“The basis of engaging the services of crewmen of a batel is

FOUR-FOLD TEST Cases determined in accordance with the contract executed between the
owner and the patron. The contract commonly followed is on a share
basis after deducting all the expenses incurred on the voyage. One
[G.R. No. L-8967. May 31, 1956.] half goes to the owner of the batel and the other half goes to the
ANASTACIO VIAÑA, Petitioner, vs. ALEJO AL-LAGADAN and patron and the members of the crew and divided among themselves
FILOMENA PIGA, Respondents. on a share basis also in accordance with their agreement with the
patron getting the lion’s share. The hiring of the crew is done by the
patron himself. Usually, when a patron enters into a contract with
DECISION the owner of the batel, he has a crew ready with him.” (Italics
supplied.)
CONCEPCION, J.:
In sustaining the Referee’s finding to the effect that the deceased
Petitioner Anastacio Viaña owned the fishing sailboat “Magkapatid”, was an employee of Viaña, the Workmen’s Compensation
which, in the night of September 3, 1948, sunk in the waters Commissioner said:chanroblesvirtuallawlibrary
between the province of Bataan and the island of Corregidor, as a
consequence of a collision with the USS “TINGLES”, a vessel of the “The trial referee found that there was an employer-employee
U.S. Navy. Inasmuch as Alejandro Al-Lagadan, a member of the crew relation between the Respondentand the deceased, Alejandro Al-
of the “Magkapatid”, disappeared with the craft, his Lagadan, and the share which the deceased received at the end of
parents, Respondent Alejo Al-Lagadan and Filomena Piga, filed the each trip was in the nature of ‘wages’ which is defined under section
corresponding claim for compensation under Act No. 3428. After 39 of the Compensation Act. This is so because such share could be
appropriate proceedings, a Referee of the Workmen’s Compensation reckoned in terms of money. In other words, there existed the
Commission rendered a decision, dated February 23, relation of employer and employee between the Respondent and
1953:chanroblesvirtuallawlibrary Alejandro Al-Lagadan at the time of the latter’s death.

“1. Ordering Mr. Anastacio Viaña to pay the above-named claimants “We believe that the trial referee did not err in finding the deceased
through the Workmen’s Compensation Commission, Manila, the sum an employee of the Respondent. We cite the following cases which
of P1,560 in lump sum with interest at 6 per cent from September 3, illustrate the point at issue:chanroblesvirtuallawlibrary
1948 until fully paid; chan roblesvirtualawlibraryand. ‘The officers and crews of whaling and other fishing vessels who are
“To pay the sum of P16 to the Workmen’s Compensation to receive certain proportions of produce of the voyage in lieu of
Commission as costs.” wages; chan roblesvirtualawlibrary(Rice vs. Austin, 17 Mass.
206; chan roblesvirtualawlibrary2Y & C. 61); chan
Said decision was, on petition for review filed by Viaña, affirmed by roblesvirtualawlibraryCaptains of merchant ships who, instead of
the Workmen’s Compensation Commissioner, on or about October wages, receive shares in the profits of the adventure; chan
22, 1954, “with additional fee of P5.00”. Said Commissioner, having roblesvirtualawlibrary(4 Maule & C. 240); chan
subsequently denied a reconsideration of this action, Viaña has roblesvirtualawlibraryor who take vessels under an agreement to pay
brought the matter to us, for review by certiorari, upon the ground certain charges and receive a share of the earnings; chan
that this case does not fall within the purview of Act No. 3428, roblesvirtualawlibrary(Tagard vs. Loring, 16 Mass. 336, 8 Am. Dec.
because the gross income of his business for the year 1947 was 140; chan roblesvirtualawlibraryWinsor vs. Cutts, 7 Greenl. Me. 261)
allegedly less than P10,000, and because Alejandro Al-Lagadan was, have generally been held not to be partners with the Respondent,
at the time of his death, his (Petitioner’s) industrial partner, not his and the like. Running a steamboat on shares does not make the
employee. owners partners in respect to the vessel (The Daniel Koine, 35 Fed.
785); chan roblesvirtualawlibraryso of an agreement between two
The first ground is untenable, Petitioner not having invoked it before
parties to farm on shares; chan roblesvirtualawlibrary(Hooloway vs.
the rendition of the Referee’s decision on February 23, 1953. The
Brinkley, 42 Ga. 226); chan roblesvirtualawlibraryA seaman who is to
objection to the application of Act No. 3428, upon said ground, was
receive pay in proportion to the amount of fish caught is not a
made for the first time when Petitioner sought a review of said
partner; chan roblesvirtualawlibrary(Holdren vs. French, 68 Me.
decision by the Workmen’s Compensation Commissioner. The non-
241); chan roblesvirtualawlibrarysharing profits in lieu of wages is
applicability of said Act to employers whose gross income does not
not a partnership. There is no true contribution; chan
reach P20,000 is, however, a matter of defense, which cannot be
roblesvirtualawlibrary(Crawford vs. Austin, 34 Md. 49; chan
availed of unless pleaded in the employer’s answer to the claim for
roblesvirtualawlibraryWhitehill vs. Shickle, 43 Mo. 538; chan
compensation filed by the employee or his heirs. Petitioner herein
roblesvirtualawlibrarySankey vs. Iron Works, 44 Ga. 228.)’“ (Italics
having failed to do so, said defense may not now be entertained
supplied.)
(Rolan vs. Perez, 63 Phil., 80, 85-86).
In other words, in the opinion of the Referee, as well as of said
As regards the second ground, Petitioner maintains, contrary to the
Commissioner, the mere fact that Alejandro’s share in the
finding of the Referee and said Commissioner, that the deceased was
understanding “could be reckoned in terms of money”, sufficed to
his industrial partner, not employee. In this connection, it is alleged
characterize him as an employee of Viaña. We do not share this view.
in paragraph (6) of the petition:chanroblesvirtuallawlibrary
Neither can we accept, however, Petitioner’s theory to the effect that
“That the practice observed then and now in engaging the services the deceased was his partner, not an employee, simply because he
of crewmen of sailboats plying between Mindoro and Manila is on a (the deceased) shared in the profits, not in the losses. In determining
partnership basis, to wit:chanroblesvirtuallawlibrary that the owner the existence of employer-employee relationship, the following
of the vessel, on one hand receives one-half of the earnings of the elements are generally considered,
sailboat after deducting the expenses for the maintenance of the namely:chanroblesvirtuallawlibrary (1) the selection and
crew, the other half is divided pro rata among the members of the engagement of the employee; chan roblesvirtualawlibrary(2) the
crew, the ‘patron’ or captain receiving four parts, the ‘piloto’ or next payment of wages; chan roblesvirtualawlibrary(3) the power of
in command three parts, the wheelsman or ‘timonel’ 1 1/2 parts and dismissal; chan roblesvirtualawlibraryand (4) the power to control
the rest of the members of the crew one part each, as per Annex ‘B’ the employees’ conduct — although the latter is the most important
hereof.” element (35 Am. Jur. 445). Assuming that the share received by the
deceased could partake of the nature of wages — on which we need
It appears that, before rendering his aforementioned decision, the
not, and do not, express our view — and that the second element,
Referee requested Mr. Manuel O. Morente, an attorney of the
therefore, exists in the case at bar, the record does not contain any
Workmen’s Compensation Commission, “to look into and inquire and
specific data regarding the third and fourth elements.
determine the method of and the basis of engaging the services of
crewmen for sailboats (batel) of twenty (20) tons or more plying With respect to the first element, the facts before us are insufficient
between Manila and Mariveles and moored along Manila North to warrant a reasonable conclusion, one way or the other. On the
Harbor”, and that, thereafter, said Atty. Morente one hand, Atty. Morente said, in his aforementioned report, that
reported:chanroblesvirtuallawlibrary “the contract commonly followed is on a share basis cralaw The
Page1

