectors filed a complaint for illegal dismissal and money claims against Manila Water, claiming that they were its employees since all the methods and procedures of their collection were controlled by the latter. On the other hand, Manila Water contended that the bill collectors were employees of AGCI, an independent contractor.[78]
The Court ruled that the bill collectors were regular employees of Manila Water, debunking the latter‘s claim that they worked for an independent contractor corporation, thus:
First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, and other materials, to qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered substantial capitalization. The 121 collectors subscribed to four shares each and paid only the amount of P625.00 in order to comply with the incorporation requirements. Further, private respondents reported daily to the branch office of the petitioner because ACGI has no office or work premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Peña. Moreover, in dealing with the consumers, private respondents used the receipts and identification cards issued by petitioner.
Second, the work of the private respondents was directly related to the principal business or operation of the petitioner. Being in the business of providing water to the consumers in the East Zone, the collection of the charges therefor by private respondents for the petitioner can only be categorized as clearly related to, and in the pursuit of the latter‘s business.
Lastly, ACGI did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, petitioner. Prior to private respondents‘ alleged employment with ACGI, they were already working for petitioner, subject to its rules and regulations in regard to the manner and method of performing their tasks. This form of control and supervision never changed although they were already under the seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods and distribution of books to the collectors; it required private respondents to report daily and to remit their collections on the same day to the branch office or to deposit them with Bank of the Philippine Islands; it monitored strictly their attendance as when a collector cannot perform his daily collection, he must notify petitioner or the branch office in the morning of the day that he will be absent; and although it was ACGI which ultimately disciplined private respondents, the penalty to be imposed was dictated by petitioner as shown in the letters it sent to ACGI specifying the penalties to be meted on the erring private respondents. These are indications that ACGI was not left alone in the supervision and control of its alleged employees. Consequently, it can be concluded that ACGI was not an independent contractor since it did not carry a distinct business free from the control and supervision of petitioner.[79]
Even under the ―four-fold test‖, the bill collectors proved to be employees of Manila Water. Thus, the Court held that:
Even the ―four-fold test‖ will show that petitioner is the employer of private respondents. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer‘s power to control the employee‘s conduct. The most important element is the employer‘s control of the employee‘s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.
We agree with the Labor Arbiter that in the three stages of private respondents‘ services with the petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2) from September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to February 8, 1999, the latter exercised control and supervision over the formers‘ conduct.
Petitioner contends that the employment of private respondents from August 1, 1997 to August 30, 1997 was only temporary and done to accommodate their request to be absorbed since petitioner was still undergoing a transition period. It was only when its business became settled that petitioner employed private respondents for a fixed term of three months.
Although petitioner was not obliged to absorb the private respondents, by engaging their services, paying their wages in the form of commission, subjecting them to its rules and imposing punishment in case of breach thereof, and controlling not only the end result but the manner of achieving the same as well, an employment relationship existed between them.
Notably, private respondents performed activities which were necessary or desirable to its principal trade or business. Thus, they were regular employees of petitioner, regardless of whether the engagement was merely an accommodation of their request….[80] (Emphasis Ours)
In fine, the Court found that the so-called independent contractor did not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other material to qualify as an independent contractor. Moreover, respondents therein reported daily to the Manila Water branch office and dealt with the consumers through receipts and I.D.s. issued by the latter. Likewise, their work was directly related to and in the pursuit of Manila Water‘s principal business. More importantly, the Court noted that ACGI did not carry a distinct business free from the control and supervision of Manila Water.
The similarity between this case and the instant petition cannot be denied. For one, the respondents in said case are petitioners in this case.[81] Second, the work set-up was essentially the same. While the bill collectors were individually hired, or eventually engaged through ACGI, they were under the direct control and supervision of the concessionaire, much like the arrangement between herein petitioners and MWSS. Third, they performed the same vital function of collection in both cases. Fourth, they worked exclusively for their employers. Hence, the bill collectors in the Manila Water case were declared employees of Manila Water despite the existence of a sham labor contractor. In the present case, petitioners were directly and individually hired by MWSS, the latter not resoting to the intermediary labor contractor artifice, but a mere a scrap of paper impudently declaring the bill collectors to be not employees of MWSS. With greater reason, therefore, should the actuality of the employer-employee relationship between MWSS and petitioners be recognized.
The CSC, as well as the Court of Appeals, makes much of CSC Memorandum Circular No. 38, Series of 1993, which distinguishes between contract of services/job services and contractual appointment. The Circular provides:
Contract of Services and Job Orders are different from Contractual appointment and Plantilla appointment of casual employees, respectively, which are required to be submitted to CSC for approval.
Contracts of Services and Job Orders refer to employment described as follows:
1. The contract covers lump sum work or services such as janitorial, security or consultancy services where no employer-employee relationship exist;
2. The job order covers piece of work or intermittent job of short duration not exceeding six months on a daily basis;
3. The contract of services and job orders are not covered by Civil Service Law, Rules and Regulations; [sic] but covered by COA rules;
4. The employees involved in the contracts or job orders do not enjoy the benefits enjoined by government employees, such as PERA, COLA and RATA.
5. As the services rendered under contracts of services and job orders are not considered government services, they do not have to be submitted to the Civil Service Commission for approval.[82]
Clinging to its tenuous denial of petitioners‘ employee status, the CSC avers that contractual employees are those with contractual appointment submitted to and attested by the CSC, unlike petitioners who failed to show that their appointments were duly attested by the CSC. The Court recognizes the authority of the CSC in promulgating circulars and memoranda concerning the civil service sector in line with its function as the central personnel agency of the Government.[83] Nevertheless, it cannot turn a blind eye to a rather haphazard application and interpretation by the CSC of its own issuance, such as in this case.
A careful review of the above-quoted circular shows that the relationship defined by the Agreement cannot fall within the purview of contract of services or job orders. Payments made by MWSS‘ subscribers are the lifeblood of the company. Viewed in that context the work rendered by the petitioners is essential to the company‘s survival and growth. Alongside its public service thrust, the MWSS is an income-generating entity for the Government. It relies for the most part on the bill collections in order to sustain its operations. The task of collecting payments for the water supplied by the MWSS to its consumers does not deserve to be compared with mere janitorial, security or even consultancy work. It is not intermittent and seasonal, but rather continuous and increasing by reason of its indisputable essentiality. To lump petitioners with the run-of-the-mill service providers is to ignore the vital role they perform for the MWSS. Rightly so, as clearly indicated in the circular, employees involved in the contracts or job orders do not enjoy the benefits enjoyed by the petitioners which are the same benefits given to government employees.
Petitioners are indeed regular employees of the MWSS. The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Likewise, the repeated and continuing need for the performance of the job has been deemed sufficient evidence of the necessity, if not indispensability of the activity to the business.[84] Some of the petitioners had rendered more than two decades of service to the MWSS. The continuous and repeated rehiring of these bill collectors indicate the necessity and desirability of their services, as well as the importance of the role of bill collectors in the MWSS.
We agree with the CSC when it stated that the authority of government agencies to contract services is an authority recognized under civil service rules.[85] However, said authority cannot be used to circumvent the laws and deprive employees of such agencies from receiving what is due them.
The CSC goes further to say that petitioners were unable to present proof that their appointments were contractual in nature and submitted to the CSC for its approval, and that submission to and approval of the CSC are important as these show that their services had been credited as government service.[86] The point is of no moment. Petitioners were able to attach only two of such Agreements which bore the stamp of approval by the CSC and these are simply inadequate to prove that the other agreements were similarly approved. Even petitioners admit that subsequently such Agreements were no longer submitted to the CSC for its approval. Still, the failure to submit the documents for approval of the CSC cannot militate against the existence of employer-employee relationship between petitioners and MWSS. MWSS cannot raise its own inaction to buttress its adverse position.
MWSS committed itself to pay severance and terminal leave pay to its regular employees.[87] The guidelines[88] thereof states that regular employees who have rendered at least a year of service and not eligible for retirement are entitled to severance pay equivalent to one (1) month basic pay for every full year of service.[89] In view of the Court‘s finding that petitioners were employees of MWSS, the corresponding severance pay, in accordance with the guidelines, should be given to them. Terminal leave pay are likewise due petitioners, provided they meet the requirements therefor.
However, petitioners in this case cannot avail of retirement benefits from the GSIS. When their services were engaged by MWSS, they were not reported as its employees and hence no deductions were made against them for purpose of the GSIS contributions. It would be unjust to grant petitioners retirement benefits when there was no remittance of the employees‘ or the employer‘s share of contributions.
The case of Chua v. Civil Service Commission[90] relied upon by petitioners is not in point. There was no question that Chua was an employee, specifically a contractual/project employee of the National Irrigation Administration (NIA). The CSC‘s denial of her request for early retirement benefits was based on the CSC‘s conclusion that contractual employees are not covered by the Early Retirement Law.[91] This Court held that co-terminus employees who have rendered years of continuous service such as Chua -who was continuously hired and rehired for four (4) successive times in a span of fifteen (15) years-should be included in the coverage of the Early Retirement Law as long as they comply with CSC regulations promulgated for such purpose. Underlying this grant of retirement benefits to Chua is the finding that her work with the NIA was recognized and accredited by the CSC as government service, that she paid her GSIS contributions throughout her service, and the fact that she applied for the benefit within the prescribed period.[92]
The differences between Chua and petitioners are readily apparent. The ruling in Chua concerns claims based on the Early Retirement Law. On the other hand, this case involves bill collectors who were hired by virtue of individual agreements, and who are now claiming payment of retirement, separation and terminal leave benefits. Petitioners‘ services, admittedly, were not credited/recognized by the CSC. Likewise, the parties still dispute the nature of their relationship when petitioners made the claim for the benefits, unlike in the case of Chua where there was no question as to her status as an employee of the NIA. Moreover, unlike Chua, petitioners in this case did not give any contribution for GSIS coverage, especially since retirement benefits come from the monthly contributions of GSIS members.
Petitioner‘s claim for damages and attorney‘s fees are similarly untenable. MWSS cannot be made liable for moral damages for the ―serious moral disturbance‖[93] petitioners allegedly suffered as a result of the denial of the requested benefits because it was merely following the earlier resolution[94] of the CSC. MWSS‘ adherence to the position of the CSC is but logical. It is after all, the central personnel agency of the government, and its resolution at the time was valid and binding on MWSS.
WHEREFORE, the petition is GRANTED IN PART. The Decision of the Court of Appeals in C.A.–G.R. SP No. 55263, as well as the Civil Service Commission‘s Resolutions Nos. 991384 and 992074, are hereby REVERSED and SET ASIDE. MWSS is ordered to pay terminal leave pay and separation pay and/or severance pay to each of herein petitioners on the basis of remunerations/commissions, allowances and bonuses each were actually receiving at the time of termination of their employment as contract collectors of MWSS. Let the case be remanded to the Civil Service Commission for the computation of the above awards and the appropriate disposition in accordance with the pronouncements in this Decision.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Chico-Nazario, and Garcia, JJ., concur.
G.R. No. 84484 November 15, 1989
(13)INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10
... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct — although the latter is the most important element (35 Am. Jur. 445). ... has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, 13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods — or the methods themselves — of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.
G.R. No. L-41182-3 April 16, 1988
(14)DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, vs. THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute: xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which was elevated the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business venture appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediately columnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate office located at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and as such was designated manager. 1 xxx xxx xxx
The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING- APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the between parties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer- employee relation. In general, we 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." 10 Subsequently, however, we have considered, 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, in determining the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidum as and for rental payments, an arrangement that would be like claims of a master-servant relationship. True the respondent Court would later minimize her participation in the lease as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said, employment is determined by the right-of-control test and certain economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed 15 and where each party exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof —
ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and analogous cases: xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.
Costs against said private respondents.
SO ORDERED.
Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.
G.R. No. 170087 August 31, 2006
(15)ANGELINA FRANCISCO, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
D E C I S I O N
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 company‘s employees. 12
Petitioner‘s 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 petitioner‘s 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 complainant‘s 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% Attorney‘s 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% attorney‘s fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th 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 petitioner‘s 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 employer‘s 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 employer‘s 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 latter‘s employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 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.
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 employer‘s business; (2) the extent of the worker‘s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker‘s 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 corporation‘s 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. Petitioner‘s 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 latter‘s 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 petitioner‘s 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 former‘s 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 petitioner‘s job was as Kamura‘s 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, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco‘s 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.
CONSUELO YNARES-SANTIAGO Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN Chief Justice Chairperson
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice
ROMEO J. CALLEJO, SR. Associate Justice
MINITA V. CHICO-NAZARIO Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
ARTEMIO V. PANGANIBAN Chief Justice
[G.R. No. 138051. June 10, 2004]
(16)JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent. D E C I S I O N 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 CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza (―SONZA‖). The Court of Appeals affirmed the findings of the National Labor Relations Commission (―NLRC‖), which affirmed the Labor Arbiter‘s dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (―ABS-CBN‖) signed an Agreement (―Agreement‖) with the Mel and Jay Management and Development Corporation (―MJMDC‖). ABS-CBN was represented by its corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco (―TIANGCO‖), as EVP and Treasurer. Referred to in the Agreement as ―AGENT,‖ MJMDC agreed to provide SONZA‘s services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows: a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays; b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZA‘s services a monthly talent fee of 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-CBN‘s President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.) JOSE Y. SONZA President and Gen. 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 SONZA‘s monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZA‘s talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondent‘s plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent‘s Position Paper with Motion to Expunge Respondent‘s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN‘s witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.[6] The pertinent parts of the decision read as follows: x x x
While Philippine jurisprudence has not yet, with certainty, touched on the ―true nature of the contract of a talent,‖ it stands to reason that a ―talent‖ as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant Sonza‘s monthly talent fees amount to a staggering 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 respondent‘s Rules and Regulations, likewise, does not detract from the absence of employer-employee relationship. As held by the Supreme Court, ―The line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means to achieve it.‖ (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989). x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter‘s decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC‘s finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the NLRC‘s decision, the appellate court quoted the following findings of the NLRC: x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC ‗is a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.‘ (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the ‗AGENT‘. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere ‗labor-only‘ contractor of ABS-CBN such that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from complainant- appellant‘s Position Paper, his claims for compensation for services, ‗13th month pay‘, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant- appellant bears perusal:
‗Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was receiving prior to effectivity of (the) Agreement‘.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.‘
Thus, it is precisely because of complainant-appellant‘s own recognition of the fact that his contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the latter a ‗notice of rescission‘ of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, ‗he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement.‘ (Annex 3 of the respondent ABS-CBN‘s Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellant‘s claims being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.[11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRC‘s conclusion.[12] The Court of Appeals added that it could not re-examine the parties‘ evidence and substitute the factual findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC‘S DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.[14]
The Court‘s Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiter‘s dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one of its ―talents.‖ There is no case law stating that a radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose ―Jay‖ Sonza, a known television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence.[15] Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[16] A party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer‘s power to control the employee on the means and methods by which the work is accomplished.[18] The last element, the so-called ―control test‖, is the most important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA‘s services to co-host its television and radio programs because of SONZA‘s peculiar skills, talent and celebrity status. SONZA contends that the ―discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondent‘s claim of independent contractorship.‖
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS- CBN. SONZA also points out that ABS-CBN granted him benefits and privileges ―which he would not have enjoyed if he were truly the subject of a valid job contract.‖
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBN‘s employee, there would be no need for the parties to stipulate on benefits such as ―SSS, Medicare, x x x and 13th month pay‖[20] which the law automatically incorporates into every employer-employee contract.[21] Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.[22]
SONZA‘s talent fees, amounting to 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 SONZA‘s unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZA‘s talent fees as long as ―AGENT and Jay Sonza shall faithfully and completely perform each condition of this Agreement.‖[24] Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA‘s talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA‘s talent fees during the remaining life of the Agreement even if ABS- CBN cancelled SONZA‘s programs through no fault of SONZA.[25]
SONZA assails the Labor Arbiter‘s interpretation of his rescission of the Agreement as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that ―if it were true that complainant was really an employee, he would merely resign, instead.‖ SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZA‘s letter clearly bears this out.[26] However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública (―WIPR‖)[27] that a television program host is an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a master‘s degree in public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with ―Desde Mi Pueblo.‖ Second, Alberty provided the ―tools and instrumentalities‖ necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR provided the ―equipment necessary to tape the show.‖ Alberty‘s argument is misplaced. The equipment necessary for Alberty to conduct her job as host of ―Desde Mi Pueblo‖ related to her appearance on the show. Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming ―Desde Mi Pueblo.‖ Alberty‘s contracts with WIPR specifically provided that WIPR hired her ―professional services as Hostess for the Program Desde Mi Pueblo.‖ There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x 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.
SONZA‘s argument is misplaced. ABS-CBN engaged SONZA‘s services specifically to co-host the ―Mel & Jay‖ programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN‘s control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.[31] ABS-CBN could not dictate the contents of SONZA‘s script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA‘s work.[33] ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule ―for more effective programming.‖[34] ABS-CBN‘s sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZA‘s work.
SONZA claims that ABS-CBN‘s power not to broadcast his shows proves ABS-CBN‘s power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA‘s show, ABS-CBN was still obligated to pay SONZA‘s talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZA‘s performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA‘s show but ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBN‘s right not to broadcast SONZA‘s show, burdened as it was by the obligation to continue paying in full SONZA‘s talent fees, did not amount to control over the means and methods of the performance of SONZA‘s work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBN‘s approval. This proves that ABS-CBN‘s control was limited only to the result of SONZA‘s work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZA‘s talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the ―Mel & Jay‖ programs. However, the equipment, crew and airtime are not the ―tools and instrumentalities‖ SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS- CBN‘s sole concern was for SONZA to display his talent during the airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an independent contractor.[40] SONZA‘s work as television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN‘s employee because ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS- CBN‘s control ―not only [over] his manner of work but also the quality of his work.‖
The Agreement stipulates that SONZA shall abide with the rules and standards of performance ―covering talents‖[41] of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the ―Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics.‖[42] The KBP code applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.[43] In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.[44]
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according to his own initiative.[45]
Lastly, SONZA insists that the ―exclusivity clause‖ in the Agreement is the most extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.[46] This practice is not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time and effort ―in building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate period of time.‖[47] Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter‘s finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a ―labor-only‖ contractor and ABS- CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the ―labor-only‖ contractor; (2) the employee who is ostensibly under the employ of the ―labor-only‖ contractor; and (3) the principal who is deemed the real employer. Under this scheme, the ―labor-only‖ contractor is the agent of the principal. The law makes the principal responsible to the employees of the ―labor- only contractor‖ as if the principal itself directly hired or employed the employees.[48] These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS- CBN. MJMDC merely acted as SONZA‘s agent. The Agreement expressly states that MJMDC acted as the ―AGENT‖ of SONZA. The records do not show that MJMDC acted as ABS-CBN‘s agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZA‘s status. A mere executive issuance cannot exclude independent contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBN‘s Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBN‘s witnesses, he was never prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum x x x
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latter‘s direct testimony. x x x
Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.[51] The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.[52] If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the 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% value-added tax (―VAT‖) on services they render. Exempted from the VAT are those under an employer- employee relationship.[57] This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZA‘s Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA‘s claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZA‘s cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
[G.R. No. 149011. June 28, 2005]
(17)SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAÑETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEÑA, ROBERTO HOFILEÑA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents. D E C I S I O N CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi- Purpose Cooperative (Sunflower), represented by the Chairman of its Board of Directors Roy G. Asong, entered into a one-year Contract of Services[1] commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party. The pertinent provisions of the contract read:
1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-exclusive basis for a period of one year the following services for the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial B. Shrimp Harvesting/Receiving C. Sanitation/Washing/Cold Storage[2] 2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall employ the necessary personnel and provide adequate equipment, materials, tools and apparatus, to efficiently, fully and speedily accomplish the work and services undertaken by the cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. – Piece rate of P0.34/kg. Or P100.00 minimum per person/activity whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal. This will be pre-set every harvest based on harvest plan approved by the Senior Buyer. C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on the end of each month. The cooperative shall pay taxes, fees, dues and other impositions that shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work and services herein agreed upon. xxx
4. There is no employer-employee relationship between the company and the cooperative, or the cooperative and any of its members, or the company and any members of the cooperative. The cooperative is an association of self-employed members, an independent contractor, and an entrepreneur. It is subject to the control and direction of the company only as to the result to be accomplished by the work or services herein specified, and not as to the work herein contracted. The cooperative and its members recognize that it is taking a business risk in accepting a fixed service fee to provide the services contracted for and its realization of profit or loss from its undertaking, in relation to all its other undertakings, will depend on how efficiently it deploys and fields its members and how they perform the work and manage its operations.