hiring of a crew is done by the patron himself. Usually, when a patron

enters into a contract with the owner of the batel, he has a crew Wherefore they instituted this action in the Manila court of first
ready with him”. This statement suggests that the members of the instance in December 1954.
crew are chosen by the patron, seemingly, upon his sole
responsibility and authority. It is noteworthy, however, that said On motion by defendant and after hearing the parties, the Hon.
report referred to a practice commonly and “usually” observed in a Francisco E. Jose, Judge, issued an order dismissing the complaint on
given place. The record is silent on whether such practice had been
the ground that plaintiffs had no cause of action against defendant
followed in the case under consideration. More important still, the
language used in said report may be construed as intimating, not since they were not its employees. Hence this appeal directly to this
only that the “patron” selects and engages the crew, but, also, that Court, involving only questions of law. In the meantime Tirso Cruz
the members thereof are subject to his control and may be the band leader died; he is now substituted by his legal heirs.
dismissed by him. To put it differently, the literal import of said However for convenience we shall refer to him as if he were still a
report is open to the conclusion that the crew has a contractual party to the proceedings.
relation, not with the owner of the vessel, but with the patron, and
that the latter, not the former, is either their employer or their The complaint alleged that plaintiffs "were members of the orchestra
partner.
which had been employed by the defendant to furnish music in the
Upon the other hand, the very allegations of the petition show Manila Hotel"; that they were employees of the Hotel, and that
otherwise, for Petitioner explicitly averred therein that the deceased contrary to the announcement (Annex A) promising gratuities to its
Alejandro Al-Lagadan was his “industrial partner”. This implies that a "employees" the Hotel Management had refused to pay plaintiffs.
contract of partnership existed between them and that, accordingly,
The complaint attached a Copy of the announcement which partly
if the crew was selected and engaged by the “patron”, the latter did
so merely as agent or representative of Petitionerherein. Again, reads as follows:
if Petitioner were a partner of the crew members, then neither the
former nor the patron could control or dismiss the latter. . . . . It is for this reason that the necessary authority has already
been secured for the payment of separation gratuity to the
In the interest of justice and equity, and considering that a decision
employees to be laid off as a result of the lease and who are not yet
on the merits of the issue before us may establish an important
precedent, it would be better to remand the case to the Workmen’s entitled to either the optional or compulsory retirement insurance
Compensation Commission for further evidence and findings on the provided under Republic Act No. 660, as amended, . . . .
following questions:chanroblesvirtuallawlibrary (1) who selected the
crew of the “Magkapatid” and engaged their services; chan The defendant filed a motion to dismiss alleging that plaintiffs were
roblesvirtualawlibrary(2) if selected and engaged by the “patron”, did not its employees, under the terms of the contract whereby they
the latter act in his own name and for his own account, or on behalf had rendered services to the hotel, copy of which was attached as
and for the account of Viaña; chan roblesvirtualawlibrary(3) could Exhibit 1. It also alleged plaintiffs did not fall within the terms of
Viaña have refused to accept any of the crew members chosen and
Annex A because they were not, and never had been members of
engaged by the “patron”; chan roblesvirtualawlibrary(4)
the Government Service Insurance System. Plaintiffs replied to the
did Petitioner have authority to determine the time when, the place
where and/or the manner or conditions in or under which the crew motion, did not deny the terms of Exhibit 1, nor the allegations of
would work; chan roblesvirtualawlibraryand (5) who could dismiss its non-membership in the Government Service Insurance System; but
members. insisted they were employees of the Hotel.
Wherefore, let the case be remanded to the Workmen’s
The controversy could therefore be decided and it was decide in the
Compensation Commission, for further proceedings in conformity
with this decision, without special pronouncement as to costs. SO light of the terms of Exhibit 1 and Annex A, plus the factual
ORDERED. allegations expressly or impliedly admitted by the contending
parties.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista
Angelo, Reyes, J.B.L., and Endencia, JJ., concur.
At the outset the following consideration presents itself: plaintiffs'
Republic of the Philippines right is not predicated on some statutory provision, but upon the
SUPREME COURT offer or promise contained in Annex A. Such offer or promise having
Manila been written by the defendant, it is logical to regard said defendant
to in the best position to state who were the
EN BANC employees contemplated in the aforesaid Annex A. The defendant
asserts these musicians were not included; therefore such assertion
G.R. No. L-9110 April 30, 1957
should be persuasive, if not conclusive. Let it be emphasized that
JOSEFA VDA. DE CRUZ, ET AL., plaintiffs-appellants, Annex A is not a contract, but a mere offer of gratuity, the
vs. beneficiaries of which normally depended upon the free selection of
THE MANILA HOTEL COMPANY, defendant-appellee. the offeror.