5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its member-workers or otherwise in the direction and control thereof. The determination of the wages, salaries and compensation of the member-workers of the cooperative shall be within its full control. It is further understood that the cooperative is an independent contractor, and as such, the cooperative agrees to comply with all the requirements of all pertinent laws and ordinances, rules and regulations. Although it is understood and agreed between the parties hereto that the cooperative, in the performance of its obligations, is subject to the control or direction of the company merely as a (sic) result to be accomplished by the work or services herein specified, and not as to the means and methods of accomplishing such result, the cooperative hereby warrants that it will perform such work or services in such manner as will be consistent with the achievement of the result herein contracted for. xxx
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits, premiums and protection in accordance with the provisions of the labor code, cooperative code and other applicable laws and decrees and the rules and regulations promulgated by competent authorities, assuming all responsibility therefor.
The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a statement made, signed and sworn to by its duly authorized representative before a notary public or other officer authorized by law to administer oaths, to the effect that the cooperative has paid all wages or salaries due to its employees or personnel for services rendered by them during the month immediately preceding, including overtime, if any, and that such payments were all in accordance with the requirements of law. xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one (1) year commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a month-to-month basis until terminated by either party by sending a written notice to the other at least thirty (30) days prior to the intended date of termination. xxx[3] (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMC‘s Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended Complaint[4] to include illegal dismissal as additional cause of action following SMC‘s closure of its Bacolod Shrimp Processing Plant on September 15, 1995[5] which resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint[6] dated November 27, 1995 to implead Sunflower as Third Party Defendant which was, by Order[7] of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and Employment (DOLE) a Notice of Closure[8] of its aquaculture operations effective on even date, citing serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents‘ complaint for lack of merit, ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly exercise its management prerogative to contract out the preparation and processing aspects of its aquaculture operations. Judicial notice has already been taken regarding the general practice adopted in government and private institutions and industries of hiring independent contractors to perform special services. xxx xxx
Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions and we do not see how this activity could not be legally undertaken by an independent service cooperative like the third-party respondent herein.
There is no basis to the demand for regularization simply on the theory that complainants performed activities which are necessary and desirable in the business of respondent. It has been held that the definition of regular employees as those who perform activities which are necessary and desirable for the business of the employer is not always determinative because any agreement may provide for one (1) party to render services for and in behalf of another for a consideration even without being hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping generalization and completely unsubstantiated. xxx In the absence of clear and convincing evidence showing that third-party respondent acted merely as a labor only contractor, we are firmly convinced of the legitimacy and the integrity of its service contract with respondent SMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by economic factors which was (sic) mainly serious business losses. The law recognizes the right of the employer to close his business or cease his operations for bonafide reasons, as much as it recognizes the right of the employer to terminate the employment of any employee due to closure or cessation of business operations, unless the closing is for the purpose of circumventing the provisions of the law on security of tenure. The decision of respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) clearly been established, is a management prerogative which could hardly be interfered with. xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly terminated following the legal requisites prescribed by law. The closure, however, in so far as the complainants are concerned, resulted in the termination of SMC‘s service contract with their cooperative xxx[9] (Underscoring supplied)
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third party respondent Sunflower was an independent contractor in light of its observation that ―[i]n all the activities of private respondents, they were under the actual direction, control and supervision of third party respondent Sunflower, as well as the payment of wages, and power of dismissal.‖[10]
Private respondents‘ Motion for Reconsideration[11] having been denied by the NLRC for lack of merit by Resolution of September 10, 1999, they filed a petition for certiorari[12] before the Court of Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss[13] private respondents‘ petition for non- compliance with the Rules on Civil Procedure and failure to show grave abuse of discretion on the part of the NLRC.
SMC subsequently filed its Comment[14] to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998 decision and 10 September 1999 resolution of the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT petitioners: (a) separation pay in accordance with the computation given to the regular SMC employees working at its Bacolod Shrimp Processing Plant with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from 11 September 1995, the time their actual compensation was withheld from them, up to the time of the finality of this decision; (b) differentials pays (sic) effective as of and from the time petitioners acquired regular employment status pursuant to the disquisition mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from employment on 11 September 1995; and ORDERING private respondent SMC to PAY unto the petitioners attorney‘s fees equivalent to ten (10%) percent of the total award.
No pronouncement as to costs.
SO ORDERED.[15] (Underscoring supplied)
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned:
Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to abstain from establishing an employer-employee relationship between SMC and [Sunflower] or the latter‘s members, the extent to which the parties successfully realized this intent in the light of the applicable law is the controlling factor in determining the real and actual relationship between or among the parties. xxx
With respect to the power to control petitioners‘ conduct, it appears that petitioners were under the direct control and supervision of SMC supervisors both as to the manner they performed their functions and as to the end results thereof. It was only after petitioners lodged a complaint to have their status declared as regular employees of SMC that certain members of [Sunflower] began to countersign petitioners‘ daily time records to make it appear that they (petitioners) were under the control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would never have allowed the petitioners to work within its premises, using its own facilities, equipment and tools, alongside SMC employees discharging similar or identical activities unless it exercised a substantial degree of control and supervision over the petitioners not only as to the manner they performed their functions but also as to the end results of such functions. xxx xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower] and the petitioners did not have substantial capital or investment in the form of tools, equipment, implements, work premises, et cetera necessary to actually perform the service under their own account, responsibility, and method. The only ―work premises‖ maintained by [Sunflower] was a small office within the confines of a small ―carinderia‖ or refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo, pp. 525-525) and, the only assets it provided SMC were the bare bodies of its members, the petitioners herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and supervision of SMC both as to the manner and method in discharging their functions and as to the results thereof.
Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and handlers were directly related to the aquaculture business of SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract from January 1993 to September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the suspicion that the non-exclusive service contract between SMC and [Sunflower] was ―designed to evade the obligations inherent in an employer-employee relationship‖ (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower] retained counsel are both partners of the local counsel of SMC (rollo, p. 9). xxx
With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of SMC, facilitating the manpower requirements of the latter, the real employer of the petitioners. We simply cannot allow these two entities through the convenience of a non- exclusive service contract to stipulate on the existence of employer-employee relation. Such existence is a question of law which cannot be made the subject of agreement to the detriment of the petitioners (Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500). xxx
There being a finding of ―labor-only‖ contracting, liability must be shouldered either by SMC or [Sunflower] or shared by both (See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC however should be held solely liable for [Sunflower] became non-existent with the closure of the aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer feasible. Consistent with the pronouncement in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus entitled to separation pay (in the computation similar to those given to regular SMC employees at its Bacolod Shrimp Processing Plant) ―with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld from them‖ up to the time of the finality of this decision. This is without prejudice to differentials pays (sic) effective as of and from the time petitioners acquired regular employment status pursuant to the discussion mentioned above, and all such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from employment on 11 September 1995.[16] (Emphasis and underscoring supplied)
SMC‘s Motion for Reconsideration[17] having been denied for lack of merit by Resolution of July 11, 2001, it comes before this Court via the present petition for review on certiorari assigning to the CA the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS‘ PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS LOSSES.[18] (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the ninety seven named petitioners signed the verification and certification against forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient,[19] this Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective.[20] Strict compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded.[21] It does not, however, thereby interdict substantial compliance with its provisions under justifiable circumstances.[22]
Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association,[23] this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by their homeowners‘ association president who was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of action which was the breach of contractual obligations and payment of damages. They shared a common interest in the subject matter of the case, being the aggrieved residents of the poorly constructed and developed Emily Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could validly sign the certificate of non-forum shopping in behalf of all his co- plaintiffs. In cases therefore where it is highly impractical to require all the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the certificate provided that xxx the plaintiffs share a common interest in the subject matter of the case or filed the case as a ―collective,‖ raising only one common cause of action or defense.[24] (Emphasis and underscoring supplied)
Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one common cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private respondents of the certificate of non-forum shopping constitutes substantial compliance with the Rules.[25] That the three indeed represented their co-petitioners before the appellate court is, as it correctly found, ―subsequently proven to be true as shown by the signatures of the majority of the petitioners appearing in their memorandum filed before Us.‖[26]
Additionally, the merits of the substantive aspects of the case may also be deemed as ―special circumstance‖ or ―compelling reason‖ to take cognizance of a petition although the certification against forum shopping was not executed and signed by all of the petitioners.[27]
SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by ―copies of all pleadings and documents relevant and pertinent thereto‖ in contravention of Section 1, Rule 65 of the Rules of Court.[28]
This Court is not persuaded. The records show that private respondents appended the following documents to their petition before the appellate court: the September 23, 1997 Decision of the Labor Arbiter,[29] their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed before the NLRC,[30] the December 29, 1998 NLRC Decision,[31] their Motion for Reconsideration dated March 26, 1999 filed with the NLRC[32] and the September 10, 1999 NLRC Resolution.[33]
It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are sufficient to make out a prima facie case.[34] It discerns whether on the basis of what have been submitted it could already judiciously determine the merits of the petition.[35] In the case at bar, the CA found that the petition was adequately supported by relevant and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-forum shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of justice; (2) where the interest of substantial justice will be served; (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.[36]
Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.[37]
SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and the NLRC as ―findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and finality,‖ and that this principle acquires greater weight and application in the case at bar as the labor arbiter and the NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the particular field of its endeavor are accorded great weight on appeal.[38] The rule is not absolute and admits of certain well-recognized exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court may make an independent evaluation of the facts of the case.[39]
SMC further faults the appellate court in giving due course to private respondents‘ petition despite the fact that the complaint filed before the labor arbiter was signed and verified only by private respondent Winifredo Talite; that private respondents‘ position paper[40] was verified by only six[41] out of the ninety seven complainants; and that their Joint-Affidavit[42] was executed only by twelve[43] of the complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been considered by the appellate court in establishing the claims of those who did not sign the same, citing this Court‘s ruling in Southern Cotabato Development and Construction, Inc. v. NLRC.[44]
SMC‘s position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice. Thus the first sentence of their complaint alleges: ―xxx complainants, by counsel and unto this Honorable Office respectfully state xxx.‖ And the complaint was signed by Atty. Jose Max S. Ortiz as ―counsel for the complainants.‖ Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of the complainants and was causing the preparation of the complaint ―with the authority of my co- complainants‖ indubitably shows that Talite was representing the rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. – Attorneys and other representatives of parties shall have authority to bind their clients in all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a compromise agreement with the opposing party in full or partial discharge of a client‘s claim. (Underscoring supplied)
As regards private respondents‘ position paper which bore the signatures of only six of them, appended to it was an Authority/Confirmation of Authority[45] signed by the ninety one others conferring authority to their counsel ―to file RAB Case No. 06-07-10316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City‖ and appointing him as their retained counsel to represent them in the said case.
That there has been substantial compliance with the requirement on verification of position papers under Section 3, Rule V of the 1990 NLRC Rules of Procedure[46] is not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads:
Section 7. Nature of Proceedings. – The proceedings before a Labor Arbiter shall be non- litigious in nature. Subject to the requirements of due process, the technicalities of law and procedure and the rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the controversy speedily, including ocular inspection and examination of well-informed persons. (underscoring supplied)
As regards private respondents‘ Joint-Affidavit which is being assailed in view of the failure of some complainants to affix their signatures thereon, this Court quotes with approval the appellate court‘s ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads:
―Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor appear during trial and in whose favor no other independent evidence was adduced, no award for back wages could have been validly and properly made for want of factual basis. There is no showing at all that any of the affidavits of the thirty-four (34) complainants were offered as evidence for those who did not submit their affidavits, or that such affidavits had any bearing at all on the rights and interest of the latter. In the same vein, private respondent‘s position paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered as evidence for those who did not submit theirs, or the affidavits were material and relevant to the rights and interest of the latter, such affidavits may be sufficient to establish the claims of those who did not give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein) would readily reveal that the affidavit was offered as evidence not only for the signatories therein but for all of the complainants. (These ninety-seven (97) individuals were previously identified during the mandatory conference as the only complainants in the proceedings before the labor arbiter) Moreover, the affidavit touched on the common interest of all of the complainants as it supported their claim of the existence of an employer-employee relationship between them and respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the complainants.[47] (Emphasis supplied, underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. – In any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of substantial justice.[48]
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand, private respondents assert that Sunflower is a labor-only contractor.
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. – Whenever an employer enters into a contract with another person for the performance of the former‘s work, the employees of the contractor and of the latter‘s subcontractor, if any shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is ―labor-only‖ contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal, or ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.
―Substantial capital or investment‖ refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The ―right to control‖ shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.[49]
In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees‘ wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.[50]
In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.[51]
The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties‘ relationship; rather it is the totality of the facts and surrounding circumstances of the case.[52] A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute.[53]
SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it had no substantial capital.[54]
While indeed Sunflower was issued Certificate of Registration No. IL0-875[55] on February 10, 1992 by the Cooperative Development Authority, this merely shows that it had at least P2,000.00 in paid-up share capital as mandated by Section 5 of Article 14[56] of Republic Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be considered substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other materials to qualify it as an independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private respondents in carrying out their tasks were owned and provided by SMC. Consider the following uncontroverted allegations of private respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery, equipment, or working tool used in the processing plant. Everything was owned and provided by respondent SMC. The lot, the building, and working facilities are owned by respondent SMC. The machineries and equipments (sic) like washer machine, oven or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also owned by respondent SMC. The gloves and boots used by the complainants were also owned by respondent SMC. Even the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used by the complainants assigned as cleaners were all owned and provided by respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities used in said prawn processing xxx
The alleged office of [Sunflower] is found within the confines of a small ―carinderia‖ or ―refreshment‖ (sic) owned by the mother of the Cooperative Chairman Roy Asong. xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. [57]
And from the job description provided by SMC itself, the work assigned to private respondents was directly related to the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp harvesting, receiving and packing formed an integral part of the shrimp processing operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer[58] has been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC exercised the power of control and supervision over its employees.[59] And control of the premises in which private respondents worked was by SMC. These tend to disprove the independence of the contractor.[60]
More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC shrimp processing workers performing identical jobs under the same SMC supervisors.[61] This circumstance is another indicium of the existence of a labor-only contractorship.[62]
And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing to the contrary having been proffered by SMC, Sunflower did not cater to clients other than SMC,[63] and with the closure of SMC‘s Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Court‘s ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.[64] is thus instructive. xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which was then having labor problems in its segregation division, none of its workers was also ever assigned to any other establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC followed MAERC‘s cessation of operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers.[65] (Underscoring supplied)
All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and private respondents.
Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter[66] and as such are entitled to all the benefits and rights appurtenant to regular employment.[67] They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMC‘s other regular employees.
Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with approval the appellate court‘s ruling thereon:
Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v. NLRC, supra, p. 359).[68]
The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.[69]
As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day immediately following their first year of service.[70]
Regarding the closure of SMC‘s aquaculture operations and the consequent termination of private respondents, Article 283 of the Labor Code provides:
ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Underscoring supplied)
In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally ceased operations but is still very much an on-going and highly viable business concern.[71]
Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence.[72]
For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.[73]
In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative defense.[74]
Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors failing which they can be assailed as self-serving documents.[75]
In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co. showing that the aquaculture operations of SMC‘s Agribusiness Division accumulated losses amounting to P145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its employees.
For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the DOLE at least one (1) month before the actual date of the retrenchment,[76] in order to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.[77]
Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano Capay that effective the following day or on September 11, 1995, they were no longer to report for work as SMC would be closing its operations.[78]
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employer‘s exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.[79]
In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private respondent as nominal damages.
The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a statutory obligation on the part of the employer and a demandable right on the part of the employee. Private respondents should thus be awarded separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents.
Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well settled that backwages may be granted only when there is a finding of illegal dismissal.[80] The appellate court thus erred in awarding backwages to private respondents upon the authority of Bustamante v. NLRC,[81] what was involved in that case being one of illegal dismissal.
With respect to attorney‘s fees, in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and interests,[82] a maximum of ten percent (10%) of the total monetary award[83] by way of attorney‘s fees is justifiable under Article 111 of the Labor Code,[84] Section 8, Rule VIII, Book III of its Implementing Rules,[85] and paragraph 7, Article 2208 of the Civil Code.[86] Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case.[87]
Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 19[88] of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents.
WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11, 2001 of the Court of Appeals are AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to jointly and severally pay each private respondent differential pay from the time they became regular employees up to the date of their termination; separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents; and ten percent (10%) attorney‘s fees based on the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.
(18)THELMA DUMPIT-MURILLO, Petitioner, - versus - G.R. No. 164652
Present:
QUISUMBING, J.,* Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.
COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD TAN, Respondents.
Promulgated:
June 8, 2007 x------x DECISION QUISUMBING, J.: This petition seeks to reverse and set aside both the Decision[1] dated January 30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its Resolution[2] dated June 23, 2004 denying the motion for reconsideration. The Court of Appeals had overturned the Resolution[3] dated August 30, 2000 of the National Labor Relations Commission (NLRC) ruling that petitioner was illegally dismissed. The facts of the case are as follows: On October 2, 1995, under Talent Contract No. NT95-1805,[4] private respondent Associated Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co- anchor for Balitang-Balita, an early evening news program. The contract was for a period of three months. It was renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and NT99-5649.[5] In addition, petitioner‘s services were engaged for the program ―Live on Five.‖ On September 30, 1999, after four years of repeated renewals, petitioner‘s talent contract expired. Two weeks after the expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President for News and Public Affairs of ABC, informing the latter that she was still interested in renewing her contract subject to a salary increase. Thereafter, petitioner stopped reporting for work. On November 5, 1999, she wrote Mr. Javier another letter,[6] which we quote verbatim: x x x x Dear Mr. Javier: On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal note ―what terms and conditions‖ in response to my first letter dated October 13, 1999. To date, or for more than fifteen (15) days since then, I have not received any formal written reply. xxx In view hereof, should I not receive any formal response from you until Monday, November 8, 1999, I will deem it as a constructive dismissal of my services. x x x x A month later, petitioner sent a demand letter[7] to ABC, demanding: (a) reinstatement to her former position; (b) payment of unpaid wages for services rendered from September 1 to October 20, 1999 and full backwages; (c) payment of 13th month pay, vacation/sick/service incentive leaves and other monetary benefits due to a regular employee starting March 31, 1996. ABC replied that a check covering petitioner‘s talent fees for September 16 to October 20, 1999 had been processed and prepared, but that the other claims of petitioner had no basis in fact or in law. On December 20, 1999, petitioner filed a complaint[8] against ABC, Mr. Javier and Mr. Edward Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay, service incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR Case No. 30-12-00985-99. She likewise demanded payment for moral, exemplary and actual damages, as well as for attorney‘s fees. The parties agreed to submit the case for resolution after settlement failed during the mandatory conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.[9] On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC held that an employer-employee relationship existed between petitioner and ABC; that the subject talent contract was void; that the petitioner was a regular employee illegally dismissed; and that she was entitled to reinstatement and backwages or separation pay, aside from 13th month pay and service incentive leave pay, moral and exemplary damages and attorney‘s fees. It held as follows: WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby REVERSED/SET ASIDE and a NEW ONE promulgated: 1) declaring respondents to have illegally dismissed complainant from her regular work therein and thus, ordering them to reinstate her in her former position without loss of seniority right[s] and other privileges and to pay her full backwages, inclusive of allowances and other benefits, including 13th month pay based on her said latest rate of P28,000.00/mo. from the date of her illegal dismissal on 21 October 1999 up to finality hereof, or at complainant‘s option, to pay her separation pay of one (1) month pay per year of service based on said latest monthly rate, reckoned from date of hire on 30 September 1995 until finality hereof; 2) to pay complainant‘s accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and 13th month pay for the years 1999, 1998 and 1997 of P19,236.00 and P84,000.00, respectively and her accrued salary from 16 September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12% from date of judicial demand on 20 December 1999 until finality hereof; 3) to pay complainant moral damages of P500,000.00, exemplary damages of P350,000.00 and 10% of the total of the adjudged monetary awards as attorney‘s fees. Other monetary claims of complainant are dismissed for lack of merit. SO ORDERED.[10] After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals in a petition for certiorari under Rule 65. The petition was first dismissed for failure to attach particular documents,[11] but was reinstated on grounds of the higher interest of justice.[12] Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and reversed the decision of the NLRC.[13] The appellate court reasoned that petitioner should not be allowed to renege from the stipulations she had voluntarily and knowingly executed by invoking the security of tenure under the Labor Code. According to the appellate court, petitioner was a fixed-term employee and not a regular employee within the ambit of Article 280[14] of the Labor Code because her job, as anticipated and agreed upon, was only for a specified time.[15] Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as follows: I. THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT[;] II. THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC – FIRST DIVISION, ARE ―ANTI-REGULARIZATION DEVICES‖ WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]
III. BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE- MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;] IV. BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONER‘S RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.][16] The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the Court of Appeals committed a reversible error in its Decision. On the first issue, private respondents contend that the issues raised in the instant petition are mainly factual and that there is no showing that the said issues have been resolved arbitrarily and without basis. They add that the findings of the Court of Appeals are supported by overwhelming wealth of evidence on record as well as prevailing jurisprudence on the matter.[17] Petitioner however contends that this Court can review the findings of the Court of Appeals, since the appellate court erred in deciding a question of substance in a way which is not in accord with law or with applicable decisions of this Court.[18] We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any case — regardless of the nature of the action or proceeding involved — may be appealed to this Court through a petition for review. This remedy is a continuation of the appellate process over the original case,[19] and considering there is no congruence in the findings of the NLRC and the Court of Appeals regarding the status of employment of petitioner, an exception to the general rule that this Court is bound by the findings of facts of the appellate court,[20] we can review such findings. On the second issue, private respondents contend that the Court of Appeals did not err when it upheld the validity of the talent contracts voluntarily entered into by petitioner. It further stated that prevailing jurisprudence has recognized and sustained the absence of employer-employee relationship between a talent and the media entity which engaged the talent‘s services on a per talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.[21] Petitioner avers however that an employer-employee relationship was created when the private respondents started to merely renew the contracts repeatedly fifteen times or for four consecutive years.[22] Again, we agree with petitioner. The Court of Appeals committed reversible error when it held that petitioner was a fixed-term employee. Petitioner was a regular employee under contemplation of law. The practice of having fixed-term contracts in the industry does not automatically make all talent contracts valid and compliant with labor law. The assertion that a talent contract exists does not necessarily prevent a regular employment status.[23] Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza how to perform his job. How Sonza delivered his lines, appeared on television, and sounded on radio were outside the television station‘s control. Sonza had a free hand on what to say or discuss in his shows provided he did not attack the television station or its interests. Clearly, the television station did not exercise control over the means and methods of the performance of Sonza‘s work.[24] In the case at bar, ABC had control over the performance of petitioner‘s work. Noteworthy too, is the comparatively low P28,000 monthly pay of petitioner[25] vis the P300,000 a month salary of Sonza,[26] that all the more bolsters the conclusion that petitioner was not in the same situation as Sonza. The contract of employment of petitioner with ABC had the following stipulations: x x x x 1. SCOPE OF SERVICES – TALENT agrees to devote his/her talent, time, attention and best efforts in the performance of his/her duties and responsibilities as Anchor/Program Host/Newscaster of the Program, in accordance with the direction of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES – TALENT shall: a. Render his/her services as a newscaster on the Program; b. Be involved in news-gathering operations by conducting interviews on- and off-the-air; c. Participate in live remote coverages when called upon; d. Be available for any other news assignment, such as writing, research or camera work; e. Attend production meetings; f. On assigned days, be at the studios at least one (1) hour before the live telecasts; g. Be present promptly at the studios and/or other place of assignment at the time designated by ABC; h. Keep abreast of the news; i. Give his/her full cooperation to ABC and its duly authorized representatives in the production and promotion of the Program; and j. Perform such other functions as may be assigned to him/her from time to time. x x x x 1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND REGULATIONS – TALENT agrees that he/she will promptly and faithfully comply with the requests and instructions, as well as the program standards, policies, rules and regulations of ABC, the KBP and the government or any of its agencies and instrumentalities.[27] x x x x In Manila Water Company, Inc. v. Pena,[28] we said that the elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee, (b) the payment of wages, (c) the power of dismissal, and (d) the employer‘s power to control. The most important element is the employer‘s control of the employee‘s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.[29] The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work of petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioner‘s wages. ABC also had power to dismiss her. All these being present, clearly, there existed an employment relationship between petitioner and ABC. Concerning regular employment, the law provides for two kinds of employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.[30] In other words, regular status arises from either the nature of work of the employee or the duration of his employment.[31] In Benares v. Pancho,[32] we very succinctly said: …[T]he primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee vis-à-vis the usual trade or business of the employer. This connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. If the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists.[33] In our view, the requisites for regularity of employment have been met in the instant case. Gleaned from the description of the scope of services aforementioned, petitioner‘s work was necessary or desirable in the usual business or trade of the employer which includes, as a pre- condition for its enfranchisement, its participation in the government‘s news and public information dissemination. In addition, her work was continuous for a period of four years. This repeated engagement under contract of hire is indicative of the necessity and desirability of the petitioner‘s work in private respondent ABC‘s business.[34] The contention of the appellate court that the contract was characterized by a valid fixed-period employment is untenable. For such contract to be valid, it should be shown that the fixed period was knowingly and voluntarily agreed upon by the parties. There should have been no force, duress or improper pressure brought to bear upon the employee; neither should there be any other circumstance that vitiates the employee‘s consent.[35] It should satisfactorily appear that the employer and the employee dealt with each other on more or less equal terms with no moral dominance being exercised by the employer over the employee.[36] Moreover, fixed-term employment will not be considered valid where, from the circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee.[37] In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms. Understandably, the petitioner could not object to the terms of her employment contract because she did not want to lose the job that she loved and the workplace that she had grown accustomed to,[38] which is exactly what happened when she finally manifested her intention to negotiate. Being one of the numerous newscasters/broadcasters of ABC and desiring to keep her job as a broadcasting practitioner, petitioner was left with no choice but to affix her signature of conformity on each renewal of her contract as already prepared by private respondents; otherwise, private respondents would have simply refused to renew her contract. Patently, the petitioner occupied a position of weakness vis-à-vis the employer. Moreover, private respondents‘ practice of repeatedly extending petitioner‘s 3-month contract for four years is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-term employment between petitioner and private respondents. While this Court has recognized the validity of fixed-term employment contracts in a number of cases, it has consistently emphasized that when the circumstances of a case show that the periods were imposed to block the acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public order or public policy.[39] As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just cause and after due compliance with procedural due process. Since private respondents did not observe due process in constructively dismissing the petitioner, we hold that there was an illegal dismissal. WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held that the petitioner was a fixed-term employee, are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED. Costs against private respondents. SO ORDERED.
LEONARDO A. QUISUMBING Acting Chief Justice
WE CONCUR: ANTONIO T. CARPIO Associate Justice CONCHITA CARPIO MORALES Associate Justice DANTE O. TINGA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.`
LEONARDO A. QUISUMBING Acting Chief Justice
G.R. No. 164156 September 26, 2006 (19)ABS-CBN BROADCASTING CORPORATION, petitioner, vs. MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents. D E C I S I O N CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of television and radio stations, whose operations revolve around the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to operate by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates. They were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN employees‘ identification cards and were required to work for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following tasks and duties: a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-CBN; b) Coordinate, arrange personalities for air interviews; c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports; d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints; e) Assist, anchor program interview, etc; and f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1, 2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the studio technician. Thus, their revised schedule and other assignments would be as follows:
Monday – Saturday
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. – 12:00 MN – Jennifer Deiparine
Sunday
5:00 A.M. – 1:00 P.M. – Jennifer Deiparine
1:00 P.M. – 10:00 P.M. – Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers. Upon respondents‘ failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case. Respondents received a copy of the Order on May 16, 2001.7 Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint on November 20, 2000.
Machine copies of complainants‘ ABS-CBN Employee‘s Identification Card and salary vouchers are hereto attached as follows, thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employee‘s Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employee‘s Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employee‘s Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employee‘s Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a condition precedent for their admission into the existing union and collective bargaining unit of respondent company where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises.10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls from listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a program or a particular production. They are considered in the industry as "program employees" in that, as distinguished from regular or station employees, they are basically engaged by the station for a particular or specific program broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are updated from time to time, and are thus made the basis to determine the programs to which they shall later be called on to assist. The program assignments of complainants were as follows: a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition) b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such as drama talents in other productions. As program employees, a PA‘s engagement is coterminous with the completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be assigned to new programs upon the cancellation of one program and the commencement of another. As such program employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them under the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially since respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
______
P48,100.00 plus ten (10%) percent Attorney‘s Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Code.
Respondents‘ counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondent‘s Motion for Reconsideration on an interlocutory order on the ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney‘s fees.14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows: a. Deiparine, Jennifer - P 716,113.49 b. Gerzon, Merlou - 716,113.49 c. Nazareno, Marlyn - 716,113.49 d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing their rice subsidy in the CBA, broken down as follows: a. Deiparine, Jennifer - 60 Sacks b. Gerzon, Merlou - 60 Sacks c. Nazareno, Marlyn - 60 Sacks d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents‘ motion to refile the complaint and admit their position paper. Although respondents were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents‘ monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and not as members of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of respondents‘ claim does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits to respondents under the CBA although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be upon the expiration of the last day to appeal by all parties, should there be several parties to a case. Since respondents received their copies of the decision on September 8, 2001 (except respondent Nazareno who received her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA declared that respondents‘ failure to submit their position paper on time is not a ground to strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the 1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioner‘s motion for reconsideration, the CA denied the same in a Resolution17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER‘S DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the NLRC, and entertained respondents‘ appeal from the decision of the Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal must be reckoned from receipt of a party‘s counsel, not from the time the party learns of the decision, that is, notice to counsel is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioner‘s own timely appeal that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may still be given due course in the interest of substantial justice as an exception to the general rule that the negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner‘s contention that the perfection of an appeal within the statutory or reglementary period is not only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives the appellate court or body of the legal authority to alter the final judgment, much less entertain the appeal. However, this Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if greater injustice may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed.19 The Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 22321 of the Labor Code a liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.22 We have held in a catena of cases that technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the workingman.23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both parties.24
We find no merit in petitioner‘s contention that the Labor Arbiter abused his discretion when he admitted respondents‘ position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process.25 Indeed, as stressed by the appellate court, respondents‘ failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint.26 Likewise, there is simply no truth to petitioner‘s assertion that it was denied due process when the Labor Arbiter admitted respondents‘ position paper without requiring it to file a comment before admitting said position paper. The essence of due process in administrative proceedings is simply an opportunity to explain one‘s side or an opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that would suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiter‘s admission of respondents‘ position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention by unscrupulous employers of the employees‘ right to security of tenure by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the concept of regular employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiter‘s order dated 18 June 2001 as violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents‘ suggestion acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice. Respondent‘s suggestion, betrays its notion of prolonging, rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the arbitration branch of origin." the same is not a serious flaw that had prejudiced the respondents‘ right to due process. The case can still be refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants‘ Position Paper and Supplemental Manifestation which were belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents‘ position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioner‘s contention that respondents are considered as its talents, hence, not regular employees of the broadcasting company. Petitioner‘s claim that the functions performed by the respondents are not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial evidence.30 The question of whether respondents are regular or project employees or independent contractors is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the legions of production assistants working in the Philippine broadcasting industry.
We agree with respondents‘ contention that where a person has rendered at least one year of service, regardless of the nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular as long as the activity exists, the reason being that a customary appointment is not indispensable before one may be formally declared as having attained regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a "regular" worker‘s security of tenure, however, can hardly be doubted. In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the particular business or trade. But, although the work to be performed is only for a specific project or seasonal, where a person thus engaged has been performing the job for at least one year, even if the performance is not continuous or is merely intermittent, the law deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity to the business or trade of the employer. The employment of such person is also then deemed to be regular with respect to such activity and while such activity exists.34
Not considered regular employees are "project employees," the completion or termination of which is more or less determinable at the time of employment, such as those employed in connection with a particular construction project, and "seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other productions during their free time are not conclusive of the nature of their employment. Respondents cannot be considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees. They are regular employees who perform several different duties under the control and direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are employed.35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the employee or the manner of paying the salary or the actual time spent at work. It is the character of the activities performed in relation to the particular trade or business taking into account all the circumstances, and in some cases the length of time of its performance and its continued existence.36 It is obvious that one year after they were employed by petitioner, respondents became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was presented to show that the duration and scope of the project were determined or specified at the time of their engagement. Under existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. Second, the term project may also refer to a particular job or undertaking that is not within the regular business of the employer. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employees were engaged for that project.39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting need for their services is sufficient evidence of the necessity and indispensability of such services to petitioner‘s business or trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual trade or business of the employer.41 We note further that petitioner did not report the termination of respondents‘ employment in the particular "project" to the Department of Labor and Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their separation from work, using the prescribed form on employees‘ termination/ dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier pleadings, petitioner classified respondents as program employees, and in later pleadings, independent contractors. Program employees, or project employees, are different from independent contractors because in the case of the latter, no employer-employee relationship exists.
Petitioner‘s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA‘S services to co-host its television and radio programs because of SONZA‘S peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondent‘s claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS- CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBN‘s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay which the law automatically incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.
SONZA‘s 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 SONZA‘S unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them because they were merely hired through petitioner‘s personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative to the employer, does not furnish an independent business or professional service, such work is a regular employment of such employee and not an independent contractor.45 The Court will peruse beyond any such agreement to examine the facts that typify the parties‘ actual relationship.46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular employees of petitioner under the CBA.47 We quote with approval the ruling of the appellate court, that the reason why production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as project employees by petitioner: x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary consequence of public respondent‘s ruling that private respondents as production assistants of petitioner are regular employees. The monetary award is not considered as claims involving the interpretation or implementation of the collective bargaining agreement. The reason why production assistants were excluded from the said agreement is precisely because they were classified and treated as project employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but the nature of the activities performed by such employee in relation to the particular business or trade of the employer. Considering that We have clearly found that private respondents are regular employees of petitioner, their exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project employees, is therefore not proper. Finding said private respondents as regular employees and not as mere project employees, they must be accorded the benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the employer. However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to members of the union without any valid reason would constitute undue discrimination against non-members. A collective bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner.48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur.
G.R. No. 155731 September 3, 2007
(20)LOLITA LOPEZ, petitioner, vs. BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES C. TORRES-YAP, respondents.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the July 18, 2002 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 66861, dismissing the petition for certiorari filed before it and affirming the Decision of the National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 00-03-01729-95; and its Resolution dated October 16, 2002,2 denying petitioner's Motion for Reconsideration. The NLRC Decision set aside the Decision of the Labor Arbiter finding that Lolita Lopez (petitioner) was illegally dismissed by Bodega City and/or Andres C. Torres-Yap (respondents).
Respondent Bodega City (Bodega City) is a corporation duly registered and existing under and by virtue of the laws of the Republic of the Philippines, while respondent Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the "lady keeper" of Bodega City tasked with manning its ladies' comfort room.
In a letter signed by Yap dated February 10, 1995, petitioner was made to explain why the concessionaire agreement between her and respondents should not be terminated or suspended in view of an incident that happened on February 3, 1995, wherein petitioner was seen to have acted in a hostile manner against a lady customer of Bodega City who informed the management that she saw petitioner sleeping while on duty.
In a subsequent letter dated February 25, 1995, Yap informed petitioner that because of the incident that happened on February 3, 1995, respondents had decided to terminate the concessionaire agreement between them.
On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National Capital Region, Quezon City, a complaint for illegal dismissal against respondents contending that she was dismissed from her employment without cause and due process.
In their answer, respondents contended that no employer-employee relationship ever existed between them and petitioner; that the latter's services rendered within the premises of Bodega City was by virtue of a concessionaire agreement she entered into with respondents.
The complaint was dismissed by the Labor Arbiter for lack of merit. However, on appeal, the NLRC set aside the order of dismissal and remanded the case for further proceedings. Upon remand, the case was assigned to a different Labor Arbiter. Thereafter, hearings were conducted and the parties were required to submit memoranda and other supporting documents.
On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner was an employee of respondents and that the latter illegally dismissed her.3
Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a Resolution, the dispositive portion of which reads as follows:
WHEREFORE, premises duly considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED, and in its stead, a new one entered DISMISSING the above-entitled case for lack of merit.4
Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution, but the NLRC denied the same.
Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the CA promulgated the presently assailed Decision dismissing her special civil action for certiorari. Petitioner moved for reconsideration but her motion was denied.
Hence, herein petition based on the following grounds:
1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE LABOR ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY DISMISSED BY PRIVATE RESPONDENTS.
2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF PRIVATE RESPONDENTS.5
Petitioner contends that it was wrong for the CA to conclude that even if she did not sign the document evidencing the concessionaire agreement, she impliedly accepted and thus bound herself to the terms and conditions contained in the said agreement when she continued to perform the task which was allegedly specified therein for a considerable length of time. Petitioner claims that the concessionaire agreement was only offered to her during her tenth year of service and after she organized a union and filed a complaint against respondents. Prior to all these, petitioner asserts that her job as a "lady keeper" was a task assigned to her as an employee of respondents.
Petitioner further argues that her receipt of a special allowance from respondents is a clear evidence that she was an employee of the latter, as the amount she received was equivalent to the minimum wage at that time.
Petitioner also contends that her identification card clearly shows that she was not a concessionaire but an employee of respondents; that if respondents really intended the ID card issued to her to be used simply for having access to the premises of Bodega City, then respondents could have clearly indicated such intent on the said ID card.
Moreover, petitioner submits that the fact that she was required to follow rules and regulations prescribing appropriate conduct while she was in the premises of Bodega City is clear evidence of the existence of an employer-employee relationship between her and petitioners.
On the other hand, respondents contend that the present petition was filed for the sole purpose of delaying the proceedings of the case; the grounds relied upon in the instant petition are matters that have been exhaustively discussed by the NLRC and the CA; the present petition raises questions of fact which are not proper in a petition for review on certiorari under Rule 45 of the Rules of Court; the respective decisions of the NLRC and the CA are based on evidence presented by both parties; petitioner's compliance with the terms and conditions of the proposed concessionaire contract for a period of three years is evidence of her implied acceptance of such proposal; petitioner failed to present evidence to prove her allegation that the subject concessionaire agreement was only proposed to her in her 10th year of employment with respondent company and after she organized a union and filed a labor complaint against respondents; petitioner failed to present competent documentary and testimonial evidence to prove her contention that she was an employee of respondents since 1985.
The main issue to be resolved in the present case is whether or not petitioner is an employee of respondents.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact.6
While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review on certiorari of CA decisions,7 there are well-recognized exceptions to this rule, as in this case, when the factual findings of the NLRC as affirmed by the CA contradict those of the Labor Arbiter.8 In that event, it is this Court's task, in the exercise of its equity jurisdiction, to re- evaluate and review the factual issues by looking into the records of the case and re-examining the questioned findings.9
It is a basic rule of evidence that each party must prove his affirmative allegation.10 If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.11
The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party would be successful if no evidence of such matters were given.12
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.13 However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.14
In filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was an employee of respondent, it is incumbent upon petitioner to prove the employee-employer relationship by substantial evidence.15
The NLRC and the CA found that petitioner failed to discharge this burden, and the Court finds no cogent reason to depart from their findings.
The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and Parts Corp.,16 to wit:
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important. The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.17
To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an allowance for five (5) days.18 The CA did not err when it held that a solitary petty cash voucher did not prove that petitioner had been receiving salary from respondents or that she had been respondents' employee for 10 years.
Indeed, if petitioner was really an employee of respondents for that length of time, she should have been able to present salary vouchers or pay slips and not just a single petty cash voucher. The Court agrees with respondents that petitioner could have easily shown other pieces of evidence such as a contract of employment, SSS or Medicare forms, or certificates of withholding tax on compensation income; or she could have presented witnesses to prove her contention that she was an employee of respondents. Petitioner failed to do so.
Anent the element of control, petitioner's contention that she was an employee of respondents because she was subject to their control does not hold water.
Petitioner failed to cite a single instance to prove that she was subject to the control of respondents insofar as the manner in which she should perform her job as a "lady keeper" was concerned.
It is true that petitioner was required to follow rules and regulations prescribing appropriate conduct while within the premises of Bodega City. However, this was imposed upon petitioner as part of the terms and conditions in the concessionaire agreement embodied in a 1992 letter of Yap addressed to petitioner, to wit:
January 6, 1992
Dear Ms. Lolita Lopez,
The new owners of Bodega City, 1121 Food Service Corporation offers to your goodself the concessionaire/contract to provide independently, customer comfort services to assist users of the ladies comfort room of the Club to further enhance its business, under the following terms and conditions:
1. You will provide at your own expense, all toilet supplies, useful for the purpose, such as toilet papers, soap, hair pins, safety pins and other related items or things which in your opinion is beneficial to the services you will undertake;
2. For the entire duration of this concessionaire contract, and during the Club's operating hours, you shall maintain the cleanliness of the ladies comfort room. Provided, that general cleanliness, sanitation and physical maintenance of said comfort rooms shall be undertaken by the owners of Bodega City;
3. You shall at all times ensure satisfaction and good services in the discharge of your undertaking. More importantly, you shall always observe utmost courtesy in dealing with the persons/individuals using said comfort room and shall refrain from doing acts that may adversely affect the goodwill and business standing of Bodega City;
4. All remunerations, tips, donations given to you by individuals/persons utilizing said comfort rooms and/or guests of Bodega City shall be waived by the latter to your benefit provided however, that if concessionaire receives tips or donations per day in an amount exceeding 200% the prevailing minimum wage, then, she shall remit fifty percent (50%) of said amount to Bodega City by way of royalty or concession fees;
5. This contract shall be for a period of one year and shall be automatically renewed on a yearly basis unless notice of termination is given thirty (30) days prior to expiration. Any violation of the terms and conditions of this contract shall be a ground for its immediate revocation and/or termination.
6. It is hereby understood that no employer-employee relationship exists between Bodega City and/or 1121 FoodService Corporation and your goodself, as you are an independent contractor who has represented to us that you possess the necessary qualification as such including manpower compliment, equipment, facilities, etc. and that any person you may engage or employ to work with or assist you in the discharge of your undertaking shall be solely your own employees and/or agents.