Javier and Javier for appellants. Independently however of the Hotel's interpretation of its own
Government Corporate Counsel Ambrosio Padilla and Panfilo B. announcement, and analyzing the terms of Annex A, we notice that
Morales for appellee. it extends to those employees of the Hotel who were "not
yet entitled to either the optional or compulsory retirement
BENGZON, J.: insurance provided under Republic Act No. 660". And then we read
that retirement insurance under Republic Act No. 660 is given only to
On May 22, 1954 and for several years before, Tirso Cruz with his those insured with the Government Service Insurance System or the
orchestra furnished music to the Manila Hotel under the G.S.I.S.; and that the herein plaintiffs were never members of
arrangement hereafter to be set forth. On that date the corporation (insured with) such Insurance System. Wherefore the inevitable
owning the Hotel gave written notice to its employees that beginning conclusion flows that even if these plaintiffs were "employees" of
July 1, 1954 the Hotel would be leased to the Bay View Hotel, and the Hotel in general, they cannot claim to be beneficiaries under
that those employees to be laid off would be granted a separation Annex A, because they could not qualify as employees "who were
gratuity computed according to specified terms and conditions. not yet entitled to retirement insurance under the G.S.I.S." The
quoted portion of the announcement implied reference to
Cruz and his musicians claimed the gratuity; but the Manila Hotel
employees insured by the Government Insurance System.
management denied their claim saying they were not its employees.
Page2
Still going further, are these plaintiffs "employees" of the Hotel? Republic of the Philippines
None of them except Tirzo Cruz and Ric Cruz, is mentioned in the SUPREME COURT
contract Exhibit 1. None has submitted any contract or appointment Manila
except said Exhibit 1. Obviously their connection with the Hotel was
only thru Tirso Cruz who was the leader of the orchestra; and they EN BANC
couldn't be in a better class than Tirso Cruz who dealt with the Hotel.
G.R. No. L-12582 January 28, 1961
Was Tirso Cruz an employee? Or was he an independent contractor,
as held by the trial court?
LVN PICTURES, INC., petitioner-appellant,
vs.
It will be observed that by Annex 1 the Manila Hotel contracted or
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
engaged the "services of your orchestra" (of Tirso Cruz) composed of
RELATIONS, respondents-appellees.
fifteen musicians including yourself plus Ric Cruz as vocalist" at P250
per day, said orchestra to "play from 7:30 p.m. to closing time daily".
x---------------------------------------------------------x
What pieces the orchestra shall play, and how the music shall be
arranged or directed, the intervals and other details — such are left G.R. No. L-12598 January 28, 1961
to the leader's discretion. The music instruments, the music papers
and other paraphernalia are not furnished by the Hotel, they belong SAMPAGUITA PICTURES, INC., petitioner-appellant,
to the orchestra, which in turn belongs to Tirso Cruz — not to the vs.
Hotel. The individual musicians, and the instruments they have not PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
been selected by the Hotel. It reserved no power to discharge any RELATIONS, respondents-appellees.
musician. How much salary is given to the individual members is left
entirely to "the orchestra" or the leader. Payment of such salary is Nicanor S. Sison for petitioner-appellant.
not made by the Hotel to the individual musicians, but only a lump- Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
sum compensation is given weekly to Tirso Cruz. Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians
Guild.
Considering the above features of the relationship, in connection
with the tests indicated by numerous authorities, it is our opinion CONCEPCION, J.:
that Tirso Cruz was not an employee of the Manila Hotel, but one
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc.
engaged to furnish music to said hotel for the price of P250.00 daily,
seek a review by certiorari of an order of the Court of Industrial
in other words, an independent contractor 1 within the meaning of
Relations in Case No. 306-MC thereof, certifying the Philippine
the law of master and servant.
Musicians Guild (FFW), petitioner therein and respondent herein, as
An independent contractor is one who in rendering services, the sole and exclusive bargaining agency of all musicians working
exercises an independent employment or occupation and represents with said companies, as well as with the Premiere Productions, Inc.,
the will of his employer only as to the results of his work and not as which has not appealed. The appeal of LVN Pictures, Inc., has been
to the means whereby it is accomplished; one who exercising an docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the
independent employment, contracts to do a piece of work according appeal of Sampaguita Pictures, Inc. Involving as they do the same
to his own methods, without being subject to the control of his order, the two cases have been jointly heard in this Court, and will
employer except as to the result of his work; and who engages to similarly be disposed of.
perform a certain service for another, according to his own manner
In its petition in the lower court, the Philippine Musicians Guild
and methods, without being subject to the control of his employer
(FFW), hereafter referred to as the Guild, averred that it is a duly
except as to the result of his work; and who engages to perform a
registered legitimate labor organization; that LVN Pictures, Inc.,
certain service for another, according to his own manner and
Sampaguita Pictures, Inc., and Premiere Productions, Inc. are
method, free from the control and direction of his employer in all
corporations, duly organized under the Philippine laws, engaged in
matters connected with the performance of the service, except as to
the making of motion pictures and in the processing and distribution
the result of the work. (56 C. J. S. pp. 41-43.)
thereof; that said companies employ musicians for the purpose of
Among the factors to be considered are whether the contractor making music recordings for title music, background music, musical
is carrying on an independent business; whether the work is part of numbers, finale music and other incidental music, without which a
the employer's general business; the nature and extent of the work; motion picture is incomplete; that ninety-five (95%) percent of all
the skill required; the term and duration of the relationship; the right the musicians playing for the musical recordings of said companies
to assign the performance of the work to another; the power to are members of the Guild; and that the same has no knowledge of
terminate the relationship; the existence of a contract for the the existence of any other legitimate labor organization representing
performance of a specified piece of work; the control and musicians in said companies. Premised upon these allegations, the
supervision of the work; the employer's powers and duties with Guild prayed that it be certified as the sole and exclusive bargaining
respect to the hiring, firing, and payment of the contractor's agency for all musicians working in the aforementioned companies.
servants; the control of the premises; the duty to supply the In their respective answers, the latter denied that they have any
premises, tools, appliances, material and labor; and the mode, musicians as employees, and alleged that the musical numbers in the
manner, and terms of payment. (56 C. J. S. p. 46.) (Emphasis ours.) filing of the companies are furnished by independent contractors.
The lower court, however, rejected this pretense and sustained the
Not being employees of the Manila Hotel, the plaintiff's have no theory of the Guild, with the result already adverted to. A
cause of action against the latter under Annex A. The order of reconsideration of the order complained of having been denied by
dismissal is therefore affirmed, with costs against them. So ordered. the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc.,
filed these petitions for review for certiorari.
Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Endencia
and Felix, JJ., concur. Apart from impugning the conclusion of the lower court on the
status of the Guild members as alleged employees of the film
companies, the LVN Pictures, Inc., maintains that a petition for
Page3

certification cannot be entertained when the existence of employer-

employee relationship between the parties is contested. However, provided transportation to and from the studio by the company.
this claim is neither borne out by any legal provision nor supported Similarly, the company furnishes them meals at dinner time.
by any authority. So long as, after due hearing, the parties are found
to bear said relationship, as in the case at bar, it is proper to pass During the recording sessions, the motion picture director, who is an
upon the merits of the petition for certification. employee of the company, supervises the recording of the musicians
and tells what to do in every detail. He solely directs the
It is next urged that a certification is improper in the present case, performance of the musicians before the camera as director, he
because, "(a) the petition does not allege and no evidence was supervises the performance of all the action, including the musicians
presented that the alleged musicians-employees of the respondents who appear in the scenes so that in the actual performance to be
constitute a proper bargaining unit, and (b) said alleged musicians- shown on the screen, the musical director's intervention has
employees represent a majority of the other numerous employees of stopped.
the film companies constituting a proper bargaining unit under
section 12 (a) of Republic Act No. 875." And even in the recording sessions and during the actual shooting of
a scene, the technicians, soundmen and other employees of the
The absence of an express allegation that the members of the Guild company assist in the operation. Hence, the work of the musicians is
constitute a proper bargaining unit is fatal proceeding, for the same an integral part of the entire motion picture since they not only
is not a "litigation" in the sense in which this term is commonly furnish the music but are also called upon to appear in the finished
understood, but a mere investigation of a non-adversary, fact finding picture.
character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of The question to be determined next is what legal relationship exits
employees as to the matter of their representation. In connection between the musicians and the company in the light of the foregoing
therewith, the court enjoys a wide discretion in determining the facts.
procedure necessary to insure the fair and free choice of bargaining
We are thus called upon to apply R.A. Act 875. which is substantially
representatives by employees.1 Moreover, it is alleged in the petition
the same as and patterned after the Wagner Act substantially the
that the Guild it a duly registered legitimate labor organization and
same as a Act and the Taft-Hartley Law of the United States. Hence,
that ninety-five (95%) percent of the musicians playing for all the
reference to decisions of American Courts on these laws on the
musical recordings of the film companies involved in these cases are
point-at-issue is called for.
members of the Guild. Although, in its answer, the LVN Pictures, Inc.
denied both allegations, it appears that, at the hearing in the lower
Statutes are to be construed in the light of purposes achieved and
court it was merely the status of the musicians as its employees that
the evils sought to be remedied. (U.S. vs. American Tracking
the film companies really contested. Besides, the substantial
Association, 310 U.S. 534, 84 L. ed. 1345.) .
difference between the work performed by said musicians and that
of other persons who participate in the production of a film, and the In the case of National Labor Relations Board vs. Hearts Publication,
peculiar circumstances under which the services of that former are 322 U.S. 111, the United States Supreme Court said the Wagner Act
engaged and rendered, suffice to show that they constitute a proper was designed to avert the 'substantial obstruction to the free flow of
bargaining unit. At this juncture, it should be noted that the action of commerce which results from strikes and other forms of industrial
the lower court in deciding upon an appropriate unit for collective unrest by eliminating the causes of the unrest. Strikes and industrial
bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., unrest result from the refusal of employers' to bargain collectively
66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is and the inability of workers to bargain successfully for improvement
entitled to almost complete finality, unless its action is arbitrary or in their working conditions. Hence, the purposes of the Act are to
capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. encourage collective bargaining and to remedy the workers' inability
891), which is far from being so in the cases at bar. to bargaining power, by protecting the exercise of full freedom of
association and designation of representatives of their own
Again, the Guild seeks to be, and was, certified as the sole and
choosing, for the purpose of negotiating the terms and conditions of
exclusive bargaining agency for the musicians working in the
their employment.'
aforesaid film companies. It does not intend to represent the other
employees therein. Hence, it was not necessary for the Guild to The mischief at which the Act is aimed and the remedies it offers are
allege that its members constitute a majority of all the employees of not confined exclusively to 'employees' within the traditional legal
said film companies, including those who are not musicians. The real distinctions, separating them from 'independent contractor'. Myriad
issue in these cases, is whether or not the musicians in question are forms of service relationship, with infinite and subtle variations in
employees of the film companies. In this connection the lower court the term of employment, blanket the nation's economy. Some are
had the following to say: within this Act, others beyond its coverage. Large numbers will fall
clearly on one side or on the other, by whatever test may be applied.
As a normal and usual course of procedure employed by the
Inequality of bargaining power in controversies of their wages, hours
companies when a picture is to be made, the producer invariably
and working conditions may characterize the status of one group as
chooses, from the musical directors, one who will furnish the musical
of the other. The former, when acting alone may be as helpless in
background for a film. A price is agreed upon verbally between the
dealing with the employer as dependent on his daily wage and as
producer and musical director for the cost of furnishing such musical
unable to resist arbitrary and unfair treatment as the latter.'
background. Thus, the musical director may compose his own music
specially written for or adapted to the picture. He engages his own To eliminate the causes of labor dispute and industrial strike,
men and pays the corresponding compensation of the musicians Congress thought it necessary to create a balance of forces in certain
under him. types of economic relationship. Congress recognized those economic
relationships cannot be fitted neatly into the containers designated
When the music is ready for recording, the musicians are summoned
as 'employee' and 'employer'. Employers and employees not in
through 'call slips' in the name of the film company (Exh 'D'), which
proximate relationship may be drawn into common controversies by
show the name of the musician, his musical instrument, and the
economic forces and that the very dispute sought to be avoided
date, time and place where he will be picked up by the truck of the
might involve 'employees' who are at times brought into an
film company. The film company provides the studio for the use of
Page4