1121 FoodService Corporation Bodega City
By: (Sgd.) ANDRES C. TORRES-YAP
Conforme:
______LOLITA LOPEZ19
Petitioner does not dispute the existence of the letter; neither does she deny that respondents offered her the subject concessionaire agreement. However, she contends that she could not have entered into the said agreement with respondents because she did not sign the document evidencing the same.
Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.20 For a contract, to arise, the acceptance must be made known to the offeror.21 Moreover, the acceptance of the thing and the cause, which are to constitute a contract, may be express or implied as can be inferred from the contemporaneous and subsequent acts of the contracting parties.22 A contract will be upheld as long as there is proof of consent, subject matter and cause; it is generally obligatory in whatever form it may have been entered into.23
In the present case, the Court finds no cogent reason to disregard the findings of both the CA and the NLRC that while petitioner did not affix her signature to the document evidencing the subject concessionaire agreement, the fact that she performed the tasks indicated in the said agreement for a period of three years without any complaint or question only goes to show that she has given her implied acceptance of or consent to the said agreement.
Petitioner is likewise estopped from denying the existence of the subject concessionaire agreement. She should not, after enjoying the benefits of the concessionaire agreement with respondents, be allowed to later disown the same through her allegation that she was an employee of the respondents when the said agreement was terminated by reason of her violation of the terms and conditions thereof.
The principle of estoppel in pais applies wherein -- by one's acts, representations or admissions, or silence when one ought to speak out -- intentionally or through culpable negligence, induces another to believe certain facts to exist and to rightfully rely and act on such belief, so as to be prejudiced if the former is permitted to deny the existence of those facts.24
Moreover, petitioner failed to dispute the contents of the affidavit25 as well as the testimony26 of Felimon Habitan (Habitan), the concessionaire of the men's comfort room of Bodega City, that he had personal knowledge of the fact that petitioner was the concessionaire of the ladies' comfort room of Bodega City.
Petitioner also claims that the concessionaire agreement was offered to her only in her 10th year of service, after she organized a union and filed a complaint against respondents. However, petitioner's claim remains to be an allegation which is not supported by any evidence. It is a basic rule in evidence that each party must prove his affirmative allegation,27 that mere allegation is not evidence.28
The Court is not persuaded by petitioner's contention that the Labor Arbiter was correct in concluding that there existed an employer-employee relationship between respondents and petitioner. A perusal of the Decision29 of the Labor Arbiter shows that his only basis for arriving at such a conclusion are the bare assertions of petitioner and the fact that the latter did not sign the letter of Yap containing the proposed concessionaire agreement. However, as earlier discussed, this Court finds no error in the findings of the NLRC and the CA that petitioner is deemed as having given her consent to the said proposal when she continuously performed the tasks indicated therein for a considerable length of time. For all intents and purposes, the concessionaire agreement had been perfected.
Petitioner insists that her ID card is sufficient proof of her employment. In Domasig v. National Labor Relations Commission,30 this Court held that the complainant's ID card and the cash vouchers covering his salaries for the months indicated therein were substantial evidence that he was an employee of respondents, especially in light of the fact that the latter failed to deny said evidence. This is not the situation in the present case. The only evidence presented by petitioner as proof of her alleged employment are her ID card and one petty cash voucher for a five-day allowance which were disputed by respondents.
As to the ID card, it is true that the words "EMPLOYEE'S NAME" appear printed below petitioner's name.31 However, she failed to dispute respondents' evidence consisting of Habitan's testimony,32 that he and the other "contractors" of Bodega City such as the singers and band performers, were also issued the same ID cards for the purpose of enabling them to enter the premises of Bodega City.
The Court quotes, with approval, the ruling of the CA on this matter, to wit:
Nor can petitioners identification card improve her cause any better. It is undisputed that non- employees, such as Felimon Habitan, an admitted concessionaire, musicians, singers and the like at Bodega City are also issued identification cards. Given this premise, it appears clear to Us that petitioner's I.D. Card is incompetent proof of an alleged employer-employee relationship between the herein parties. Viewed in the context of this case, the card is at best a "passport" from management assuring the holder thereof of his unmolested access to the premises of Bodega City.33
With respect to the petty cash voucher, petitioner failed to refute respondent's claim that it was not given to her for services rendered or on a regular basis, but simply granted as financial assistance to help her temporarily meet her family's needs.
Hence, going back to the element of control, the concessionaire agreement merely stated that petitioner shall maintain the cleanliness of the ladies' comfort room and observe courtesy guidelines that would help her obtain the results they wanted to achieve. There is nothing in the agreement which specifies the methods by which petitioner should achieve these results. Respondents did not indicate the manner in which she should go about in maintaining the cleanliness of the ladies' comfort room. Neither did respondents determine the means and methods by which petitioner could ensure the satisfaction of respondent company's customers. In other words, petitioner was given a free hand as to how she would perform her job as a "lady keeper." In fact, the last paragraph of the concessionaire agreement even allowed petitioner to engage persons to work with or assist her in the discharge of her functions.34
Moreover, petitioner was not subjected to definite hours or conditions of work. The fact that she was expected to maintain the cleanliness of respondent company's ladies' comfort room during Bodega City's operating hours does not indicate that her performance of her job was subject to the control of respondents as to make her an employee of the latter. Instead, the requirement that she had to render her services while Bodega City was open for business was dictated simply by the very nature of her undertaking, which was to give assistance to the users of the ladies' comfort room.
In Consulta v. Court of Appeals,35 this Court held:
It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammeled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.36
Lastly, the Court finds that the elements of selection and engagement as well as the power of dismissal are not present in the instant case.
It has been established that there has been no employer-employee relationship between respondents and petitioner. Their contractual relationship was governed by the concessionaire agreement embodied in the 1992 letter. Thus, petitioner was not dismissed by respondents. Instead, as shown by the letter of Yap to her dated February 15, 1995,37 their contractual relationship was terminated by reason of respondents' termination of the subject concessionaire agreement, which was in accordance with the provisions of the agreement in case of violation of its terms and conditions.
In fine, the CA did not err in dismissing the petition for certiorari filed before it by petitioner.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.
[G.R. No. 159890. May 28, 2004]
(21)EMPERMACO B. ABANTE, JR., petitioner, vs. LAMADRID BEARING & PARTS CORP. and JOSE LAMADRID, President, respondents. D E C I S I O N YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the Decision dated March 7, 2003 of the Court of Appeals in CA-G.R. SP No. 73102 which affirmed the Resolution dated April 2, 2002 of the National Labor Relations Commission.
Petitioner was employed by respondent company Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of Mindanao. His average monthly income was more or less P16,000.00, but later was increased to approximately P20,269.50. Aside from selling the merchandise of respondent corporation, he was also tasked to collect payments from his various customers. Respondent corporation had complete control over his work because its President, respondent Jose Lamadrid, frequently directed him to report to a particular area for his sales and collection activities, and occasionally required him to go to Manila to attend conferences regarding product competition, prices, and other market strategies.
Sometime in 1998, petitioner encountered five customers/clients with bad accounts, namely:
Customers/Clients
Amount
1)A&B Engineering Services P 86,431.20 2)Emmanuel Engineering Services 126,858.50 3)Panabo Empire Marketing 226,458.76 4)Southern Fortune Marketing 191,208.00 5)Alreg Marketing 56, 901.18
Less Returns: 691.02 56, 210.16 Total Bad Accounts P 687,166.62
Petitioner was confronted by respondent Lamadrid over the bad accounts and warned that if he does not issue his own checks to cover the said bad accounts, his commissions will not be released and he will lose his job. Despite serious misgivings, he issued his personal checks in favor of respondent corporation on condition that the same shall not be deposited for clearing and that they shall be offset against his periodic commissions.[1]
Not contented with the issuance of the foregoing checks as security for the bad accounts, respondents ―tricked‖ petitioner into signing two documents, which he later discovered to be a Promissory Note[2] and a Deed of Real Estate Mortgage.[3]
Pursuant to the parties‘ agreement that the checks would not be deposited, as their corresponding values would be offset from petitioner‘s sales commissions, respondents returned the same to petitioner as evidenced by the undeposited checks and respondent Lamadrid‘s computations of petitioner‘s commissions.[4]
Due to financial difficulties, petitioner inquired about his membership with the Social Security System in order to apply for a salary loan. To his dismay, he learned that he was not covered by the SSS and therefore was not entitled to any benefit. When he brought the matter of his SSS coverage to his employer, the latter berated and hurled invectives at him and, contrary to their agreement, deposited the remaining checks which were dishonored by the drawee bank due to ―Account Closed.‖
On March 22, 2001, counsel for respondent corporation sent a letter to petitioner demanding that he make good the dishonored checks or pay their cash equivalent. In response, petitioner sent a letter addressed to Atty. Meneses, counsel for respondent corporation, which reads:[5]
This has reference to your demand letter dated March 22, 2001 which I received on March 30, 2001, relative to the checks I issued to my employer LAMADRID BEARING PARTS CORPORATION.
May I respectfully request for a consideration as to the payment of the amount covered by the said checks, as follows:
1. I have an earned commission in the amount of P33,412.39 as shown in the hereto attached Summary of Sales as of February 28, 2001 (P22,748.60) and as of March 31, 2001 (P10,664.79), which I offer to be charged or deducted as partial payment thereof;
2. I hereby commit One Hundred Percent (100%) of all my commission to be directly charged or deducted as payment, from date onward, until such time that payment will be completed;
Sir, kindly convey my good faith to your client and my employer, as is shown by my willingness to continue working as Commission Salesman, having served the Company for the last sixteen (16) years.
I‘m sincerely appealing to my employer, through you, Sir, to settle these accountabilities which all resulted from the checks issued by my customers which bounced and later charged to my account, in the manner afore-cited.
May this request merit your kindest consideration, Sirs.
Thank you very much.
On April 2, 2001, petitioner sent another letter to respondent Lamadrid, to wit:[6]
Dear Mr. Lamadrid,
This is to inform your good office that if you pursue the case against me, I may refer this problem to Mr. Paul Dominguez and Atty. Jesus Dureza to solicit proper legal advice. I may also file counter charges against your company of (sic) unfair labor practice and unfair compensation of 3% commission to my sales and commissions of more or less 90,000,000.00 (all collected and covered with cleared check payments) for 16 years working with your company up to the present year 2001.
If I am not wrong your company did not exactly declare the correct amount of P90,000,000.00 more or less representing my sales and collections (all collected and covered with cleared check payments to the Bureau of Internal Revenue [BIR] for tax declaration purposes). In short your company profited large amount of money to (sic) the above-mentioned sales and collections of P90,000,000.00 more or less for 16 years working with your company.
I remember that upon my employment with your company last 1985 up to the present year 2001 as commission basis salesman, I have not signed any contract with your company stating that all uncollected accounts including bounced checks from Lamadrid Bearing & Parts Corp. will be charged to me. I wonder why your company forcibly instructed me to secure checking account to pay and issue check payment of P15,000.00 per month to cover your company‘s bad accounts in which this amount is too heavy on my part paying a total bad accounts of more than P650,000.00 for my 16 years employment with your company as commission basis salesman.
Recalling your visit here at my Davao City residence, located at Zone 1 2nd Avenue, San Vicente Buhangin Davao City, way back 1998, you even forced me to sign mortgage contract of my house and lot located at Zone 1 2nd Avenue, San Vicente, Buhangin, Davao City, according to Mr. Jose Lamadrid this mortgage contract of my house and lot will serve as guarantee to the uncollected and bounced checks from Lamadrid Bearing and Parts Corp., customers. I have asked 1 copy of the mortgage contract I have signed but Mr. Jose C. Lamadrid never furnished me a copy.
Very truly yours, (Sgd) Empermaco B. Abante, Jr.
While doing his usual rounds as commission salesman, petitioner was handed by his customers a letter from the respondent company warning them not to deal with petitioner since it no longer recognized him as a commission salesman.
In the interim, petitioner received a subpoena from the Office of the City Prosecutor of Manila for violations of Batas Pambansa Blg. 22 filed by respondent Lamadrid.
Petitioner thus filed a complaint for illegal dismissal with money claims against respondent company and its president, Jose Lamadrid, before the NLRC Regional Arbitration Branch No. XI, Davao City.
By way of defense, respondents countered that petitioner was not its employee but a freelance salesman on commission basis, procuring and purchasing auto parts and supplies from the latter on credit, consignment and installment basis and selling the same to his customers for profit and commission of 3% out of his total paid-up sales. Respondents cite the following as indicators of the absence of an employer-employee relationship between them:
(1) petitioner constantly admitted in all his acts, letters, communications with the respondents that his relationship with the latter was strictly commission basis salesman;
(2) he does not have a monthly salary nor has he received any benefits accruing to regular employment;
(3) he was not required to report for work on a daily basis but would occasionally drop by the Manila office when he went to Manila for some other purpose;
(4) he was not given the usual pay-slip to show his monthly gross compensation;
(5) neither has the respondent withheld his taxes nor was he enrolled as an employee of the respondent under the Social Security System and Philhealth;
(6) he was in fact working as commission salesman of five other companies, which are engaged in the same line of business as that of respondent, as shown by certifications issued by the said companies;[7]
(7) if respondent owed petitioner his alleged commissions, he should not have executed the Promissory Note and the Deed of Real Estate Mortgage.[8]
Finding no necessity for further hearing the case after the parties submitted their respective position papers, the Labor Arbiter rendered a decision dated November 29, 2001, the decretal portion of which reads:[9]
WHEREFORE, premises considered judgment is hereby rendered DECLARING respondents LAMADRID BEARING & PARTS CORPORATION AND JOSE LAMADRID to pay jointly and severally complainant EMPERMACO B. ABANTE, JR., the sum of PESOS ONE MILLION THREE HUNDRED THIRTY SIX THOUSAND SEVEN HUNDRED TWENTY NINE AND 62/100 ONLY (P1,336,729.62) representing his awarded separation pay, back wages (partial) unpaid commissions, refund of deductions, damages and attorney‘s fees.
SO ORDERED.
On appeal, the National Labor Relations Commission reversed the decision of the Labor Arbiter in a Resolution dated April 5, 2002, the dispositive portion of which reads:[10]
WHEREFORE, the Appeal is GRANTED. Accordingly, the appealed decision is Set Aside and Vacated. In lieu thereof, a new judgment is entered dismissing the instant case for lack of cause of action.
SO ORDERED.
Petitioner challenged the decision of the NLRC before the Court of Appeals, which rendered the assailed judgment on March 7, 2003, the dispositive portion of which reads:[11]
WHEREFORE, premises considered, petition is hereby DENIED. Let the supersedeas bond dated 09 January 2002, issued the Philippine Charter Insurance Corporation be cancelled and released.
SO ORDERED.
Upon denial of his motion for reconsideration, petitioner filed the instant appeal based on the following grounds:
I
THE HONORABLE COURT OF APPEALS IN GRAVE ABUSE OF DISCRETION ―MODIFIED‖ THE IMPORT OF THE ―RELEVANT ANTECEDENTS‖ AS ITS PREMISE IN ITS QUESTIONED DECISION CAUSING IT TO ARRIVE AT ERRONEOUS CONCLUSIONS OF FACT AND LAW.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN APPRECIATING THE TRUE FACTS OF THIS CASE THEREBY IT MADE A WRONG CONCLUSION BY STATING THAT THE FOURTH ELEMENT FOR DETERMINING EMPLOYER- EMPLOYEE RELATIONSHIP, WHICH IS THE ―CONTROL TEST,‖ IS WANTING IN THIS CASE.
III
THE HONORABLE COURT OF APPEALS IS AT WAR WITH THE EVIDENCE PRESENTED IN THIS CASE AS WELL AS WITH THE APPLICABLE LAW AND ESTABLISHED RULINGS OF THIS HONORABLE COURT.
Initially, petitioner challenged the statement by the appellate court that ―petitioner, who was contracted a 3% of the total gross sales as his commission, was tasked to sell private respondent‘s merchandise in the Mindanao area and to collect payments of his sales from the customers.‖ He argues that this statement, which suggests contracting or subcontracting under Department Order No. 10-97 Amending the Rules Implementing Books III and VI of the Labor Code, is erroneous because the circumstances to warrant such conclusion do not exist. Not being an independent contractor, he must be a regular employee pursuant to Article 280 of the Labor Code because an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.
Petitioner likewise disputes the finding of the appellate court that no employer-employee relationship exists between him and respondent corporation since the power of control, which is the most decisive element to determine such relationship, is wanting. He argues that the following circumstances show that he was in truth an employee of the respondent corporation:
(1) As salesman of the private respondents, petitioner was also the one collecting payment of his sales from various customers. Thus, he was bringing with him Provisional Receipts, samples of which are attached to his Position Paper filed with the Labor Arbiter.
(2) Private respondents had complete control over the work of the petitioner. From time to time, respondent JOSE LAMADRID was directing him to report to a particular area in Mindanao for his sales and collection activities, and sometimes he was required to go to Manila for a conference regarding competitions, new prices (if any), special offer (if competitors gave special offer or discounts), and other selling/marketing strategy. In other words, respondent JOSE LAMADRID was closely monitoring the sales and collection activities of the petitioner.
Petitioner further contends that it was illogical for the appellate court to conclude that since he was not required to report for work on a daily basis, the power of control is absent. He reasons that being a field personnel, as defined under Article 82 of the Labor Code, who is covering the Mindanao area, it would be impractical for him to report to the respondents‘ office in Manila in order to keep tab of his actual working hours.
Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence. The decisive factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot be accorded finality by this Court.[12] Considering the conflicting findings of fact by the Labor Arbiter and the NLRC as well as the Court of Appeals, there is a need to reexamine the records to determine with certainty which of the propositions espoused by the contending parties is supported by substantial evidence.
We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an employee of respondent corporation. To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important.[13] The so-called ―control test‖ is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.
Applying the aforementioned test, an employer-employee relationship is notably absent in this case. It is undisputed that petitioner Abante was a commission salesman who received 3% commission of his gross sales. Yet no quota was imposed on him by the respondent; such that a dismal performance or even a dead result will not result in any sanction or provide a ground for dismissal. He was not required to report to the office at any time or submit any periodic written report on his sales performance and activities. Although he had the whole of Mindanao as his base of operation, he was not designated by respondent to conduct his sales activities at any particular or specific place. He pursued his selling activities without interference or supervision from respondent company and relied on his own resources to perform his functions. Respondent company did not prescribe the manner of selling the merchandise; he was left alone to adopt any style or strategy to entice his customers. While it is true that he occasionally reported to the Manila office to attend conferences on marketing strategies, it was intended not to control the manner and means to be used in reaching the desired end, but to serve as a guide and to upgrade his skills for a more efficient marketing performance. As correctly observed by the appellate court, reports on sales, collection, competitors, market strategies, price listings and new offers relayed by petitioner during his conferences to Manila do not indicate that he was under the control of respondent.[14] Moreover, petitioner was free to offer his services to other companies engaged in similar or related marketing activities as evidenced by the certifications issued by various customers.[15]
In Encyclopedia Britannica (Philippines), Inc. v. NLRC,[16] we reiterated the rule that there could be no employer-employee relationship where the element of control is absent. Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the result of his efforts and not the amount thereof, no relationship of employer-employee exists.
We do not agree with petitioner‘s contention that Article 280[17] is a crucial factor in determining the existence of an employment relationship. It merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining their rights to certain benefits, such as to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.[18]
Neither can we subscribe to petitioner‘s misplaced reliance on the case of Songco v. NLRC.[19] While in that case the term ―commission‖ under Article 96 of the Labor Code was construed as being included in the definition of the term ―wage‖ available to employees, there is no categorical pronouncement that the payment of compensation on commission basis is conclusive proof of the existence of an employer-employee relationship. After all, commission, as a form of remuneration, may be availed of by both an employee or a non-employee.
Petitioner decried the alleged intimidation and trickery employed by respondents to obtain from him a Promissory Note and to issue forty-seven checks as security for the bad accounts incurred by five customers.
While petitioner may have been coerced into executing force to issue the said documents, it may equally be true that petitioner did so in recognition of a valid financial obligation. He who claims that force or intimidation was employed upon him lies the onus probandi. He who asserts must prove. It is therefore incumbent upon petitioner to overcome the disputable presumption that private transactions have been prosecuted fairly and regularly, and that there is sufficient consideration for every contract.[20] A fortiori, it is difficult to imagine that petitioner, a salesman of long standing, would accede without raising a protest to the patently capricious and oppressive demand by respondent of requiring him to assume bad accounts which, as he contended, he had not incurred. This lends credence to the respondent‘s assertion that petitioner procured the goods from the said company on credit, consignment or installment basis and then sold the same to various customers. In the scheme of things, petitioner, having directly contracted with the respondent company, becomes responsible for the amount of merchandise he took from the respondent, and in turn, the customer/s would be liable for their respective accounts to the seller, i.e., the petitioner, with whom they contracted the sale.
All told, we sustain the factual and legal findings of the appellate court and accordingly, find no cogent reason to overturn the same.
WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated March 7, 2003 in CA-G.R. SP No. 73102, which denied the petition of Empermaco B. Abante, is AFFIRMED in toto.
SO ORDERED.
Panganiban, (Working Chairman), Carpio, and Azcuna, JJ., concur. Davide, Jr., C.J., (Chairman), on official leave.
[G.R. No. 148508. May 20, 2004]
(22)R TRANSPORT CORPORATION, petitioner, vs. ROGELIO EJANDRA, respondent. D E C I S I O N CORONA, J.:
Before us is a petition for review of the decision[1] of the Court of Appeals[2] dated December 22, 2000 dismissing the petition for certiorari of the decision of the National Labor Relations Commission[3] (NLRC) dated May 30, 1997. The latter affirmed the decision[4] of the labor arbiter dated February 27, 1997 holding petitioner liable for illegal dismissal and directing private respondent‘s reinstatement.
Private respondent Rogelio Ejandra alleged that, for almost six years, from July 15, 1990 to January 31, 1996, he worked as a bus driver of petitioner R Transport Corporation. He plied the route ―Muntilupa-Alabang-Malanday-Monumento-UE-Letre-Sangandaan‖ from 5:00 a.m. up to 2:00 a.m. the next day and was paid 10% of his daily earnings.
On January 31, 1996, an officer of the Land Transportation Office (LTO), Guadalupe Branch, Makati City, apprehended him for obstruction of traffic for which his license was confiscated. Upon his arrival at petitioner‘s garage, he immediately reported the incident to his manager, Mr. Oscar Pasquin, who gave him P500 to redeem his license. The following day, he went to LTO, Guadalupe Branch, to claim it but he was told that it had not yet been turned over by the officer who apprehended him. He was able to retrieve his license only after a week.
On February 8, 1996, private respondent informed Mr. Pasquin that he was ready to report for work. However, he was told that the company was still studying whether to allow him to drive again. Private respondent was likewise accused of causing damage to the bus he used to drive. Denying the charge, private respondent blamed the person who drove the said bus during his absence, considering that the damage was sustained during the week that he did not drive the bus. Mr. Pacquin nonetheless told him ―Magpahinga ka muna at tatawagin ka na lang namin kung kailangan ka na para magmaneho. Magbakasyon ka muna, bata.‖ When respondent asked how long he had to rest, the manager did not give a definite time.
Petitioner denied private respondent‘s allegations and claimed that private respondent, a habitual absentee, abandoned his job. To belie private respondent‘s allegation that his license had been confiscated, petitioner asserted that, had it been true, he should have presented an apprehension report and informed petitioner of his problems with the LTO. But he did not. Petitioner further argued that private respondent was not an employee because theirs was a contract of lease and not of employment, with petitioner being paid on commission basis.
On February 23, 1997, labor arbiter Rogelio Yulo rendered his decision in favor of private respondent. The dispositive portion of the decision read:
PREMISES CONSIDERED, judgment is hereby rendered finding the dismissal of Rogelio Ejandra to be without just cause and, therefore, illegal and ORDERING R-Transport to REINSTATE him to his former position without loss of seniority and other benefits and to pay him backwages from the time of his dismissal until actual reinstatement.
SO ORDERED.[5]
Labor arbiter Yulo gave no weight to petitioner‘s claim that private respondent abandoned his work. His one-week absence did not constitute abandonment of work considering that it took him the whole week to reclaim his license. Private respondent could not retrieve it unless and until the apprehending officer first transmitted it to their office. His inability to drive for petitioner that whole week was therefore not his fault and petitioner could be held liable for illegal dismissal. Due process was not accorded to private respondent who was never given the opportunity to contest the charge of abandonment. Moreover, assuming actual abandonment, petitioner should have reported such fact to the nearest employment office of the Department of Labor and Employment. But no such report was ever made.
On May 30, 1997, the NLRC rendered a decision affirming the decision of the labor arbiter:
WHEREFORE, premises considered, the appeal is hereby DISMISSED and the appealed decision AFFIRMED in toto.
SO ORDERED.[6]
In disputing petitioner‘s claim that private respondent was not its employee and was not therefore entitled to notice and hearing before termination, the NLRC held that:
It is very clear that (sic) from no less than appellants‘ admission, that complainant was not afforded his right to due process prior to the severance of his employment with respondents. (First par. p.3, respondents‘ Appeal Memorandum, p. 45, Rollo)
Appellants‘ defense of denying the existence of employer-employee relationship with the complainant based on the manner by which complainant was being paid his salary, cannot hold water. xxx xxx xxx
While employees paid on piece-rate and commission basis are not covered by the provisions of the Labor Code, as amended, on hours of work, these employees however, for all intents and purposes, are employees of their employers. xxx xxx xxx[7]
Petitioner filed in the Court of Appeals a petition for certiorari on the ground that the NLRC committed grave abuse of discretion in affirming the decision of the labor arbiter. On December 22, 2000, the Court of Appeals rendered a decision, the dispositive portion of which read:
WHEREFORE, the instant petition is hereby DENIED for lack of merit.
SO ORDERED.[8]
Categorizing the issues raised by petitioner as factual, the appellate court held that the findings of fact of the labor arbiter (affirmed by the NLRC) were entitled to great respect because they were supported by substantial evidence. The Court of Appeals also ruled that petitioner was barred from denying the existence of an employer-employee relationship because petitioner invoked its rights under the law and jurisprudence as an employer in dismissing private respondent.
Hence, this appeal based on the following assignments of errors:
A
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS, TENTH DIVISION COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED/ADOPTED IN TOTO THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) BASED PURELY ON A SPECULATION, SURMISE OR CONJECTURE.
B
THE FINDINGS OF FACTS ARE MERE CONCLUSIONS WITHOUT CITATION OR SPECIFIC EVIDENCE ON WHICH THEY ARE BASED.
C
FURTHER, THE HONORABLE COURT OF APPEALS, TENTH DIVISION COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT RULING THAT THE RELATIONSHIP IN LAW OCCURRING BETWEEN THE PETITIONER R TRANSPORT CORPORATION AND THE PRIVATE RESPONDENT WAS IN A NATURE OF ―LESSOR AND LESSEE.‖
D
MOREOVER, THERE IS A NEED BY THIS HONORABLE COURT TO GIVE A SECOND LOOK ON THE RECORDS OF NLRC NCR CASE RAB NO. IV-2-7910-R / NLRC NCR CA- 012-605-97 TO AVOID MISCARRIAGE OF JUSTICE AND FURTHERANCE OF THE STATUTORY REQUIREMENTS OF DUE PROCESS.
E
FINALLY, THE HONORABLE COURT OF APPEALS, TENTH DIVISION GRAVELY ERRED IN DENYING THE PETITION IN CA-G.R. SP. NO. 51962 IN ITS DECISION PROMULGATED ON DECEMBER 22, 2000 (ANNEXES ―G‖ AND ―G-1‖) AND IN ITS RESOLUTION DATED JUNE 4, 2001 (ANNEX ―B‖), HAS ACTED CONTRARY TO LAW AND THE RULES OF COURT.[9]
According to the petitioner, the appellate court erred in not finding that private respondent abandoned his work; that petitioner was not the lessor of private respondent; that, as such, the termination of the contract of lease of services did not require petitioner to respect private respondent‘s rights to notice and hearing; and, that private respondent‘s affidavit was hearsay and self-serving.
We deny the appeal.
Under Section 1, Rule 45 of the 1997 Rules of Civil Procedure, a petition for review shall only raise questions of law considering that the findings of fact of the Court of Appeals are, as a general rule, conclusive upon and binding on this Court.[10] This doctrine applies with greater force in labor cases where the factual findings of the labor tribunals are affirmed by the Court of Appeals. The reason is because labor officials are deemed to have acquired expertise in matters within their jurisdiction and therefore, their factual findings are generally accorded not only respect but also finality, and are binding on this Court.[11]
In the case at bar, the labor arbiter, the NLRC and the Court of Appeals were unanimous in finding that private respondent worked as a driver of one of the buses of petitioner and was paid on a 10% commission basis. After he was apprehended for a traffic violation, his license was confiscated. When he informed petitioner‘s general manager of such fact, the latter gave him money to redeem his license. He went to the LTO office everyday but it was only after a week that he was able to get back his license. When he reported back to work, petitioner‘s manager told him to wait until his services were needed again. Considering himself dismissed, private respondent filed a complaint for illegal dismissal against petitioner.
We have no reason to disturb all these factual findings because they are amply supported by substantial evidence.
Denying the existence of an employer-employee relationship, petitioner insists that the parties‘ agreement was for a contract of lease of services. We disagree. Petitioner is barred to negate the existence of an employer-employee relationship. In its petition filed before this Court, petitioner invoked our rulings on the right of an employer to dismiss an employee for just cause.[12] Petitioner maintained that private respondent was justifiably dismissed due to abandonment of work. By adopting said rulings, petitioner impliedly admitted that it was in fact the employer of private respondent. According to the control test, the power to dismiss an employee is one of the indications of an employer-employee relationship.[13] Petitioner‘s claim that private respondent was legally dismissed for abandonment was in fact a negative pregnant:[14] an acknowledgement that there was no mutual termination of the alleged contract of lease and that private respondent was its employee. The fact that petitioner paid private respondent on commission basis did not rule out the presence of an employee-employer relationship. Article 97(f) of the Labor Code clearly provides that an employee‘s wages can be in the form of commissions.
We now ask the next question: was private respondent, an employee of petitioner, dismissed for just cause? We do not think so.
According to petitioner, private respondent abandoned his job and lied about the confiscation of his license. To constitute abandonment, two elements must concur: (1) the failure to report for work or absence without valid or justifiable reason and (2) a clear intention to sever the employer-employee relationship. Of the two, the second element is the more determinative factor and should be manifested by some overt acts. Mere absence is not sufficient. It is the employer who has the burden of proof to show a deliberate and unjustified refusal of the employee to resume his employment without any intention of returning.[15]
In the instant case, petitioner fell short of proving the requisites. To begin with, petitioner‘s absence was justified because the LTO, Guadalupe Branch, did not release his license until after a week. This was the unanimous factual finding of the labor tribunals and the Court of Appeals. As aptly held by labor arbiter Yulo, the process of redeeming a confiscated license, based on common experience, depended on when the apprehending officer turned over the same. Second, private respondent never intended to sever his employment as he in fact reported for work as soon as he got his license back. Petitioner offered no evidence to rebut these established facts. Third, labor arbiter Yulo correctly observed that, if private respondent really abandoned his work, petitioner should have reported such fact to the nearest Regional Office of the Department of Labor and Employment in accordance with Section 7, Rule XXIII, Book V of Department Order No. 9, series of 1997[16] (Rules Implementing Book V of the Labor Code). Petitioner made no such report.
In addition to the fact that petitioner had no valid cause to terminate private respondent from work, it violated the latter‘s right to procedural due process by not giving him the required notice and hearing. Section 2, Rule XXIII, Book V of Department Order No. 9 provides for the procedure for dismissal for just or authorized cause:
SEC. 2. Standards of due process; requirement of notice. – In all cases of termination of employment, the following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and
(c ) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee‘s last known address.
II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the requirements of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department at least thirty days before the effectivity of the termination, specifying the ground or grounds for termination.
III. If termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the termination is brought about by the failure of an employee to meet the standards of the employer in case of probationary employment, it shall be sufficient that a written notice is served the employee within a reasonable time from the effective date of termination.
WHEREFORE, premises considered, the petition is hereby DENIED. Costs against the petitioner.
SO ORDERED.
Vitug, (Chairman and Acting Chief Justice), Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.
[G.R. No. 127598. January 27, 1999]
(23)MANILA ELECTRIC COMPANY, petitioner, vs. THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING AND MERALCO EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents. D E C I S I O N MARTINEZ, J.:
In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annul the orders of the Secretary of labor dated August 19, 1996 and December 28, 1996, wherein the Secretary required MERALCO and its rank and file union- the Meralco Workers Association (MEWA) – to execute a collective bargaining agreement (CBA) for the remainder of the parties‘ 1992-1997 CBA cycle, and to incorporate in this new CBA the Secretary‘s dispositions on the disputed economic and non-economic issues.
MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and conditions of their existing 1992-1997 Collective Bargaining Agreement (CBA) covering the remaining period of two years starting from December 1, 1995 to November 30, 1997.[1] MERALCO signified its willingness to re-negotiate through its letter dated October 17, 1995[2] and formed a CBA negotiating panel for the purpose. On November 10, 1995, MEWA submitted its proposal[3] to MERALCO, which, in turn, presented a counter-proposal. Thereafter, collective bargaining negotiations proceeded. However, despite the series of meetings between the negotiating panels of MERALCO and MEWA, the parties failed to arrive at ―terms and conditions acceptable to both of them.‖
On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment (DOLE) which was docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair labor practices. The NCMB then conducted a series of conciliation meetings but the parties failed to reach an amicable settlement. Faced with the imminence of a strike, MERALCO on May 2, 1996, filed an Urgent Petition[4] with the Department of Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying that the Secretary assume jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.
The Labor Secretary granted the petition through its Order[5] of May 8, 1996, the dispositive portion of which reads:
―WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor dispute obtaining between the parties pursuant to Article 263 (g) of the Labor Code. Accordingly, the parties are here enjoined from committing any act that may exacerbate the situation. To speed up the resolution of the dispute, the parties are also directed to submit their respective Position Papers within ten (10) days from receipt.
‗Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between the parties to bridge their differences and eventually hammer out a solution that is mutually acceptable. He shall be assisted by the Legal Service.
SO ORDERED.‖
Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary resolved the labor dispute through an Order,[6] containing the following awards:
―ECONOMIC DEMANDS
Wage increase - P2,300.00 for the first year covering the period from December 1, 1995 to November 30, 1996 - P2,200.00 for the second year covering the period December 1, 1996 to November 30, 1997.
Red Circle Rate (RCR) Allowance- all RCR allowances (promotional increases that go beyond the maximum range of a job classification salary) shall be integrated into the basic salary of employees effective December 1, 1995.
Longevity Allowance- the integration of the longevity allowance into the basic wage is denied; the present policy is maintained.
Longevity Increase- the present longevity bonus is maintained but the bonus shall be incorporated into the new CBA.
Sick Leave- MEWA‘s demand for upgrading is denied; the company‘s present policy is maintained. However, those who have not used the sick leave benefit during a particular year shall be entitled to a one-day sick leave incentive.
Sick leave reserve- the present reserve of 25 days shall be reduced to 15 days; the employee has the option either to convert the excess of 10 days to cash or let it remain as long as he wants. In case he opts to let it remain, he may later on convert it to cash at his retirement or separation.
Vacation Leave - MEWA‘s demand for upgrading denied & the company‘s present policy is maintained which must be incorporated into the new CBA but scheduled vacation leave may be rounded off to one full day at a time in case of a benefit involving a fraction of a day.
Union Leave- of MEWA‘s officers, directors or stewards assigned to perform union duties or legitimate union activity is increased from 30 to 40 Mondays per month.
Maternity, Paternity and Funeral leaves- the existing policy is to be maintained and must be incorporated in the new CBA unless a new law granting paternity leave benefit is enacted which is superior to what the company has already granted.
Birthday Leave - union‘s demand is granted. If birthday falls on the employee‘s rest day or on a non-working holiday, the worker shall be entitled to go on leave with pay on the next working day.
Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan (HMP)- present policy is maintained insofar as the cost sharing is concerned- 70% for the Company and 30% for MEWA.
Health Maintenance Plan (HMP) for dependents - subsidized dependents increased from three to five dependents.
Longevity Bonus- is increased from P140.00 to P200.00 for every year of service to be received by the employee after serving the Company for 5 years.
Christmas Bonus and Special Christmas Grant- MEWA‘s demand of one month salary as Christmas Bonus and two month‘s salary as Special Christmas Grant is granted and to be incorporated in the new CBA.
Midyear Bonus- one month‘s pay to be included in the CBA.
Anniversary Bonus - union‘s demand is denied.
Christmas Gift Certificate - company has the discretion as to whether it will give it to its employees.
Retirement Benefits: a. Full retirement-present policy is maintained; b. one cavan of rice per month is granted to retirees; c. special retirement leave and allowance-present policy is maintained; d. HMP coverage for retirees- HMP coverage is granted to retirees who have not reached the age of 70, with MERALCO subsidizing 100% of the monthly premium; those over 70 are entitled to not more than 30 days of hospitalization at the J.F. Cotton Hospital with the company shouldering the entire cost. e. HMP coverage for retiree‘s dependents is denied f. Monthly pension of P3,000.00 for each retiree is denied. g. Death benefit for retiree‘s beneficiaries is denied.
Optional retirement - union‘s demand is denied; present policy is maintained; employee is eligible for optional retirement if he has rendered at least 18 years of service.
Dental, Medical and Hospitalization Benefits- grant of all the allowable medical, surgical, dental and annual physical examination benefits, including free medicine whenever the same is not available at the JFCH.
Resignation benefits- union‘s demand is denied.
Night work- union demand is denied but present policy must be incorporated in CBA.
Shortswing- work in another shift within the same day shall be considered as the employee‘s work for the following day and the employee shall be given additional four (4) hours straight time and the applicable excess time premium if he works beyond 8 hours in the other shift.
High Voltage allowance- is increased from P45.00 to P55.00 to be given to any employee authorized by the Safety Division to perform work on or near energized bare lines & bus including stockman drivers & crane operators and other crew members on ground.
High Pole Allowance- is increased from P30.00 to P40.00 to be given to those authorized to climb poles up to at least 60 ft. from the ground. Members of the team including stockman drivers, crane operators and other crew members on the ground, are entitled to this benefit.
Towing Allowance- where stockmen drive tow trailers with long poles and equipment on board, they shall be entitled to a towing allowance of P20.00 whether they perform the job on regular shift or on overtime.
Employee‘s Cooperative- a loan of P3 M seed money is granted to the proposed establishment of a cooperative, payable in twenty (20) years starting one year from the start of operations.
Holdup Allowance- the union demand is denied; the present policy shall be maintained.
Meal and Lodging Allowance- shall be increased effective December 1, 1995 as follows:
Breakfast - from P25.00 to P35.00 Lunch - from P35.00 to P45.00 Dinner - from P35.00 to P45.00 Lodging - from P135.00 to P180.00 a night in all MERALCO franchise areas
Payroll Treatment for Accident while on Duty- an employee shall be paid his salary and allowance if any is due plus average excess time for the past 12 months from the time of the accident up to the time of full recovery and placing of the employee back to normal duty or an allowance of P2,000.00, whichever is higher.
Housing and Equity Assistance Loan- is increased to P60,000.00; those who have already availed of the privilege shall be allowed to get the difference.
Benefits for Collectors: a. Company shall reduce proportionately the quota and monthly average product level (MAPL) in terms of equivalent bill assignment when an employee is on sick leave and paid vacation leave. b. When required to work on Saturdays, Sundays and holidays, an employee shall receive P60.00 lunch allowance and applicable transportation allowance as determined by the Company and shall also receive an additional compensation to one day fixed portion in addition to lunch and transportation allowance. c. The collector shall be entitled to an incentive pay of P25.00 for every delinquent account disconnected. d. When a collector voluntarily performs other work on regular shift or overtime, he shall be entitled to remuneration based on his computed hourly compensation and the reimbursement of actually incurred transportation expenses. e. Collectors shall be provided with bobcat belt bags every year f. Collector‘s cash bond shall be deposited under his capital contribution to MESALA. g. Collectors quota and MAPL shall be proportionately reduced during typhoons, floods, earthquakes and other similar force majeure events when it is impossible for a collector to perform collection work.
Political Demands: a. Scope of the collective bargaining unit- the collective bargaining unit shall be composed of all regular rank-and-file employees hired by the company in all its offices and operative centers throughout its franchise area and those it may employ by reason of expansion, reorganization or as a result of operational exigencies. b. Union recognition and security - i. The union shall be recognized by the Company as sole and exclusive bargaining representative of the rank-and-file employees included in the bargaining unit. The Company shall agree to meet only with Union officers and its authorized representatives on all matters involving the Union and all issues arising from the implementation and interpretation of the new CBA. ii. The union shall meet with the newly regularized employees for a period not to exceed four (4) hours, on company time, to acquaint the new regular employees of the rights, duties and benefits of Union membership. iii. The right of all rank-and-file employees to join the union shall be recognized in accordance with the maintenance of membership principle as a form of union security. c. Transfer of assignment and job security- i. No transfer of an employee from one position to another shall be made if motivated by considerations of sex, race, creed, political and religious belief, seniority or union activity. ii. If the transfer is due to the reorganization or decentralization, the distance from the employee‘s residence shall be considered unless the transfer is accepted by the employee. If the transfer is extremely necessary, the transfer shall be made within the offices in the same district. iii. Personnel hired through agencies or contractors to perform the work done by covered employees shall not exceed one month. If extension is necessary, the union shall be informed. But the Company shall not permanently contract out regular or permanent positions that are necessary in the normal operation of the Company. d. Check off Union Dues- where the union increases its dues as approved by the Board of Directors, the Company shall check off such increase from the salaries of union members after the union submits check off authorizations signed by majority of the members. The Company shall honor only those individual authorizations signed by the majority of the union members and collectively submitted by the union to the Company‘s Salary Administration. e. Payroll Reinstatement- shall be in accordance with Article 223, p. 3 of the Labor Code. f. Union Representation in Committees- the union is allowed to participate in policy formulation and in the decision-making process on matters affecting their rights and welfare, particularly in the Uniform Committee, the Safety Committee and other committees that may be formed in the future.