economic relationship with 'employers', who are not their

the musicians for that particular recording. The musicians are also
'employers'. In this light, the language of the Act's definition of
'employee' or 'employer' should be determined broadly in doubtful The right of control of the film company over the musicians is shown
situations, by underlying economic facts rather than technically and (1) by calling the musicians through 'call slips' in 'the name of the
exclusively established legal classifications. (NLRB vs. Blount, 131 F company; (2) by arranging schedules in its studio for recording
[2d] 585.) sessions; (3) by furnishing transportation and meals to musicians;
and (4) by supervising and directing in detail, through the motion
In other words, the scope of the term 'employee' must be picture director, the performance of the musicians before the
understood with reference to the purposes of the Act and the facts camera, in order to suit the music they are playing to the picture
involved in the economic relationship. Where all the conditions of which is being flashed on the screen.
relation require protection, protection ought to be given .
Thus, in the application of Philippine statutes and pertinent decisions
By declaring a worker an employee of the person for whom he works of the United States Courts on the matter to the facts established in
and by recognizing and protecting his rights as such, we eliminate this case, we cannot but conclude that to effectuate the policies of
the cause of industrial unrest and consequently we promote the Act and by virtue of the 'right of control' test, the members of
industrial peace, because we enable him to negotiate an agreement the Philippine Musicians Guild are employees of the three film
which will settle disputes regarding conditions of employment, companies and, therefore, entitled to right of collective bargaining
through the process of collective bargaining. under Republic Act No. 875.

The statutory definition of the word 'employee' is of wide scope. As In view of the fact that the three (3) film companies did not question
used in the Act, the term embraces 'any employee' that is all the union's majority, the Philippine Musicians Guild is hereby
employees in the conventional as well in the legal sense expect those declared as the sole collective bargaining representative for all the
excluded by express provision. (Connor Lumber Co., 11 NLRB 776.). musicians employed by the film companies."

It is the purpose of the policy of Republic Act 875; (a) To eliminate We are fully in agreement with the foregoing conclusion and the
the causes of industrial unrest by protecting the exercise of their reasons given in support thereof. Both are substantially in line with
right to self-organization for the purpose of collective bargaining. (b) the spirit of our decision in Maligaya Ship Watchmen Agency vs.
To promote sound stable industrial peace and the advancement of Associated Watchmen and Security Union, L-12214-17 (May 28,
the general welfare, and the best interests of employers and 1958). In fact, the contention of the employers in
employees by the settlement of issues respecting terms and the Maligaya cases, to the effect that they had dealt with
conditions of employment through the process of collective independent contractors, was stronger than that of the film
bargaining between employers and representatives of their companies in these cases. The third parties with whom the
employees. management and the workers contracted in the Maligaya cases
were agencies registered with the Bureau of Commerce and duly
The primary consideration is whether the declared policy and
licensed by the City of Manila to engage in the business of supplying
purpose of the Act can be effectuated by securing for the individual
watchmen to steamship companies, with permits to engage in said
worker the rights and protection guaranteed by the Act. The matter
business issued by the City Mayor and the Collector of Customs. In
is not conclusively determined by a contract which purports to
the cases at bar, the musical directors with whom the film companies
establish the status of the worker, not as an employee.
claim to have dealt with had nothing comparable to the business
standing of said watchmen agencies. In this respect, the status of
The work of the musical director and musicians is a functional and
said musical directors is analogous to that of the alleged
integral part of the enterprise performed at the same studio
independent contractor in Caro vs. Rilloraza, L-9569 (September 30,
substantially under the direction and control of the company.
1957), with the particularity that the Caro case involved
In other words, to determine whether a person who performs work the enforcement of the liability of an employer under the Workmen's
for another is the latter's employee or an independent contractor, Compensation Act, whereas the cases before us are merely
the National Labor Relations relies on 'the right to control' test. concerned with the right of the Guild to represent the musicians as a
Under this test an employer-employee relationship exist where the collective bargaining unit. Hence, there is less reason to be legalistic
person for whom the services are performed reserves the right to and technical in these cases, than in the Caro case.
control not only the end to be achieved, but also the manner and
Herein, petitioners-appellants cite, in support of their appeal, the
means to be used in reaching the end. (United Insurance Company,
cases of Sunripe Coconut Product Co., Inc vs. CIR(46 Off. Gaz., 5506,
108, NLRB No. 115.).
5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-
Thus, in said similar case of Connor Lumber Company, the Supreme 6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31,
Court said:. 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz.,
8540). Instead of favoring the theory of said petitioners-appellants,
'We find that the independent contractors and persons working the case of the Sunripe Coconut Product Co., Inc. is authority for
under them are employees' within the meaning of Section 2 (3) of its herein respondents-appellees. It was held that, although engaged as
Act. However, we are of the opinion that the independent piece-workers, under the "pakiao" system, the "parers" and
contractors have sufficient authority over the persons working under "shellers" in the case were, not independent contractor,
their immediate supervision to warrant their exclusion from the but employees of said company, because "the requirement imposed
unit. We shall include in the unit the employees working under the on the 'parers' to the effect that 'the nuts are pared whole or that
supervision of the independent contractors, but exclude the there is not much meat wasted,' in effect limits or controls the
contractors.' means or details by which said workers are to accomplish their
services" — as in the cases before us.
'Notwithstanding that the employees are called independent
contractors', the Board will hold them to be employees under the The nature of the relation between the parties was not settled in
Act where the extent of the employer's control over them indicates the Viana case, the same having been remanded to the Workmen's
that the relationship is in reality one of employment. (John Hancock Compensation Commission for further evidence.
Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective
Bargaining, Vol.). The case of the Philippine Manufacturing Co. involved a contract
Page5