Signing Bonus- P4,000.00 per member of the bargaining unit for the conclusion of the CBA
Existing benefits already granted by the Company but which are not expressly or impliedly repealed in the new agreement shall remain subsisting and shall be included in the new agreement to be signed by the parties effective December 1, 1995.
On August 30, 1996, MERALCO filed a motion for reconsideration[7] alleging that the Secretary of Labor committed grave abuse of discretion amounting to lack or excess of jurisdiction:
1. in awarding to MEWA a package that would cost at least P1.142 billion, a package that is grossly excessive and exorbitant, would not be affordable to MERALCO and would imperil its viability as a public utility affected with national interest.
2. in ordering the grant of a P4,500.00 wage increase, as well as a new and improved fringe benefits, under the remaining two (2) years of the CBA for the rank-and-file employees.
3. in ordering the ‗incorporation into the CBA of all existing employee benefits, on the one hand, and those that MERALCO has unilaterally granted to its employees by virtue of voluntary company policy or practice, on the other hand.‘
4. in granting certain ‗political demands‘ presented by the union.
5. in ordering the CBA to be ‗effective December 1995‘ instead of August 19, 1996 when he resolved the dispute.
MERALCO filed a supplement to the motion for reconsideration on September 18, 1995, alleging that the Secretary of Labor did not properly appreciate the effect of the awarded wages and benefits on MERALCO‘s financial viability.
MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage increase, leaves, decentralized filing of paternity and maternity leaves, bonuses, retirement benefits, optional retirement, medical, dental and hospitalization benefits, short swing and payroll treatment. On its political demands, MEWA asked the Secretary to rule its proposal to institute a Code of Discipline for its members and the union‘s representation in the administration of the Pension Fund.
On December 28, 1996, the Secretary issued an Order[8] resolving the parties‘ separate motions, the modifications of the August 19, 1996 Order being highlighted hereunder:
1) Effectivity of Agreement - December 1, 1995 to November 30, 1997.
Economic Demands
2) Wage Increase:
First year - P2,200.00 per month; Second year - P2,200.00 per month.
3) Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary -the RCR allowance shall be integrated into the basic salary of employees as of August 19, 1996 (the date of the disputed Order).
4) Longevity Bonus - P170 per year of service starting from 10 years of continuous service.
5) Vacation Leave - The status quo shall be maintained as to the number of vacation leave but employee‘s scheduled vacation may be taken one day at a time in the manner that this has been provided in the supervisory CBA.
6) Sick Leave Reserve - is reduced to 15 days, with any excess payable at the end of the year. The employee has the option to avail of this cash conversion or to accumulate his sick leave credits up to 25 days for conversion to cash at retirement or separation from the service.
7) Birthday Leave - the grant of a day off when an employee‘s birthday falls on a non-working day is deleted.
8) Retirement Benefits for Retirees - The benefits granted shall be effective on August 19, 1996, the date of the disputed order up to November 30, 1997, which is the date the CBA expires and shall apply to those who are members of the bargaining unit at the time the award is made.
One sack of rice per quarter of the year shall be given to those retiring between August 19, 1996 and November 30, 1997.
On HMP Coverage for Retirees- The parties ‗maintain the status quo, that is, with the Company complying with the present arrangement and the obligations to retirees as is.‘
9) Medical, Dental and Hospitalization Benefits - The cost of medicine unavailable at the J.F. Cotton Hospital shall be in accordance with MERALCO‘s Memorandum dated September 14, 1976.
10) GHSIP and HMP for Dependents - The number of dependents to be subsidized shall be reduced from 5 to 4 provided that their premiums are proportionately increased.
11) Employees‘ Cooperative - The original award of P3 million pesos as seed money for the proposed Cooperative is reduced to P1.5 million pesos.
12) Shortswing - the original award is deleted.
13) Payroll Treatment for Accident on Duty - Company ordered to continue its present practice on payroll treatment for accident on duty without need to pay the excess time the Union demanded.
Political Demands:
14) Scope of the collective bargaining unit - The bargaining unit shall be composed of all rank and file employees hired by the Company in accordance with the original Order.
15) Union recognition and security - The incorporation of a closed shop form of union security in the CBA; the Company is prohibited from entertaining individuals or groups of individuals only on matters that are exclusively within the domain of the union; the Company shall furnish the union with a complete list of newly regularized employees within a week from regularization so that the Union can meet these employees on the Union‘s and the employee‘s own time.
16) Transfer of assignment and job security - Transfer is a prerogative of the Company but the transfer must be for a valid business reason, made in good faith and must be reasonably exercised. The CBA shall provide that ‗No transfer of an employee from one position to another, without the employee‘s written consent, shall be made if motivated by considerations of sex, race, creed, political and religious belief, age or union activity.
17) Contracting Out - The Company has the prerogative to contract out services provided that this move is based on valid business reasons in accordance with law, is made in good faith, is reasonably exercised and, provided further that if the contracting out involves more than six months, the Union must be consulted before its implementation.
18) Check off of union dues
In any increase of union dues or contributions for mandatory activities, the union must submit to the Company a copy of its board resolution increasing the union dues or authorizing such contributions;
If a board resolution is submitted, the Company shall deduct union dues from all union members after a majority of the union members have submitted their individual written authorizations. Only those check-off authorizations submitted by the union shall be honored by the Company.
With respect to special assessments, attorney‘s fees, negotiation fees or any other extraordinary fees, individual authorizations shall be necessary before the company may so deduct the same.
19) Union Representation in Committees - The union is granted representation in the Safety Committee, the Uniform Committee and other committees of a similar nature and purpose involving personnel welfare, rights and benefits as well as duties.
Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his discretion:
1). . . in awarding wage increases of P2,200.00 for 1996 and P2,200.00 for 1997;
2) . . . in awarding the following economic benefits: a. Two months Christmas bonus; b. Rice Subsidy and retirement benefits for retirees; c. Loan for the employees‘ cooperative; d. Social benefits such as GHSIP and HMP for dependents, employees‘ cooperative and housing equity assistance loan; e. Signing bonus; f. Integration of the Red Circle Rate Allowance g. Sick leave reserve of 15 days h. The 40-day union leave; i. High pole/high voltage and towing allowance; and j. Benefits for collectors
3) . . . in expanding the scope of the bargaining unit to all regular rank and file employees hired by the company in all its offices and operating centers and those it may employ by reason of expansion, reorganization or as a result of operational exigencies;
4) . . . in ordering for a closed shop when his original order for a maintenance of membership arrangement was not questioned by the parties;
5) . . . in ordering that Meralco should consult the union before any contracting out for more than six months;
6) . . . in decreeing that the union be allowed to have representation in policy and decision making into matters affecting ―personnel welfare, rights and benefits as well as duties;‖
7) . . . in ruling for the inclusion of all terms and conditions of employment in the collective bargaining agreement;
8) . . . in exercising discretion in determining the retroactivity of the CBA;
Both MEWA and the Solicitor General; on behalf of the Secretary of Labor, filed their comments to the petition. While the case was also set for oral argument on Feb 10, 1997, this hearing was cancelled due to MERALCO not having received the comment of the opposing parties. The parties were instead required to submit written memoranda, which they did. Subsequently, both petitioner and private respondent MEWA also filed replies to the opposing parties‘ Memoranda, all of which We took into account in the resolution of this case.
The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the assailed orders arguing that he acted within the scope of the powers granted him by law and by the Constitution. The union contends that any judicial review is limited to an examination of the Secretary‘s decision-making/discretion - exercising process to determine if this process was attended by some capricious or whimsical act that constitutes ―grave abuse‖; in the absence of such abuse, his findings - considering that he has both jurisdiction and expertise to make them - are valid.
The union‘s position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the Secretary‘s arbitral award because the Secretary complied with constitutional norms in rendering the dispute award. The union posits that the yardstick for comparison and for the determination of the validity of the Secretary‘s actions should be the specific standards laid down by the Constitution itself. To the union, these standards include the State policy on the promotion of workers‘ welfare,[9] the principle of distributive justice,[10] the right of the State to regulate the use of property,[11] the obligation of the State to protect workers, both organized and unorganized, and insure their enjoyment of ―humane conditions of work‖ and a ―living wage,‖ and the right of labor to a just share in the fruits of production.[12]
Second, no reversible abuse of discretion attended the Secretary‘s decision because the Secretary took all the relevant evidence into account, judiciously weighed them, and rendered a decision based on the facts and law. Also, the arbitral award should not be reversed given the Secretary‘s expertise in his field and the general rule that findings of fact based on such expertise is generally binding on this Court.
To put matters in proper perspective, we go back to basic principles. The Secretary of Labor‘s statutory power under Art. 263 (g) of the Labor Code to assume jurisdiction over a labor dispute in an industry indispensable to the national interest, and, to render an award on compulsory arbitration, does not exempt the exercise of this power from the judicial review that Sec. 1, Art. 8 of the Constitution mandates. This constitutional provision states:
―Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government.‖
Under this constitutional mandate, every legal power of the Secretary of Labor under the Labor Code, or, for that matter, any act of the Executive, that is attended by grave abuse of discretion is subject to review by this Court in an appropriate proceeding. To be sure, the existence of an executive power alone - whether granted by statute or by the Constitution - cannot exempt the executive action from judicial oversight, interference or reversal when grave abuse of discretion is, or is alleged to be, present. This is particularly true when constitutional norms are cited as the applicable yardsticks since this Court is the final interpreter of the meaning and intent of the Constitution.[13]
The extent of judicial review over the Secretary of Labor‘s arbitral award is not limited to a determination of grave abuse in the manner of the secretary‘s exercise of his statutory powers. This Court is entitled to, and must - in the exercise of its judicial power - review the substance of the Secretary‘s award when grave abuse of discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretary‘s acts is, of course, the Constitution. And we recognize that indeed the constitutional provisions the union cited are State policies on labor and social justice that can serve as standards in assessing the validity of a Secretary of Labor‘s actions. However, we note that these provisions do not provide clear, precise and objective standards of conduct that lend themselves to easy application. We likewise recognize that the Constitution is not a lopsided document that only recognizes the interests of the working man; it too protects the interests of the property owner and employer as well.[14]
For these reasons - and more importantly because a ruling on the breadth and scope of the suggested constitutional yardsticks is not absolutely necessary in the disposition of this case - we shall not use these yardsticks in accordance with the time-honored practice of avoiding constitutional interpretations when a decision can be reached using non-constitutional standards. We have repeatedly held that one of the essential requisites for a successful judicial inquiry into constitutional questions is that the resolution of the constitutional question must be necessary in deciding the case.[15]
In this case we believe that the more appropriate and available standard - and one does not require a constitutional interpretation - is simply the standard of reasonableness. In layman‘s terms, reasonableness implies the absence of arbitrariness;[16] in legal parlance, this translates into the exercise of proper discretion and to the observance of due process. Thus, the question we have to answer in deciding this case is whether the Secretary‘s actions have been reasonable in light of the parties positions and the evidence they presented.
MEWA‘s second premise - i.e., that the Secretary duly considered the evidence presented - is the main issue that we shall discuss at length below. Additionally, MEWA implied that we should take great care before reading an abuse of discretion on the part of the Secretary because of his expertise on labor issues and because his findings of fact deserve the highest respect from this Court.
This Court has recognized the Secretary of Labor‘s distinct expertise in the study and settlement of labor disputes falling under his power of compulsory arbitration.[17] It is also well-settled that factual findings of labor administrative officials, if supported by substantial evidence, are entitled not only to great respect but even to finality.[18] We, therefore, have no difficulty in accepting the union‘s caveat on how to handle a Secretary of Labor‘s arbitral award.
But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise of the Secretary‘s arbitral functions; his findings in an arbitration case are usually based on position papers and their supporting documents (as they are in the present case), and not on the thorough examination of the parties‘ contending claims that may be present in a court trial and in the face-to-face adversarial process that better insures the proper presentation and appreciation of evidence.[19] There may also be grave abuse of discretion where the board, tribunal or officer exercising judicial function fails to consider evidence adduced by the parties.[20] Given the parties‘ positions on the justiciability of the issues before us, the question we have to answer is one that goes into the substance of the Secretary‘s disputed orders: Did the Secretary properly consider and appreciate the evidence presented before him?
We find, based on our consideration of the parties‘ positions and the evidence on record, that the Secretary of Labor disregarded and misappreciated evidence, particularly with respect to the wage award. The Secretary of Labor apparently also acted arbitrarily and even whimsically in considering a number of legal points; even the Solicitor General himself considered that the Secretary gravely abused his discretion on at least three major points: (a) on the signing bonus issue; (b) on the inclusion of confidential employees in the rank and file bargaining unit, and (c) in mandating a union security ―closed-shop‖ regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal point in the consideration of the wage award is the projected net income for 1996 which became the basis for the 1996 wage award, which in turn - by extrapolation - became the basis for the (2nd Year) 1997 award. MERALCO projected that the net operating income for 1996 was 14.7% above the 1999 level or a total net operating income of 4.171 Billion, while the union placed the 1996 net operating income at 5.795 Billion.
MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the same period in 1995. The union, on the other hand, projected that the 1996 income would increase by 29% to 35% because the ―consumption of electric power is at its highest during the last two quarters with the advent of the Yuletide season.‖ The union likewise relied heavily on a newspaper report citing an estimate by an all Asia capital financial analyst that the net operating income would amount to 5.795 Billion.[21]
Based essentially on these considerations, the Secretary made the following computations and ordered his disputed wage award:
Projected net operating Income for 1996 5,795,000,000
Principals and interests 1,426,571,703
Dividends at 1995 rate 1,636,949,000
Net amount left with the Company 2,729,479,297
Add: Tax credit equivalent to 35% of labor cost 231,804,940
Company‘s net operating income 2,961,284,237
―For 1997, the projected income is P7,613,612 which can easily absorb the incremental increase of P2,200 per month or a total of P4,500 during the last year of the CBA period.
x x x x x x x x x
―An overriding aim is to estimate the amount that is left with the Company after the awarded wages and benefits and the company‘s customary obligations are paid. This amount can be the source of an item not found in the above computations but which the Company must provide for, that is - the amount the company can use for expansion.
―Considering the expansion plans stated in the Company‘s Supplement that calls for capital expenditures of 6 billion, 6.263 billion and 5.802 billion for 1996, 1997 and 1998 respectively, We conclude that our original award of P2,300 per month for the first year and P2,200 for the second year will still leave much by way of retained income that can be used for expansion.‖[22] (Underscoring ours.)
We find after considering the records that the Secretary gravely abused his discretion in making this wage award because he disregarded evidence on record. Where he considered MERALCO‘s evidence at all, he apparently misappreciated this evidence in favor of claims that do not have evidentiary support. To our mind, the MERALCO projection had every reason to be reliable because it was based on actual and undisputed figures for the first six months of 1996.[23] On the other hand, the union projection was based on a speculation of Yuletide consumption that the union failed to substantiate. In fact, as against the union‘s unsubstantiated Yuletide consumption claim, MERALCO adduced evidence in the form of historical consumption data showing that a lengthy consumption does not tend to rise during the Christmas period.[24] Additionally, the All- Asia Capital Report was nothing more than a newspaper report that did not show any specific breakdown or computations. While the union claimed that its cited figure is based on MERALCO‘s 10-year income stream,[25] no data or computation of this 10-year stream appear in the record.
While the Secretary is not expected to accept the company-offered figures wholesale in determining a wage award, we find it a grave abuse of discretion to completely disregard data that is based on actual and undisputed record of financial performance in favor of the third-hand and unfounded claims the Secretary eventually relied upon. At the very least, the Secretary should have properly justified his disregard of the company figures. The Secretary should have also reasonably insured that the figure that served as the starting point for his computation had some substantial basis.
Both parties extensely discussed the factors that the decision maker should consider in making a wage award. While We do not seek to enumerate in this decision the factors that should affect wage determination, we must emphasize that a collective bargaining dispute such as this one requires due consideration and proper balancing of the interests of the parties to the dispute and of those who might be affected by the dispute. To our mind, the best way in approaching this task holistically is to consider the available objective facts, including, where applicable, factors such as the bargaining history of the company, the trends and amounts of arbitrated and agreed wage awards and the company‘s previous CBAs, and industry trends in general. As a rule, affordability or capacity to pay should be taken into account but cannot be the sole yardstick in determining the wage award, especially in a public utility like MERALCO. In considering a public utility, the decision maker must always take into account the ―public interest‖ aspects of the case; MERALCO‘s income and the amount of money available for operating expenses - including labor costs - are subject to State regulation. We must also keep in mind that high operating costs will certainly and eventually be passed on to the consuming public as MERALCO has bluntly warned in its pleadings.
We take note of the ―middle ground‖ approach employed by the Secretary in this case which we do not necessarily find to be the best method of resolving a wage dispute. Merely finding the midway point between the demands of the company and the union, and ―splitting the difference‖ is a simplistic solution that fails to recognize that the parties may already be at the limits of the wage levels they can afford. It may lead to the danger too that neither of the parties will engage in principled bargaining; the company may keep its position artificially low while the union presents an artificially high position, on the fear that a ―Solomonic‖ solution cannot be avoided. Thus, rather than encourage agreement, a ―middle ground approach‖ instead promotes a ―play safe‖ attitude that leads to more deadlocks than to successfully negotiated CBAs.
After considering the various factors the parties cited, we believe that the interests of both labor and management are best served by a wage increase of P1,900.00 per month for the first year and another P1,900.00 per month for the second year of the two-year CBA term. Our reason for this is that these increases sufficiently protects the interest of the worker as they are roughly 15% of the monthly average salary of P11,600.00.[26] They likewise sufficiently consider the employer‘s costs and its overall wage structure, while at the same time, being within the range that will not disrupt the wage trends in Philippine industries.
The records shows that MERALCO, throughout its long years of existence, was never remiss in its obligation towards its employees. In fact, as a manifestation of its strong commitment to the promotion of the welfare and well-being of its employees, it has consistently improved their compensation package. For instance, MERALCO has granted salary increases[27] through the collective bargaining agreement the amount of which since 1980 for both rank-and-file and supervisory employees were as follows:
Based on the above-quoted table, specifically under the column ―RANK-AND-FILE,‖ it is easily discernible that the total wage increase of P3,800.00 for 1996 to 1997 which we are granting in the instant case is significantly higher than the total increases given in 1992 to 1994, or a span of three (3) years, which is only P3,900.00 a month. Thus, the Secretary‘s grant of P2,200.00 monthly wage increase in the assailed order is unreasonably high a burden for MERALCO to shoulder.
We now go to the economic issues.
1. CHRISTMAS BONUS
MERALCO questions the Secretary‘s award of ―Christmas bonuses‖ on the ground that what it had given its employees were special bonuses to mark or celebrate ―special occasions,‖ such as when the Asia Money Magazine recognized MERALCO as the ―best managed company in Asia.‖ These grants were given on or about Christmas time, and the timing of the grant apparently led the Secretary to the conclusion that what were given were Christmas bonuses given by way of a ―company practice‖ on top of the legally required 13th month pay.
The Secretary in granting the two-month bonus, considered the following factual finding, to wit:
―We note that each of the grant mentioned in the commonly adopted table of grants has a special description. Christmas bonuses were given in 1988 and 1989. However, the amounts of bonuses given differed. In 1988, it was P1,500. In 1989, it was ½ month salary. The use of ―Christmas bonus‖ title stopped after 1989. In 1990, what was given was a ―cash gift‖ of ½ month‘s salary. The grants thereafter bore different titles and were for varying amounts. Significantly, the Company explained the reason for the 1995 bonuses and this explanation was not substantially contradicted by the Union.
―What comes out from all these is that while the Company has consistently given some amount by way of bonuses since 1988, these awards were not given uniformly as Christmas bonuses or special Christmas grants although they may have been given at or about Christmas time.
― x x x x x x x x x
―The Company is not therefore correct in its position that there is not established practice of giving Christmas bonuses that has ripened to the status of being a term and condition of employment. Regardless of its nomenclature and purpose, the act of giving this bonus in the spirit of Christmas has ripened into a Company practice.‖[28]
It is MERALCO‘s position that the Secretary erred when he recognized that there was an ―established practice‖ of giving a two-month Christmas bonus based on the fact that bonuses were given on or about Christmas time. It points out that the ―established practice‖ attributed to MERALCO was neither for a considerable period of time nor identical in either amount or purpose. The purpose and title of the grants were never the same except for the Christmas bonuses of 1988 and 1989, and were not in the same amounts.
We do not agree.