between said company and Eliano Garcia, who undertook to paint a

tank of the former. Garcia, in turn engaged the services of Arcadio musicians." He "says he wants more drums and the drummer plays
Geronimo, a laborer, who fell while painting the tank and died in more" or "if he wants more violin or he does not like that.".
consequence of the injuries thus sustained by him. Inasmuch as the
company was engaged in the manufacture of soap, vegetable lard, It is well settled that "an employer-employee relationship exists . .
cooking oil and margarine, it was held that the connection between .where the person for whom the services are performed reserves a
its business and the painting aforementioned was purely casual; that right to control not only the end to be achieved but also the
Eliano Garcia was an independent contractor; that Geronimo was means to be used in reaching such end . . . ." (Alabama Highway
not an employee of the company; and that the latter was not bound, Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive
therefore, to pay the compensation provided in the Workmen's nature of said control over the "means to be used", is illustrated in
Compensation Act. Unlike the Philippine Manufacturing case, the the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No.
relation between the business of herein petitioners-appellants and 210, pp. 1197, 1199-1201), in which, by reason of said control, the
the work of the musicians is not casual. As held in the order employer-employee relationship was held to exist between the
appealed from which, in this respect, is not contested by herein management and the workers, notwithstanding the intervention of
petitioners-appellants — "the work of the musicians is an integral an alleged independent contractor, who had, and exercise, the
part of the entire motion picture." Indeed, one can hardly find power to hire and fire said workers. The aforementioned control over
modern films without music therein. Hence, in the Caro case (supra), the means to be used" in reading the desired end is possessed and
the owner and operator of buildings for rent was held bound to pay exercised by the film companies over the musicians in the cases
the indemnity prescribed in the Workmen's Compensation Act for before us.
the injury suffered by a carpenter while working as such in one of
WHEREFORE, the order appealed from is hereby affirmed, with costs
said buildings even though his services had been allegedly engaged
against petitioners herein. It is so ordered.
by a third party who had directly contracted with said owner. In
other words, the repair work had not merely a casual connection
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L.,
with the business of said owner. It was a necessary incident thereof,
Barrera, Paredes and Dizon, JJ., concur.
just as music is in the production of motion pictures.
Gutierrez David, J., took no part.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110
Republic of the Philippines
(April 30, 1957) differs materially from the present cases. It involved
SUPREME COURT
the interpretation of Republic Act No. 660, which amends the law
Manila
creating and establishing the Government Service Insurance System.
No labor law was sought to be construed in that case. In act, the THIRD DIVISION
same was originally heard in the Court of First Instance of Manila,
the decision of which was, on appeal, affirmed by the Supreme G.R. No. 77205 May 27, 1991
Court. The meaning or scope if the term "employee," as used in the
Industrial Peace Act (Republic Act No. 875), was not touched therein. VALENTINO TORILLO, petitioner,
Moreover, the subject matter of said case was a contract between vs.
the management of the Manila Hotel, on the one hand, and Tirso VICENTE LEOGARDO, JR., in his official capacity as Deputy Minister
Cruz, on the other, whereby the latter greed to furnish the former of Labor; the HONORABLE MINISTER OF LABOR AND
the services of his orchestra, consisting of 15 musicians, including EMPLOYMENT; and ABERDEEN COURT, INC., respondents.
Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of
F.P. Pobre & Associates for petitioner.
this court in that case, "what pieces the orchestra shall play, and how
Delos Reyes, Bonifacio, Delos Reyes for Aberdeen Court, Inc.
the music shall be arranged or directed, the intervals and other
details — such are left to the leader's discretion."

This is not situation obtaining in the case at bar. The musical

directors above referred to have no such control over the musicians
FERNAN, C.J.:
involved in the present case. Said musical directors control neither
the music to be played, nor the musicians playing it. The film
The main issue in this case is whether or not the award of backwages
companies summon the musicians to work, through the musical
in addition to an award of separation pay to an illegally dismissed
directors. The film companies, through the musical directors, fix the
employee whose reinstatement is no longer feasible is proper.
date, the time and the place of work. The film companies, not the
musical directors, provide the transportation to and from the studio. Petitioner Valentino Torillo, alias "Lady Valerie," was employed as an
The film companies furnish meal at dinner time. organist by private respondent Aberdeen Court, Inc. in October 1977
with a daily compensation of P115.00 for five hour work a day. On
What is more — in the language of the order appealed from —
July 2, 1978, he invited his co-employees for a night out in his
"during the recording sessions, the motion picture director who is
hometown in Rosario, Cavite in celebration of his birthday. Private
an employee of the company" — not the musical director —
respondent objected to such activity, requesting its employees, if
"supervises the recording of the musicians and tells them what to do
possible, to refrain from attending the affair because the following
in every detail". The motion picture director — not the musical
day was a working day. Despite private respondent's objections,
director — "solely directs and performance of the musicians before
petitioner pushed through with his birthday party.
the camera". The motion picture director "supervises the
performance of all the actors, including the musicians who appear in Petitioner reported for work the next day, July 3. On July 4, 1978,
the scenes, so that in the actual performance to be shown in the private respondent, through its Floor Manager, informed petitioner
screen, the musical director's intervention has stopped." Or, as that he was being dismissed from his employment effective that
testified to in the lower court, "the movie director tells the musical same day for having defied private respondent's order.
director what to do; tells the music to be cut or tells additional music
in this part or he eliminates the entire music he does not (want) or Consequently, on October 8, 1978 petitioner filed with the Ministry
he may want more drums or move violin or piano, as the case may of Labor & Employment, Region IV, a complaint against private
Page6

be". The movie director "directly controls the activities of the respondent for illegal dismissal with prayer for reinstatement with
backwages, including payment of his unpaid wages from July 1 to
July 3, 1978, holiday pay and premium pay from February to July 1, On May 30, 1986, Officer-in-charge Romeo A. Young of the Ministry
1978. Private respondent tried to justify petitioner's dismissal by of Labor, National Capital Region, issued a restraining order enjoining
claiming that the latter abandoned his work in failing to report for the assigned sheriff from proceeding with the auction sale of the
duty after his birthday celebration. levied properties of private respondent until further
orders.11 However, on July 23, 1986, he recalled the restraining order
On November 23, 1978, the Ministry of Labor, thru Director issued and directed the sheriff to proceed with the execution. 12
Francisco L. Estrella, ruled that private respondent's theory of
abandonment of work was without factual and legal basis as Thereafter, private respondent appealed to the Office of the Minister
petitioner reported for work on July 3, 1978 immediately following of Labor praying that the July 23, 1986 Order be set aside and should
his birthday celebration; and that his dismissal was without the private respondent be liable to pay backwages to complainant, the
required prior clearance. Finding petitioner's dismissal as illegal, same be computed following the guidelines set forth by this Court. 13
Director Estrella ordered private respondent Aberdeen Court, Inc. to
reinstate petitioner to his former position without loss of seniority On September 8, 1986, Deputy Minister Vicente Leogardo, Jr. issued
rights and privileges with full backwages from date of dismissal on an order setting aside the order dated July 23, 1986, stating therein
July 4, 1978 until date of actual reinstatement and to pay petitioner that the February 13, 1986 Order stands with the clarification that
his holiday pay for seven (7) days plus his unpaid wages from July 1 the affirmative relief granted to complainant does not include the
to 3, 1978, However, petitioner's claim for premium pay was payment of backwages. In addition, the writ of execution dated May
dismissed for lack of merit.1 13, 1986 to enforce payment of backwages in the amount of
P280,715.00 was quashed.14
On December 14, 1978, private respondent Aberdeen Court, Inc.
appealed to the Ministry of Labor (Rollo, pp. 20-23) alleging that On September 11, 1986, petitioner filed a motion for reconsideration
there was no factual or legal basis to support the subject order and of said order but the same was denied on November 12, 1986 by
that said Director abused his discretion. Petitioner filed on January 3, Minister of Labor Augusta Sanchez.15
1979 his opposition alleging that the appeal was frivolous and
Hence, this recourse by petitioner.
dilatory.
Preliminarily, it must be stressed that the illegality of petitioner's
On February 13, 1986, or after seven (7) years, the Ministry of Labor
dismissal is a matter long settled in the Order dated November 23,
and Employment, thru Deputy Minister Vicente Leogardo, Jr., issued
1978 issued by Director Estrella, which on appeal, was affirmed by
an order affirming that of Director Estrella with the modification that
then Deputy Minister Vicente Leogardo, Jr. on February 13, 1986.
in lieu of reinstatement, petitioner should be paid separation pay
The finding of illegality of dismissal having thus attained finality,
equivalent to petitioner's wages for two (2) months. 2 A motion for
petitioner now questions the scope and extent of the reliefs granted
reconsideration dated March 21, 1986 was filed by private
to him by public respondent.
respondent but this was denied in an order dated April 21,
1986.3 Undaunted, private respondent filed a motion for leave to file
The dispute in the instant case arose when Deputy Minister
second motion for reconsideration attaching thereto the said second
Leogardo, Jr. issued an Order on September 8, 1986 16clarifying his
motion.4
previous Order of February 13, 198617 by declaring in the clarificatory
order that the dispositive portion of the Order of February 13, 1986
Meanwhile, petitioner filed an urgent motion for execution and
should not be accorded the interpretation that backwages are
appointment of special sheriff dated April 7, 1986 5which was
likewise included as due the complainant (petitioner) for the
opposed by private respondent. 6 Thereafter, the Ministry of Labor,
affirmative relief of backwages is available only where reinstatement
National Capital Region, thru its Officer-in-Charge, Romeo A. Young,
is ordered.
issued a writ of execution on May 13, 1986 directing the sheriff to
execute the order of Deputy Minister Leogardo, Jr. 7 requiring private
We find the clarificatory order erroneous in so far as it declared that
respondent to pay petitioner the total amount of P280,715.00
the affirmative relief of backwages is available only where
representing his backwages from July 4, 1978 to February 13, 1986,
reinstatement is ordered.18
legal holiday pay for seven days, separation pay of two (2) months
and unpaid wages for three (3) days. A number of cases have already been decided by this Court whereby
an illegally dismissed employee is awarded both backwages and
By virtue of said writ, personal properties of private respondent
separation pay.
were levied upon. These personal properties were to have been sold
in a public auction scheduled on May 30, 1986 8 were it not for the Article 280 (now Article 279) of the Labor Code provides that "an
motion to quash the writ of execution filed by private respondent on employee who is unjustly dismissed from work shall be entitled to
the grounds that: first, its second motion for reconsideration has not reinstatement without loss of seniority rights and other privileges
yet been acted upon, second, backwages should not be awarded to and to his full backwages . . . ." Backwages in general are granted on
petitioner since the order of Deputy Minister Leogardo, Jr. on grounds of equity for earnings which a worker or employee has lost
February 13, 1986 stated that in lieu of reinstatement, petitioner due to his illegal dismissal. 19 Reinstatement, on the other hand,
should only be paid separation pay equivalent to his wages for two means restoration to a state of condition from which one had been
(2) months, third, assuming that petitioner is entitled to backwages, removed or separated.20
the law allows the employer to deduct from his backwages his
income earned elsewhere during the time he was out of work; Backwages and reinstatement are two reliefs given to an illegally
andfourth, private respondent should be present during the dismissed employee. They are separate and distinct from each
computation of the monetary award. 9 other.1awp++i1 However, in the event that reinstatement is no
longer possible, separation pay is awarded to the employee. Thus,
Petitioner filed an opposition to this motion as well as a the award of separation pay is in lieu of reinstatement and not of
supplemental motion for execution citing Section 2, Rule XV of the backwages. In other words, an illegally dismissed employee is
Implementing Rules & Regulations of the New Labor Code, which entitled to (1) either reinstatement, if viable, or separation pay if
states that the decision of the Secretary of Labor shall be reinstatement is no longer viable and (2) backwages.
immediately executory, pending appeal, unless stayed by the order
Page7

of the President of the Philippines.10

The distinction between separation pay and backwages has been satisfying the award on the part of the employer. This practice has
exhaustively discussed by this Court in Santos vs. NLRC, et. been hailed as a realistic, reasonable and mutually beneficial
al,21 wherein we held: solution. An award of backwages equivalent to three years (where
the case is not terminated sooner) serves as the base figure for such
The normal consequences of a finding that an employee has been award without deduction.25
illegally dismissed are, firstly, that the employee becomes entitled to
reinstatement to his former position without loss of seniority rights Again, as we stated in Lepanto Consolidated Mining Company vs.
and, secondly, the payment of backwages corresponding to the Olegario,26: "The Court serves notice on the National Labor Relations
period from his illegal dismissal up to actual reinstatement. The Commission (NLRC), labor arbiters and other responsible officials of
statutory intent on this matter is clearly discernible. Reinstatement the Department of Labor and Employment to take their bearings
restores the employee who was unjustly dismissed to the position from this rule that illegally dismissed employees or laborers shall be
from which he was removed, that is, to his status quo antedismissal, entitled to reinstatement without loss of seniority (rights) and
while the grant of backwages allows the same employee to recover payment of backwages of not more than three (3) years without any
from the employer that which he had lost by way of wages as a qualification or deduction. Although this policy had been consistently
result of his dismissal. These twin remedies-reinstatement and adhered to by the Court even after the passage of the present Labor
payment of backwages — make the dismissed employee whole who Code, there are still many instances, as in this case and other cases
can then look forward to continued employment. Thus do these two decided by the Court, where the labor arbiters and/or the NLRC still
remedies give meaning and substance to the constitutional right of awarded backwages beyond the 3-year limit set by the Court. The
labor to security of tenure. The two forms of relief are distinct and governing principle, which has given consistency and stability to the
separate, one from the other. Though the grant of reinstatement law, is stare decisis et no movere (follow past precedent and do not
commonly carries with it an award of backwages, the disturb what has been settled).27
inappropriateness or non-availability of one does not carry with it
the inappropriateness or non-availability of the other. Separation pay With regards to petitioner's separation pay which was awarded to
was awarded in favor of petitioner Lydia Santos because the NLRC him in lieu of reinstatement, he shall receive the amount equivalent
found that her reinstatement was no longer feasible or appropriate. to one month wage/salary for every year of service, including the
As the term suggest, separation pay is the amount that an employee three-year period in which backwages are awarded. This finds
receives at the time of his severance from the service and, as support in the case of Grolier International, Inc. vs.
correctly noted by the Solicitor General in Comment, is designed to Amansec,28 wherein we held:
provide the employee with "the wherewithal during the period that
Thus, when the Court stated that private respondent was entitled to
he is looking for another employment." In the instant case, the grant
"separation pay based on the applicable law or company practice,
of separate on pay was a substitute for immediate and continued re-
whichever is higher, effective as of the end of the above three (3)
employment with the private respondent Bank. The grant of
year period," it meant only that in the computation of separation
separation pay did not redress the injury that is intended to be
pay, the three (3) year period in respect of which backwages are
relieved by the second remedy of backwages, that is, the loss of
awarded, must be included (although private respondent had not
earnings that would have accrued to the dismissed employee during
actually served during the last three (3) years). . .29
the period between dismissal and reinstatement. Put a little
differently, payment of backwages is a form of relief that restores the
Furthermore, his actual service with private respondent for
income that was lost by reason of unlawful dismissal; separation pay,
approximately nine (9) months, counted from October 1977 to July
in contrast, is oriented towards the immediate future, the
1978 shall be considered as one (1) year, in accordance with Article
transitional period the dismissed employee must undergo before
283 of the Labor Code, which provides that a fraction of at least six
locating a replacement job.
(6) months is considered one (1) whole year.