As a rule, a bonus is not a demandable and enforceable obligation;[29] it may nevertheless be granted on equitable consideration[30] as when the giving of such bonus has been the company‘s long and regular practice.[31] To be considered a ―regular practice,‖ the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate.[32] Thus we have ruled in National Sugar Refineries Corporation vs. NLRC:[33]
―The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.‖
In the case at bar, the record shows the MERALCO, aside from complying with the regular 13th month bonus, has further been giving its employees an additional Christmas bonus at the tail-end of the year since 1988. While the special bonuses differed in amount and bore different titles, it can not be denied that these were given voluntarily and continuously on or about Christmas time. The considerable length of time MERALCO has been giving the special grants to its employees indicates a unilateral and voluntary act on its part, to continue giving said benefits knowing that such act was not required by law.
Indeed, a company practice favorable to the employees has been established and the payments made by MERALCO pursuant thereto ripened into benefits enjoyed by the employees. Consequently, the giving of the special bonus can no longer be withdrawn by the company as this would amount to a diminution of the employee‘s existing benefits.[34]
We can not, however, affirm the Secretary‘s award of a two-month special Christmas bonus to the employees since there was no recognized company practice of giving a two-month special grant. The two-month special bonus was given only in 1995 in recognition of the employees‘ prompt and efficient response during the calamities. Instead, a one-month special bonus, We believe, is sufficient, this being merely a generous act on the part of MERALCO.
2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES
It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice subsidy and medical benefits of MERALCO retirees. This ruling was reconsidered based on the position that retirees are no longer employees of the company and therefore are no longer bargaining members who can benefit from a compulsory arbitration award. The Secretary, however, ruled that all members of the bargaining unit who retire between August 19, 1996 and November 30, 1997 (i.e., the term of the disputed CBA under the Secretary‘s disputed orders) are entitled to receive an additional rice subsidy.
The question squarely brought in this petition is whether the Secretary can issue an order that binds the retirement fund. The company alleges that a separate and independent trust fund is the source of retirement benefits for MERALCO retirees, while the union maintains that MERALCO controls these funds and may therefore be compelled to improve this benefit in an arbitral award.
The issue requires a finding of fact on the legal personality of the retirement fund. In the absence of any evidence on record indicating the nature of the retirement fund‘s legal personality, we rule that the issue should be remanded to the Secretary for reception of evidence as whether or not the MERALCO retirement fund is a separate and independent trust fund. The existence of a separate and independent juridical entity which controls an irrevocable retirement trust fund means that these retirement funds are beyond the scope of collective bargaining: they are administered by an entity not a party to the collective bargaining and the funds may not be touched without the trustee‘s conformity.
On the other hand, MERALCO control over these funds means that MERALCO may be compelled in the compulsory arbitration of a CBA deadlock where it is the employer, to improve retirement benefits since retirement is a term or condition of employment that is a mandatory subject of bargaining.
3. EMPLOYEES‘ COOPERATIVE
The Secretary‘s disputed ruling requires MERALCO to provide the employees covered by the bargaining unit with a loan of 1.5 Million as seed money for the employees formation of a cooperative under the Cooperative Law, R.A. 6938. We see nothing in this law - whether expressed or implied - that requires employers to provide funds, by loan or otherwise, that employees can use to form a cooperative. The formation of a cooperative is a purely voluntary act under this law, and no party in any context or relationship is required by law to set up a cooperative or to provide the funds therefor. In the absence of such legal requirement, the Secretary has no basis to order the grant of a 1.5 million loan to MERALCO employees for the formation of a cooperative. Furthermore, we do not see the formation of an employees cooperative, in the absence of an agreement by the collective bargaining parties that this is a bargainable term or condition of employment, to be a term or condition of employment that can be imposed on the parties on compulsory arbitration.
4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN
MERALCO contends that it is not bound to bargain on these benefits because these do not relate to ―wages, hours of work and other terms and conditions of employment‖ hence, the denial of these demands cannot result in a bargaining impasse.
The GHSIP, HMP benefits for dependents and the housing equity loan have been the subject of bargaining and arbitral awards in the past. We do not see any reason why MERALCO should not now bargain on these benefits. Thus, we agree with the Secretary‘s ruling:
―x x x Additionally and more importantly, GHSIP and HMP, aside from being contributory plans, have been the subject of previous rulings from this Office as bargainable matters. At this point, we cannot do any less and must recognize that GHSIP and HMP are matters where the union can demand and negotiate for improvements within the framework of the collective bargaining system.‖[35]
Moreover, MERALCO have long been extending these benefits to the employees and their dependents that they now become part of the terms and conditions of employment. In fact, MERALCO even pledged to continue giving these benefits. Hence, these benefits should be incorporated in the new CBA.
With regard to the increase of the housing equity grant, we find P60,000.00 reasonable considering the prevailing economic crisis.
5. SIGNING BONUS
On the signing bonus issue, we agree with the positions commonly taken by MERALCO and by the Office of the Solicitor General that the signing bonus is a grant motivated by the goodwill generated when a CBA is successfully negotiated and signed between the employer and the union. In the present case, this goodwill does not exist. In the words of the Solicitor General:
―When negotiations for the last two years of the 1992-1997 CBA broke down and the parties sought the assistance of the NCMB, but which failed to reconcile their differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and respondent union disappeared. xxx.‖[36]
In contractual terms, a signing bonus is justified by and is the consideration paid for the goodwill that existed in the negotiations that culminated in the signing of a CBA. Without the goodwill, the payment of a signing bonus cannot be justified and any order for such payment, to our mind, constitutes grave abuse of discretion. This is more so where the signing bonus is in the not insignificant total amount of P16 Million.
6. RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic salary, that is granted by the company to an employee who is promoted to a higher position grade but whose actual basic salary at the time of the promotion already exceeds the maximum salary for the position to which he or she is promoted. As an allowance, it applies only to specifics individuals whose salary levels are unique with respect to their new and higher positions. It is for these reasons that MERALCO prays that it be allowed to maintain the RCR allowance as a separate benefit and not be integrated in the basic salary.
The integration of the RCR allowance in the basic salary of the employees had consistently been raised in the past CBAs (1989 and 1992) and in those cases, the Secretary decreed the integration of the RCR allowance in the basic salary. We do not see any reason why it should not be included in the present CBA. In fact, in the 1995 CBA between MERALCO and the supervisory union (FLAMES), the integration of the RCR allowance was recognized. Thus, Sec. 4 of the CBA provides:
―All Red-Circle-Rate Allowance as of December 1, 1995 shall be integrated in the basic salary of the covered employees who as of such date are receiving such allowance. Thereafter, the company rules on RCR allowance shall continue to be observed/applied.‖[37]
For purposes of uniformity, we affirm the Secretary‘s order on the integration of the RCR allowance in the basic salary of the employees.
7. SICK LEAVE RESERVE OF 15 DAYS
MERALCO assails the Secretary‘s reduction of the sick leave reserve benefit from 25 days to 15 days, contending that the sick leave reserve of 15 days has reached the lowest safe level that should be maintained to give employees sufficient buffer in the event they fall ill.
We find no compelling reason to deviate from the Secretary‘s ruling that the sick leave reserve is reduced to 15 days, with any excess convertible to cash at the end of the year. The employee has the option to avail of this cash conversion or to accumulate his sick leave credits up to 25 days for conversion to cash at his retirement or separation from the service. This arrangement is, in fact, beneficial to MERALCO. The latter admits that ―the diminution of this reserve does not seriously affect MERALCO because whatever is in reserve are sick leave credits that are payable to the employee upon separation from service. In fact, it may be to MERALCO‘s financial interest to pay these leave credits now under present salary levels than pay them at future higher salary levels.‖[38]
8. 40-DAY UNION LEAVE
MERALCO objects to the demand increase in union leave because the union leave granted to the union is already substantial. It argues that the union has not demonstrated any real need for additional union leave.
The thirty (30) days union leave granted by the Secretary, to our mind, constitute sufficient time within which the union can carry out its union activities such as but not limited to the election of union officers, selection or election of appropriate bargaining agents, conduct referendum on union matters and other union-related matters in furtherance of union objectives. Furthermore, the union already enjoys a special union leave with pay for union authorized representatives to attend work education seminars, meetings, conventions and conferences where union representation is required or necessary, and Paid-Time-off for union officers, stewards and representatives for purpose of handling or processing grievances.
9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE
MERALCO argues that there is no justification for the increase of these allowances. The personnel concerned will not receive any additional risk during the life of the current CBA that would justify the increase demanded by the union. In the absence of such risk, then these personnel deserve only the same salary increase that all other members of the bargaining unit will get as a result of the disputed CBA. MERALCO likewise assails the grant of the high voltage/high pole allowance to members of the team who are not exposed to the high voltage/high pole risks. The risks that justify the higher salary and the added allowance are personal to those who are exposed to those risks. They are not granted to a team because some members of the team are exposed to the given risks.
The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole allowance (from P30.00 to P40.00), and towing allowance is justified considering the heavy risk the employees concerned are exposed to. The high-voltage allowance is granted to an employee who is authorized by the company to actually perform work on or near energized bare lines and bus, while the high-pole allowance is given to those authorized to climb poles on a height of at least 60 feet from the ground to work thereat. The towing allowance, on the other hand, is granted to the stockman drivers who tow trailers with long poles and equipment on board. Based on the nature of the job of these concerned employees, it is imperative to give them these additional allowances for taking additional risks. These increases are not even commensurate to the danger the employees concerned are subjected to. Besides, no increase has been given by the company since 1992.[39]
We do not, however, subscribe to the Secretary‘s order granting these allowances to the members of the team who are not exposed to the given risks. The reason is obvious- no risk, no pay. To award them the said allowances would be manifestly unfair for the company and even to those who are exposed to the risks, as well as to the other members of the bargaining unit who do not receive the said allowances.
10. BENEFITS FOR COLLECTORS
MERALCO opposes the Secretary‘s grant of benefits for collectors on the ground that this is grossly unreasonable both in scope and on the premise it is founded.
We have considered the arguments of the opposing parties regarding these benefits and find the Secretary‘s ruling on the (a) lunch allowance; (b) disconnection fee for delinquent accounts; (c) voluntary performance of other work at the instance of the Company; (d) bobcat belt bags; and (e) reduction of quota and MAPL during typhoons and other force majeure events, reasonable considering the risks taken by the company personnel involved, the nature of the employees‘ functions and responsibilities and the prevailing standard of living. We do not however subscribe to the Secretary‘s award on the following:
(a) Reduction of quota and MAPL when the collector is on sick leave because the previous CBA has already provided for a reduction of this demand. There is no need to further reduce this.
(b) Deposit of cash bond at MESALA because this is no longer necessary in view of the fact that collectors are no longer required to post a bond.
We shall now resolve the non-economic issues.
1. SCOPE OF THE BARGAINING UNIT
The Secretary‘s ruling on this issue states that:
―a. Scope of the collective bargaining unit. The union is demanding that the collective bargaining unit shall be composed of all regular rank and file employees hired by the company in all its offices and operating centers through its franchise and those it may employ by reason of expansion, reorganization or as a result of operational exigencies. The law is that only managerial employees are excluded from any collective bargaining unit and supervisors are now allowed to form their own union (Art. 254 of the Labor Code as amended by R.A. 6715). We grant the union demand.‖
Both MERALCO and the Office of the Solicitor General dispute this ruling because if disregards the rule We have established on the exclusion of confidential employee from the rank and file bargaining unit.
In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores Union,[40] we ruled that:
―Put another way, the confidential employee does not share in the same ―community of interest‖ that might otherwise make him eligible to join his rank and file co-workers, precisely because of a conflict in those interests.‖
Thus, in Metrolab Industries vs. Roldan-Confesor,[41] We ruled:
―……..that the Secretary‘s order should exclude the confidential employees from the regular rank and file employees qualified to become members of the MEWA bargaining unit.‖
From the foregoing disquisition, it is clear that employees holding a confidential position are prohibited from joining the union of the rank and file employees.
2. ISSUE OF UNION SECURITY
The Secretary in his Order of August 19, 1996,[42] ruled that:
―b. Union recognition and security. The union is proposing that it be recognized by the Company as sole and exclusive bargaining representative of the rank and file employees included in the bargaining unit for the purpose of collective bargaining regarding rates of pay, wages, hours of work and other terms and conditions of employment. For this reason, the Company shall agree to meet only with the Union officers and its authorized representatives on all matters involving the Union as an organization and all issues arising from the implementation and interpretation of the new CBA. Towards this end, the Company shall not entertain any individual or group of individuals on matters within the exclusive domain of the Union.
Additionally, the Union is demanding that the right of all rank and file employees to join the Union shall be recognized by the Company. Accordingly, all rank and file employees shall join the union.
x x x x x x x x x
These demands are fairly reasonable. We grant the same in accordance with the maintenance of membership principle as a form of union security."
The Secretary reconsidered this portion of his original order when he said in his December 28, 1996 order that:
―x x x. when we decreed that all rank and file employees shall join the Union, we were actually decreeing the incorporation of a closed shop form of union security in the CBA between the parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme Court ruled that a CBA provision for a closed shop is a valid form of union security and is not a restriction on the right or freedom of association guaranteed by the Constitution, citing Lirag v. Blanco, 109 SCRA 87.‖
MERALCO objected to this ruling on the grounds that: (a) it was never questioned by the parties; (b) there is no evidence presented that would justify the restriction on employee's union membership; and (c) the Secretary cannot rule on the union security demand because this is not a mandatory subject for collective bargaining agreement.
We agree with MERALCO‘s contention.
An examination of the records of the case shows that the union did not ask for a closed shop security regime; the Secretary in the first instance expressly stated that a maintenance of membership clause should govern; neither MERALCO nor MEWA raised the issue of union security in their respective motions for reconsideration of the Secretary‘s first disputed order; and that despite the parties clear acceptance of the Secretary‘s first ruling, the Secretary motu proprio reconsidered his maintenance of membership ruling in favor of the more stringent union shop regime.
Under these circumstances, it is indubitably clear that the Secretary gravely abused his discretion when he ordered a union shop in his order of December 28, 1996. The distinctions between a maintenance of membership regime from a closed shop and their consequences in the relationship between the union and the company are well established and need no further elaboration.
Consequently, We rule that the maintenance of membership regime should govern at MERALCO in accordance with the Secretary‘s order of August 19, 1996 which neither party disputed.
3. THE CONTRACTING OUT ISSUE
This issue is limited to the validity of the requirement that the union be consulted before the implementation of any contracting out that would last for 6 months or more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs Bersamina,[43] (where we recognized that contracting out of work is a proprietary right of the employer in the exercise of an inherent management prerogative) the issue we see is whether the Secretary‘s consultation requirement is reasonable or unduly restrictive of the company‘s management prerogative. We note that the Secretary himself has considered that management should not be hampered in the operations of its business when he said that:
‗We feel that the limitations imposed by the union advocates are too specific and may not be applicable to the situations that the company and the union may face in the future. To our mind, the greater risk with this type of limitation is that it will tend to curtail rather than allow the business growth that the company and the union must aspire for. Hence, we are for the general limitations we have stated above because they will allow a calibrated response to specific future situations the company and the union may face.‖[44]
Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal limitations. As we have previously held, the company can determine in its best business judgment whether it should contract out the performance of some of its work for as long as the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or must not have been the result of malicious or arbitrary action.[45] The Labor Code and its implementing rules also contain specific rules governing contracting out (Department of Labor Order No. 10, May 30, 1997, Sections. 1-25).
Given these realities, we recognize that a balance already exist in the parties‘ relationship with respect to contracting out; MERALCO has its legally defined and protected management prerogatives while workers are guaranteed their own protection through specific labor provisions and the recognition of limits to the exercise of management prerogatives. From these premises, we can only conclude that the Secretary‘s added requirement only introduces an imbalance in the parties‘ collective bargaining relationship on a matter that the law already sufficiently regulates. Hence, we rule that the Secretary‘s added requirement, being unreasonable, restrictive and potentially disruptive should be struck down.
4. UNION REPRESENTATION IN COMMITTEES
As regards this issue, We quote with approval the holding of the Secretary in his Order of December 28, 1996, to wit:
―We see no convincing reason to modify our original Order on union representation in committees. It reiterates what the Article 211 (A)(g) of the Labor Codes provides: ―To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare. ‗Denying this opportunity to the Union is to lay the claim that only management has the monopoly of ideas that may improve management strategies in enhancing the Company‘s growth. What every company should remember is that there might be one among the Union members who may offer productive and viable ideas on expanding the Company‘s business horizons. The union‘s participation in such committees might just be the opportune time for dormant ideas to come forward. So, the Company must welcome this development (see also PAL v. NLRC, et. al., G.R. 85985, August 13, 1995). It must be understood, however, that the committees referred to here are the Safety Committee, the Uniform Committee and other committees of a similar nature and purpose involving personnel welfare, rights and benefits as well as duties.‖
We do not find merit in MERALCO‘s contention that the above-quoted ruling of the Secretary is an intrusion into the management prerogatives of MERALCO. It is worthwhile to note that all the Union demands and what the Secretary‘s order granted is that the Union be allowed to participate in policy formulation and decision-making process on matters affecting the Union member‘s right, duties and welfare as required in Article 211 (A)(g) of the Labor Code. And this can only be done when the Union is allowed to have representatives in the Safety Committee, Uniform Committee and other committees of a similar nature. Certainly, such participation by the Union in the said committees is not in the nature of a co-management control of the business of MERALCO. What is granted by the Secretary is participation and representation. Thus, there is no impairment of management prerogatives.
5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA
MERALCO also decries the Secretary‘s ruling in both the assailed Orders that-
―All other benefits being enjoyed by the company‘s employees but which are not expressly or impliedly repealed in this new agreement shall remain subsisting and shall likewise be included in the new collective bargaining agreement to be signed by the parties effective December 1, 1995.‖[46] claiming that the above-quoted ruling intruded into the employer‘s freedom to contract by ordering the inclusion in the new CBA all other benefits presently enjoyed by the employees even if they are not incorporated in the new CBA. This matter of inclusion, MERALCO argues, was never discussed and agreed upon in the negotiations; nor presented as issues before the Secretary; nor were part of the previous CBA‘s between the parties.
We agree with MERALCO.
The Secretary acted in excess of the discretion allowed him by law when he ordered the inclusion of benefits, terms and conditions that the law and the parties did not intend to be reflected in their CBA.
To avoid the possible problems that the disputed orders may bring, we are constrained to rule that only the terms and conditions already existing in the current CBA and was granted by the Secretary (subject to the modifications decreed in this decision) should be incorporated in the CBA, and that the Secretary‘s disputed orders should accordingly be modified.
6. RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretary‘s order that the effectivity of the new CBA shall retroact to December 1, 1995, the date of the commencement of the last two years of the effectivity of the existing CBA. This retroactive date, MERALCO argues, is contrary to the ruling of this Court in Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan-Confessor[47] which mandates that the effective date of the new CBA should be the date the Secretary of Labor has resolved the labor disputes.
On the other hand, MEWA supports the ruling of the Secretary on the theory that he has plenary power and discretion to fix the date of effectivity of his arbitral award citing our ruling in St. Lukes Medical Center, Inc. vs. Torres.[48] MEWA also contends that if the arbitral award takes effect on the date of the Secretary Labor‘s ruling on the parties‘ motion for reconsideration (i.e., on December 28, 1996), an anomaly situation will result when CBA would be more than the 5- year term mandated by Article 253-A of the Labor Code.
However, neither party took into account the factors necessary for a proper resolution of this aspect. Pier 8, for instance, does not involve a mid-term negotiation similar to this case, while St. Lukes does not take the ―hold over‖ principle into account, i.e., the rule that although a CBA has expired, it continues to have legal effects as between the parties until a new CBA has been entered into.[49]
Article 253-A serves as the guide in determining when the effectivity of the CBA at bar is to take effect. It provides that the representation aspect of the CBA is to be for a term of 5 years, while
―x x x [A]ll other provisions of the Collective Bargaining Agreement shall be re-negotiated not later than 3 years after its execution. Any agreement on such other provisions of the Collective Bargaining Agreement entered into within 6 months from the date of expiry of the term of such other provisions as fixed in such Collective Bargaining Agreement shall retroact to the day immediately following such date. If such agreement is entered into beyond 6 months, the parties shall agree on the duration of the effectivity thereof. x x x.‖
Under these terms, it is clear that the 5-year term requirement is specific to the representation aspect. What the law additionally requires is that a CBA must be re-negotiated within 3 years ―after its execution.‖ It is in this re-negotiation that gives rise to the present CBA deadlock.
If no agreement is reached within 6 months from the expiry date of the 3 years that follow the CBA execution, the law expressly gives the parties - not anybody else - the discretion to fix the effectivity of the agreement.
Significantly, the law does not specifically cover the situation where 6 months have elapsed but no agreement has been reached with respect to effectivity. In this eventuality, we hold that any provision of law should then apply for the law abhors a vacuum.[50]
One such provision is the principle of hold over, i.e., that in the absence of a new CBA, the parties must maintain the status quo and must continue in full force and effect the terms and conditions of the existing agreement until a new agreement is reached.[51] In this manner, the law prevents the existence of a gap in the relationship between the collective bargaining parties. Another legal principle that should apply is that in the absence of an agreement between the parties, then, an arbitrated CBA takes on the nature of any judicial or quasi-judicial award; it operates and may be executed only respectively unless there are legal justifications for its retroactive application.