In Hernandez vs. NLRC,22 involving an illegally dismissed employee,

Petitioner Valentino Torillo was illegally dismissed in 1978. This case
this Court held that "petitioner should be paid backwages not
has been pending for almost thirteen (13) years. In the interest of
exceeding three years without deduction and separation pay in the
justice and equity as well as to avoid any further ambiguities, this
amount of one month for every year of service." In another case, this
Court shall fix the exact amount due petitioner. Thus, based on the
Court stated "the public respondent's order for the private
records of the case,30 we hold that the total amount due to
respondents' reinstatement to their former position is no longer
petitioner is P146,255.37, computed as follows:
possible under the circumstances. An award equivalent to three
years backwages plus separation pay to compensate for their illegal 1âwphi1
separation is thus proper.23 Also in Asphalt & Cement Pavers, Inc. vs.
Vicente Leogardo, Jr.,24 we held that "an illegally dismissed employee A. Backwages
is entitled to reinstatement to his previous position without loss of
seniority rights with backwages for a period of three (3) years
P330,050.00*
without qualification or deduction. If reinstatement is no longer
feasible, the employer may be ordered to pay, in addition to
x 365 days x 3 years — P130,048.48
backwages, separation pay as provided by law."
2,779 days
In the light of the above rulings of this Court, petitioner, by reason of
his illegal dismissal is entitled to both separation pay and backwages.
However, the amount of backwages shall be based on the Mercury B. Holiday Pay — 1,610.00
Drug Rulewhich limits backwages of illegally dismissed employees to
an amount equivalent to their wages for three (3) years, without C. Separation Pay
qualification and deduction. The Court has adopted the practice of
fixing the amount of backwages at a reasonable level without P330,050.00 x 30 days x 4 years — 14,251.89
qualification and deduction so as to relieve the employees from
proving their earnings during their layoffs and the employer from
Page8

submitting counter proofs and thus obviate the twin evils of idleness
on the part of the employees and attrition and undue delay in
 2,779 On the pivotal issue of whether or not there existed an employer-
employee relationship between the parties, our finding is in the
negative. The finding finds support in the service contract dated
D. Unpaid Wages from July 1 to 3, 1978 — 345.00
September 1, 1992 xxx. crvll

TOTAL P146,55.37 xxx

WHEREFORE, the petition is granted. The decision in Labor Case No. Even if we grant the initial non-existence of the service contract, as
R-4-STF-7-4525-78 is hereby modified. Private respondent Aberdeen complainant suggests in his reply (third paragraph, page 4), the
Court, Inc. is hereby ordered to pay petitioner Valentino Torillo, the picture would not change because of the admission by complainant
amount of P146,255.37 representing his backwages, separation pay, in his letter dated October 8, 1996 (Annex "C") that what he was
holiday pay and unpaid wages by reason of his illegal dismissal. This receiving was talent fee and not salary.
decision is immediately executory. Costs against private respondent.
This is reinforced by the undisputed fact that complainant received
SO ORDERED. his talent fee nightly, unlike the regular employees of the hotel who
are paid by monthly xxx. crvll
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.
xxx
FIRST DIVISION
And thus, absent the power to control with respect to the means and
[G.R. NO. 153511 - July 18, 2012] methods by which his work was to be accomplished, there is no
employer-employee relationship between the parties xxx.
LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION,
and/or, NELSON NAPUD, in his capacity as the President of xxx
Petitioner Corporation, Petitioner, v. HERNANI S. REALUYO, also
known as JOEY ROA, Respondent. WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of
merit.
DECISION
SO ORDERED.4ςrνll
BERSAMIN, J.:
Respondent appealed, but the National Labor Relations Commission
This labor case for illegal dismissal involves a pianist employed to (NLRC) affirmed the LA on May 31, 2001.5ςrνll
perform in the restaurant of a hotel. On August 9, 1999, respondent,
whose stage name was Joey R. Roa, filed a complaint for alleged Respondent assailed the decision of the NLRC in the Court of
unfair labor practice, constructive illegal dismissal, and the Appeals (CA) on certiorari .
underpayment/nonpayment of his premium pay for holidays,
On February 11, 2002, the CA set aside the decision of the
separation pay, service incentive leave pay, and 13111 month pay. He
NLRC,6 holding:
prayed for attorney's fees, moral damages off P100,000.00 and
exemplary damages for P100,000.00.1ςrνll
xxx
Respondent averred that he had worked as a pianist at the Legend
Applying the above-enumerated elements of the employee-
Hotel s Tanglaw Restaurant from September 1992 with an initial rate
employer relationship in this case, the question to be asked is, are
of P400.00/night that was given to him after each night s
those elements present in this case?chanroblesvirtualawlibrary
performance; that his rate had increased to P750.00/night; and that
during his employment, he could not choose the time of The answer to this question is in the affirmative.
performance, which had been fixed from 7:00 pm to 10:00 pm for
three to six times/week. He added that the Legend Hotel s restaurant xxx
manager had required him to conform with the venue s motif; that
he had been subjected to the rules on employees representation Well settled is the rule that of the four (4) elements of employer-
checks and chits, a privilege granted to other employees; that on July employee relationship, it is the power of control that is more
9, 1999, the management had notified him that as a cost-cutting decisive.
measure his services as a pianist would no longer be required
In this regard, public respondent failed to take into consideration
effective July 30, 1999; that he disputed the excuse, insisting that
that in petitioner s line of work, he was supervised and controlled by
Legend Hotel had been lucratively operating as of the filing of his
respondent s restaurant manager who at certain times would require
complaint; and that the loss of his employment made him bring his
him to perform only tagalog songs or music, or wear barong tagalog
complaint.2ςrνll
to conform with Filipiniana motif of the place and the time of his
In its defense, petitioner denied the existence of an employer- performance is fixed by the respondents from 7:00 pm to 10:00 pm,
employee relationship with respondent, insisting that he had been three to six times a week. Petitioner could not choose the time of his
only a talent engaged to provide live music at Legend Hotel s performance. xxx. crvll
Madison Coffee Shop for three hours/day on two days each week;
As to the status of petitioner, he is considered a regular employee of
and stated that the economic crisis that had hit the country
private respondents since the job of the petitioner was in
constrained management to dispense with his services.
furtherance of the restaurant business of respondent hotel. Granting
On December 29, 1999, the Labor Arbiter (LA) dismissed the that petitioner was initially a contractual employee, by the sheer
complaint for lack of merit upon finding that the parties had no length of service he had rendered for private respondents, he had
employer-employee relationship.3 The LA explained thusly:ςrαlαω been converted into a regular employee xxx. crvll

xxx xxx
Page9
xxx In other words, the dismissal was due to retrenchment in order The contention is unwarranted. There is no longer any doubt that a
to avoid or minimize business losses, which is recognized by law petition for certiorari brought to assail the decision of the NLRC may
under Article 283 of the Labor Code, xxx. crvll raise factual issues, and the CA may then review the decision of the
NLRC and pass upon such factual issues in the process. 8 The power of
xxx the CA to review factual issues in the exercise of its original
jurisdiction to issue writs of certiorari is based on Section 9 of Batas
WHEREFORE, foregoing premises considered, this petition is
Pambansa Blg. 129, which pertinently provides that the CA "shall
GRANTED. xxx.7ςrνll
have the power to try cases and conduct hearings, receive evidence
and perform any and all acts necessary to resolve factual issues
Issues
raised in cases falling within its original and appellate jurisdiction,
In this appeal, petitioner contends that the CA erred:ςηαñrοblεš including the power to grant and conduct new trials or further
νιr†υαl lαω lιbrαrÿ proceedings."