Consequently, we find no sufficient legal ground on the other justification for the retroactive application of the disputed CBA, and therefore hold that the CBA should be effective for a term of 2 years counted from December 28, 1996 (the date of the Secretary of Labor‘s disputed order on the parties‘ motion for reconsideration) up to December 27, 1999.
WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a Collective Bargaining Agreement incorporating the terms and conditions contained in the unaffected portions of the Secretary of Labor‘s order of August 19, 1996 and December 28, 1996, and the modifications set forth above. The retirement fund issue is remanded to the Secretary of Labor for reception of evidence and determination of the legal personality of the MERALCO retirement fund.
SO ORDERED. Davide, Jr., C.J. (Chairman), Melo, Kapunan, and Pardo, JJ., concur. G.R. No. 146408 February 29, 2008
(24)PHILIPPINE AIRLINES, INC., petitioner, vs. ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN BENTUZAL, respondents.
D E C I S I O N
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo and other related services to and from [petitioner]'s aircraft at the Mactan Station."2
The Agreement specified the following "Scope of Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and delivery materials, facilities, supplies, equipment and tools for the satisfactory performance and execution of the following services (the Work): a. Loading and unloading of baggage and cargo to and from the aircraft; b. Delivering of baggage from the ramp to the baggage claim area; c. Picking up of baggage from the baggage sorting area to the designated parked aircraft; d. Delivering of cargo unloaded from the flight to cargo terminal; e. Other related jobs (but not janitorial functions) as may be required and necessary;
CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at Mactan Station, to wit: a. Ramp Area b. Baggage Claim Area c. Cargo Terminal Area, and d. Baggage Sorting Area3 (Underscoring supplied)
And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."4
On the duration of the Agreement, Section 10 thereof provided:
10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be unsatisfactory, it shall notify CONTRACTOR who shall have fifteen (15) days from such notice within which to improve the services. If CONTRACTOR fails to improve the services under this Agreement according to OWNER'S specifications and standards, OWNER shall have the right to terminate this Agreement immediately and without advance notice.
10.2 Should CONTRACTOR fail to improve the services within the period stated above or should CONTRACTOR breach the terms of this Agreement and fail or refuse to perform the Work in such a manner as will be consistent with the achievement of the result therein contracted for or in any other way fail to comply strictly with any terms of this Agreement, OWNER at its option, shall have the right to terminate this Agreement and to make other arrangements for having said Work performed and pursuant thereto shall retain so much of the money held on the Agreement as is necessary to cover the OWNER's costs and damages, without prejudice to the right of OWNER to seek resort to the bond furnished by CONTRACTOR should the money in OWNER's possession be insufficient. x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have been assigned by Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their respective officials for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service incentive leave pay, 13th month pay and allowances, and for regularization of employment status with petitioner, they claiming to be "performing duties for the benefit of [petitioner] since their job is directly connected with [its] business x x x."5
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and reinstatement with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents' complaint for regularization against petitioner, but granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
(1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein their 13th month pay and service incentive leave benefits; x x x x
(3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the amount of P5,000.00.
The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are computed in detail by our Fiscal Examiner which computation is hereto attached to form part of this decision.
The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by Decision9 of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE and judgment is hereby rendered:
1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, . . . and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the Collective Bargaining Agreement subsisting during the period of their employment; x x x x
4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his reinstatement as helper or utility man with respondent Philippine Airlines, with full backwages, allowances and other benefits and privileges from the time of his dismissal up to his actual reinstatement; and
5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit.10 (Emphasis and underscoring supplied)
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.
By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which was promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.12 Petitioner's motion for reconsideration having been denied by Resolution of December 21, 2000,13 the present petition was filed, faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.14 (Underscoring supplied)
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the case.15
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy effective June 30, 199816 as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, AND the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are [sic] present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. (Emphasis, underscoring and capitalization supplied)
"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the Department Order as follows:
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents - loading and unloading of baggage and cargo of passengers - is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner.17
Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.18 Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully subscribed and paid for.19 The corporation's status as independent contractor had in fact been previously confirmed in an earlier case20 by this Court which found it to be serving, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has substantial capital, but there is no showing in the records as to how much is that capital. Neither had respondents shown that SYNERGY has such substantial capital. x x x21 (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial statements, e.g., balance sheets, statements of income and retained earnings, marked as "Annexes 'A' - 'A-4.'"22
More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing identical work.23 As San Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25 teach, such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal, OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. (Emphasis and CAPITALIZATION supplied)
Even if only one of the two elements is present then, there is labor-only contracting.
The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules (Department Order No. 10, Series of 1997),26 echoes the prevailing jurisprudential trend27 elevating such element as a primary determinant of employer-employee relationship in job contracting agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.28
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.
Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and delivery Work as well as provide all equipment, loading, unloading and delivery equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the latter with information regarding the qualifications of the former's workers, to prove their capability and experience. Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed to perform the services hereunder without OWNER'S permission.29 (Underscoring partly in the original and partly supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane arrivals.30 And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.31
Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.32
The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the case33 which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had been working as utility man/helper since November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance with procedural due process. Petitioner's claim that he abandoned his work does not persuade.35 The elements of abandonment being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts,36 the onus probandi lies with petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment, should be entitled to salary differential37 from the time he rendered one year of service until his dismissal, reinstatement plus backwages until the finality of this decision.38 In view, however, of the long period of time39 that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for each year of service, in lieu of reinstatement.40
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its regular employees and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5, 1998.41 Hence, there are no available positions where respondents could be placed.
And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy."42
Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals.43 Further, the notice of termination in 1998 was in disregard of a subsisting temporary restraining order44 to preserve the status quo, issued by this Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed decision, respondents are deemed to be continuously employed by petitioner, for purposes of computing the wages and benefits due respondents.
Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially equivalent positions, and pay the wages and benefits due them as regular employees plus salary differential corresponding to the difference between the wages and benefits given them and those granted to petitioner's other regular employees of the same rank; and
(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal until the finality of this decision; and separation pay, in lieu of reinstatement, equivalent to one (1) month pay for every year of service until the finality of this decision.
There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose.
SO ORDERED.
CONCHITA CARPIO MORALES Associate Justice WE CONCUR: *LEONARDO A. QUISUMBING Associate Justice Chairperson **ANTONIO T. CARPIO Associate Justice Acting Chairperson ***ADOLFO S. AZCUNA Associate Justice DANTE O. TINGA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO Associate Justice Acting Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson's Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.
REYNATO S. PUNO Chief Justice
G.R. No. 160854 March 3, 2006
(25)BIG AA MANUFACTURER, Petitioner, vs. EUTIQUIO ANTONIO, JAY ANTONIO, FELICISIMO ANTONIO, and LEONARDO ANTONIO, SR.,* Respondents.
D E C I S I O N
QUISUMBING, J:
For review on certiorari is the Decision1dated April 11, 2003 of the Court of Appeals in CA- G.R. SP No. 70363 affirming the decision2of the National Labor Relations Commission (NLRC). The NLRC had modified the Labor Arbiter‘s decision3ordering petitioner to reinstate respondents to their former positions or to pay them separation pay in case reinstatement was no longer possible, with full backwages in either case. Also assailed is the appellate court‘s Resolution4dated November 17, 2003, denying the motion for reconsideration.
The instant petition arose from the following factual antecedents:
Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo,5with office address at 311 Barrio Santol, Balagtas, Bulacan.
On January 13, 2000, herein respondents Eutiquio Antonio,6Jay Antonio, Felicisimo Antonio, Leonardo Antonio, Sr. and Roberto Fabian filed a complaint for illegal lay-off and illegal deductions before the NLRC‘s Regional Arbitration Branch No. III. They claimed that they were dismissed on January 11, 2000 and sought separation pay from petitioner.
When amicable settlement during the mandatory conference failed, the parties were required to file their position papers. The Labor Arbiter did not dismiss the complaint with respect to Roberto Fabian, despite his failure to file a position paper. Neither did the Labor Arbiter‘s decision concern Roberto Fabian. Hence, this petition shall apply only to Eutiquio, Jay, Felicisimo, and Leonardo, Sr., all surnamed Antonio, the respondents herein.
In respondents‘ position paper,7they alleged that as regular employees, they worked from 8:00 a.m. to 5:00 p.m. at petitioner‘s premises using petitioner‘s tools and equipment and they received P250 per day. Eutiquio was employed as carpenter-foreman from 1991-1999; Jay as carpenter from 1993-1999; Felicisimo as carpenter from 1994-1999; and Leonardo, Sr. also as carpenter from 1997-1999. According to respondents, they were dismissed without just cause and due process; hence, their prayer for reinstatement and full backwages. They also impleaded one Hermie Alejo, a relative of the petitioner‘s owner, as co-respondent in their complaint.
On the other hand, in its position paper, petitioner Big AA Manufacturer,8affirmed it is a sole proprietorship registered in the name of Enrico Alejo and engaged in manufacturing office furniture, but it denied that respondents were its regular employees. Instead, petitioner claimed that Eutiquio Antonio was one of its independent contractors who used the services of the other respondents. According to petitioner, its independent contractors were paid by results and were responsible for the salaries of their own workers. Allegedly, there was no employer-employee relationship between petitioner and respondents. However, petitioner stated it allowed respondents to use its facilities to meet job orders.
Petitioner also denied that respondents were laid-off by Big AA Manufacturer, since they were project employees only. It added that since Eutiquio Antonio had refused a job order of office tables, their contractual relationship ended. Petitioner surmised that Eutiquio resented the January 10, 2000 Implementing Guidelines it issued to improve efficiency and performance.
In their Reply9to petitioner‘s position paper, respondents stated that Enrico Alejo should be impleaded as a proper or indispensable party as sole proprietor of Big AA. They also pointed out that petitioner‘s payroll shows that Eutiquio Antonio was assigned in its carpentry section and obtained "vales" (advances on salaries) on various dates. The Implementing Guidelines and written warnings addressed to Eutiquio Antonio also prove that respondents were under petitioner‘s control and supervision.
In its own Reply10to respondents‘ position paper, petitioner labeled as fabricated the respondents‘ allegations. It presented additional evidence such as the bio-data of Eutiquio and Jay to disprove their claim that they worked with petitioner from 1991 and 1993, respectively. It also said that the claim that respondents received P250 per day based on its payroll was speculative. While petitioner admitted that respondents were issued identification cards to gain access to company premises to obtain raw materials, it denied that respondents worked from 8:00 a.m. to 5:00 p.m. It stated that respondents do not even have daily time records.
On June 1, 2000, the Labor Arbiter rendered a decision ordering "BIG-AA MANUFACTURERS II, ET AL." to pay respondents P136,500 as separation pay, and P121,160 as backwages. It was unclear concerning Enrico Alejo‘s liability as the sole proprietor of Big AA. The Labor Arbiter ruled that respondents were regular employees because their work as carpenters was necessary and desirable in petitioner‘s business. Since Eutiquio worked in petitioner‘s premises and was without substantial capital or investment in the form of tools, equipment, machinery or work premises, the Labor Arbiter held that Eutiquio was not an independent contractor. Noting the absence of contracts providing the duration of respondents‘ employment and of reports of project completion to the Department of Labor and Employment (DOLE), the Labor Arbiter also rejected petitioner‘s allegation that respondents were project employees. The Labor Arbiter further held that respondents were constructively dismissed when the Implementing Guidelines changed their status from regular employees to project employees.
Both parties appealed to the NLRC. Petitioner claimed that the Labor Arbiter committed errors in his findings of facts. It also prayed that (1) Eutiquio Antonio be declared a labor-only contractor; (2) Hermie Alejo be dropped from the case; (3) respondents be ordered to report back to work; and (4) the respondents‘ claim for separation pay and backwages be dismissed.
Respondents, on the other hand, assailed the Labor Arbiter‘s decision for not ordering their reinstatement to their former positions.
The NLRC modified the Labor Arbiter‘s decision. It ordered petitioner to reinstate respondents to their former positions or to pay them separation pay in case reinstatement was no longer feasible, with full backwages in either case. It also dropped Hermie Alejo as a party to the case for he may not be held personally liable with petitioner to satisfy the judgment in favor of respondents.11The NLRC ruled that respondents were regular employees, not independent contractors. It further held that petitioner failed to justify its reason for terminating respondents and its failure to comply with the due process requirements.
Upon denial of the parties‘ motions for reconsideration, petitioner filed a petition for certiorari before the Court of Appeals, which dismissed the petition but affirmed the NLRC decision.
Hence, this petition with prayer for Temporary Restraining Order (TRO). On December 12, 2003, we issued a TRO enjoining the Court of Appeals, NLRC, Labor Arbiter and respondents from implementing the appellate court‘s Decision and Resolution.12
Before this Court, petitioner claims that the Court of Appeals erred in,
(a) ...finding that respondents are regular employees of petitioner,
(B) …finding that respondents were illegally dismissed by petitioner and
(C) …order[ing] petitioner to reinstate respondents [to their former positions with full backwages] without loss of seniority rights and should reinstatement not be feasible, to pay respondents separation pay.13(Emphasis supplied).
In effect, petitioner prays that we resolve the following issues: Are respondents regular employees of petitioner? Did they abandon their work? Were they illegally dismissed by petitioner? If so, what benefits, if any, are due them?
Petitioner contends that employment for more than one year and "performing carpentry works that were necessary and desirable" in petitioner‘s usual trade and business are "not controlling" factors in determining whether respondents are regular employees. Petitioner argues that Article 28014of the Labor Code and the "circumstances which attended the relationship between" the parties, must be considered. The circumstances of the case, according to petitioner, show that respondents were not its regular employees. Specifically, petitioner Eutiquio was an independent businessman and was contracted to render particular job orders using his own methods and style. Further, Eutiquio hired his own workers and used his own house as his factory and work premises where he kept his own tools, equipment and materials.15
Respondents point out that petitioner had offered inconsistent arguments. They note that before the Labor Arbiter, petitioner argued that Eutiquio was an independent contractor. In its appeal and motion for reconsideration before the NLRC, petitioner prayed that Eutiquio be declared a labor-only contractor. In this petition, it alleges that Eutiquio is an independent businessman. Respondents insist that they are petitioner‘s regular employees and that their job is necessary and desirable to its main business and day-to-day operations.
At the outset, it should be stressed that whether respondents are regular employees or project employees or independent contractors is a question of fact.16The unanimous finding of the Labor Arbiter, NLRC, and Court of Appeals that respondents were petitioner‘s regular employees, not independent contractors, binds this Court. Under Rule 45 of the Rules of Court, our jurisdiction is limited to questions of law. Notably, petitioner not only urges us to reexamine the evidence presented below but to consider evidence not presented before the Labor Arbiter. This practice of submitting evidence late is properly rejected as it defeats the speedy administration of justice involving poor workers. It is also unfair.17
Besides, petitioner is barred from raising its new theory that Eutiquio is an independent businessman who uses his own house as his factory. We consistently rejected this pernicious practice of shifting to a new theory on appeal in the hope of a favorable result. Fair play, justice and due process require that as a rule new matters cannot be raised for the first time before an appellate tribunal.18
Moreover, petitioner‘s inconsistent arguments reflect its lack of candor and its attempt to confuse the issues in this case to defeat respondents‘ claims. Before us, petitioner even admits that "respondents worked within" its premises "for purposes of convenience especially so since the tools and materials necessary for the job belonged to" it.19Recall also its position before the Labor Arbiter that it allowed respondents to use its facilities for the "proper implementation" of job orders.
Worse, petitioner first argued that Eutiquio is an independent contractor and that respondents are project employees, only to pray later that Eutiquio should be declared a labor-only contractor. It is also surprising how petitioner could argue that respondents are not its employees, in view of its prayer before the NLRC that respondents be ordered to report back to work. And after the NLRC ruled that respondents should be reinstated, it petitioned the Court of Appeals to dismiss respondents‘ complaint.
Considering the submission of the parties, we are constrained to agree with the unanimous ruling of the Court of Appeals, NLRC and Labor Arbiter that respondents are petitioner‘s regular employees. Respondents were employed for more than one year and their work as carpenters was necessary or desirable in petitioner‘s usual trade or business of manufacturing office furniture. Under Article 280 of the Labor Code, the applicable test to determine whether an employment should be considered regular or non-regular is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer.20
True, certain forms of employment require the performance of usual or desirable functions and exceed one year but do not necessarily result to regular employment under Article 280 of the Labor Code.21Some specific exceptions include project or seasonal employment. Yet, in this case, respondents cannot be considered project employees. Petitioner had neither shown that respondents were hired for a specific project the duration of which was determined at the time of their hiring nor identified the specific project or phase thereof for which respondents were hired.
We also agree that Eutiquio was not an independent contractor for he does not carry a distinct and independent business, and he does not possess substantial capital or investment in tools, equipment, machinery or work premises.22He works within petitioner‘s premises using the latter‘s tools and materials, as admitted by petitioner. Eutiquio is also under petitioner‘s control and supervision. Attesting to this is petitioner‘s admission that it allowed respondents to use its facilities for the "proper implementation" of job orders. Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines, penalties; providing petitioner‘s right to fire employees or "contractors"; requiring the carpentry division to join petitioner‘s exercise program; and providing rules on machine maintenance, all reflect control and supervision over respondents.
Petitioner likewise alleges that it did not dismiss respondents as they were not its regular employees; that respondents failed to sufficiently establish the fact of illegal dismissal; and that respondents abandoned the work after it issued the Implementing Guidelines.23
Having ruled that respondents are regular employees, we shall proceed to determine whether respondents have, as petitioner contends, abandoned their work, or they have been illegally dismissed.
The consistent rule is that the employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause, failing in which would make the termination illegal, as in this case.24
For accusing respondents of abandonment, petitioner must present evidence (1) not only of respondents‘ failure to report for work or absence without valid reason, but (2) also of respondents‘ clear intention to sever employer-employee relations as manifested by some overt acts. The second element is the more determinative factor.>25
Here, petitioner‘s argument in support of its abandonment charge was that respondents may have resented its issuance of the Implementing Guidelines. This, in our view, fails to establish respondents‘ intention to abandon their jobs. On the contrary, by filing the complaint for illegal dismissal within two days of their dismissal on January 11, 2000 and by seeking reinstatement in their position paper, respondents manifested their intention against severing their employment relationship with petitioner and abandoning their jobs. It is settled that an employee who forthwith protests his layoff cannot be said to have abandoned his work.26
Finally, Article 279 of the Labor Code,27provides that a regular employee who is unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. If reinstatement is no longer feasible, separation pay equivalent to one month salary for every year of service should be awarded as an alternative. This has been our consistent ruling in the award of separation pay to illegally dismissed employees in lieu of reinstatement.28
Hence, the four respondents, Eutiquio, Felicisimo, Jay and Leonardo, Sr., all surnamed Antonio, are entitled to backwages and separation pay in case their reinstatement is no longer possible. Eutiquio‘s and Jay‘s bio-data reveal that they started working for petitioner only in 1993 (not 1991) and 1998 (not 1993), respectively. Regrettably, we find no factual basis for respondents‘ claim that they received P250 per day. Petitioner‘s manifestation reveals, however, that respondents‘ earnings in 1999 were P211,385 or P169.37 each per day,29which is a little less than the P171.50 minimum wage.30The NLRC should consider that Eutiquio started only in 1993 and Jay, in 1998 and use P171.50 as respondents‘ daily wage, not P250 or P169.37.
Lastly, we note the silence of the decisions below with respect to Enrico Alejo, in whose name petitioner is registered as a sole proprietorship. Alejo as the sole proprietor is liable to respondents for backwages and separation pay. We also note that Enrico is consistently represented as petitioner‘s sole-proprietor in its pleadings including this petition. Therefore, respondents properly sought the inclusion of Enrico Alejo as a proper or indispensable party to this case. Strictly speaking, he is the proper party in this case and the one liable to respondents, for petitioner has no juridical personality to defend this suit. We have held that: a sole proprietorship … does not have a separate juridical personality that could enable it to file a suit in court. In fact, there is no law authorizing sole proprietorships to file a suit in court.
A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government. The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.31
WHEREFORE, the petition is DENIED for lack of merit. Petitioner thru its sole proprietor, Enrico Alejo, is ordered (1) to reinstate the four respondents to their former positions without loss of seniority rights and other privileges or to pay them separation pay in case reinstatement is no longer possible and (2) to pay them full backwages, in either case, computed from the time their compensation was withheld from them up to the time of their actual reinstatement or up to the time it is determined that reinstatement is no longer possible. The NLRC is also ordered to RECOMPUTE respondents‘ backwages and separation pay, as aforementioned, and execute the payments to respondents. Costs against the petitioner.
SO ORDERED.
LEONARDO A. QUISUMBING Associate Justice
WE CONCUR:
ANTONIO T. CARPIO Associate Justice
CONCHITA CARPIO MORALES Associate Justice DANTE O. TINGA Asscociate Justice A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
LEONARDO A. QUISUMBING Associate Justice Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson‘s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.
ARTEMIO V. PANGANIBAN Chief Justice