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER- Substantive Issue No. 1:
EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND
Employer-employee relationship existed between the parties
RESPONDENT ROA.

We next ascertain if the CA correctly found that an employer-

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT
employee relationship existed between the parties.
THE TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE
ERRED WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS
The issue of whether or not an employer-employee relationship
FORMER POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO
existed between petitioner and respondent is essentially a question
ONE MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999
of fact.9 The factors that determine the issue include who has the
UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN
power to select the employee, who pays the employee s wages, who
EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.
has the power to dismiss the employee, and who exercises control of
the methods and results by which the work of the employee is
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES,
accomplished.10 Although no particular form of evidence is required
SERVICE INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT
to prove the existence of the relationship, and any competent and
THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE
relevant evidence to prove the relationship may be admitted, 11 a
PARTIES.
finding that the relationship exists must nonetheless rest on
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN substantial evidence, which is that amount of relevant evidence that
NLRC NCR CA NO. 023404-2000 OF THE NLRC AS WELL AS ITS a reasonable mind might accept as adequate to justify a
RESOLUTION DATED JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER conclusion.12ςrνll
HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW PROOF
Generally, the Court does not review factual questions, primarily
THAT THE NLRC AND THE LABOR ARBITER HAVE COMMITTED GRAVE
because the Court is not a trier of facts. However, where, like here,
ABUSE OF DISCRETION OR LACK OF JURISDICTION IN THEIR
there is a conflict between the factual findings of the Labor Arbiter
RESPECTIVE DECISIONS.
and the NLRC, on the one hand, and those of the CA, on the other
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH hand, it becomes proper for the Court, in the exercise of its equity
ROA FILED IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT. jurisdiction, to review and re-evaluate the factual issues and to look
into the records of the case and re-examine the questioned
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA findings.13ςrνll
WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED
OUTRIGHT CONSIDERING THAT A PETITION FOR CERTIORARI UNDER A review of the circumstances reveals that respondent was, indeed,
RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE petitioner s employee. He was undeniably employed as a pianist in
ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY petitioner s Madison Coffee Shop/Tanglaw Restaurant from
THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT September 1992 until his services were terminated on July 9, 1999.
IN THE CASE AT BAR.
First of all, petitioner actually wielded the power of selection at the
chanrobles virtual law library time it entered into the service contract dated September 1, 1992
with respondent. This is true, notwithstanding petitioner s insistence
The assigned errors are divided into the procedural issue of whether that respondent had only offered his services to provide live music at
or not the petition for certiorari filed in the CA was the proper petitioner s Tanglaw Restaurant, and despite petitioner s position
recourse; and into two substantive issues, namely: (a) whether or that what had really transpired was a negotiation of his rate and time
not respondent was an employee of petitioner; and (b) if respondent of availability. The power of selection was firmly evidenced by,
was petitioner s employee, whether he was validly terminated. among others, the express written recommendation dated January
12, 1998 by Christine Velazco, petitioner s restaurant manager, for
Ruling the increase of his remuneration.14ςrνll

The appeal fails. Petitioner could not seek refuge behind the service contract entered
into with respondent. It is the law that defines and governs an
Procedural Issue:
employment relationship, whose terms are not restricted to those
Certiorari was a proper recourse fixed in the written contract, for other factors, like the nature of the
work the employee has been called upon to perform, are also
Petitioner contends that respondent s petition for certiorari was considered. The law affords protection to an employee, and does not
improper as a remedy against the NLRC due to its raising mainly countenance any attempt to subvert its spirit and intent. Any
questions of fact and because it did not demonstrate that the NLRC stipulation in writing can be ignored when the employer utilizes the
was guilty of grave abuse of discretion. stipulation to deprive the employee of his security of tenure. The
Page10

inequality that characterizes employer-employee relations generally

tips the scales in favor of the employer, such that the employee is namely: (a) respondent could beg off from his nightly performances
often scarcely provided real and better options.15ςrνll in the restaurant for other engagements; (b) he had the sole
prerogative to play and perform any musical arrangements that he
Secondly, petitioner argues that whatever remuneration was given to wished; (c) although petitioner, through its manager, required him to
respondent were only his talent fees that were not included in the play at certain times a particular music or song, the music, songs, or
definition of wage under the Labor Code; and that such talent fees arrangements, including the beat or tempo, were under his
were but the consideration for the service contract entered into discretion, control and direction; (d) the requirement for him to wear
between them. barong Tagalog to conform with the Filipiniana motif of the venue
whenever he performed was by no means evidence of control; (e)
The argument is baseless.
petitioner could not require him to do any other work in the
restaurant or to play the piano in any other places, areas, or
Respondent was paid P400.00 per three hours of performance from
establishments, whether or not owned or operated by petitioner,
7:00 pm to 10:00 pm, three to six nights a week. Such rate of
during the three hour period from 7:00 pm to 10:00 pm, three to six
remuneration was later increased to P750.00 upon restaurant
times a week; and (f) respondent could not be required to sing,
manager Velazco s recommendation. There is no denying that the
dance or play another musical instrument.
remuneration denominated as talent fees was fixed on the basis of
his talent and skill and the quality of the music he played during the
A review of the records shows, however, that respondent performed
hours of performance each night, taking into account the prevailing
his work as a pianist under petitioner s supervision and control.
rate for similar talents in the entertainment industry. 16ςrνll
Specifically, petitioner s control of both the end achieved and the
manner and means used to achieve that end was demonstrated by
Respondent s remuneration, albeit denominated as talent fees, was
the following, to wit:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
still considered as included in the term wage in the sense and
context of the Labor Code, regardless of how petitioner chose to
A. He could not choose the time of his performance, which
designate the remuneration. Anent this, Article 97(f) of the Labor
petitioners had fixed from 7:00 pm to 10:00 pm, three to six times a
Code clearly states:ςrαlαω
week;
xxx wage paid to any employee shall mean the remuneration or
b. He could not choose the place of his performance;
earnings, however designated, capable of being expressed in terms
of money, whether fixed or ascertained on a time, task, piece, or c. The restaurant s manager required him at certain times to perform
commission basis, or other method of calculating the same, which is only Tagalog songs or music, or to wear barong Tagalog to conform
payable by an employer to an employee under a written or unwritten to the Filipiniana motif; andcralawlibrary
contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable d. He was subjected to the rules on employees representation check
value, as determined by the Secretary of Labor, of board, lodging, or and chits, a privilege granted to other employees.
other facilities customarily furnished by the employer to the
employee. chanrobles virtual law library

Clearly, respondent received compensation for the services he Relevantly, it is worth remembering that the employer need not
rendered as a pianist in petitioner s hotel. Petitioner cannot use the actually supervise the performance of duties by the employee, for it
service contract to rid itself of the consequences of its employment sufficed that the employer has the right to wield that power.
of respondent. There is no denying that whatever amounts he
Lastly, petitioner claims that it had no power to dismiss respondent
received for his performance, howsoever designated by petitioner,
due to his not being even subject to its Code of Discipline, and that
were his wages.
the power to terminate the working relationship was mutually
It is notable that under the Rules Implementing the Labor Code and vested in the parties, in that either party might terminate at will,
as held in Tan v. Lagrama,17 every employer is required to pay his with or without cause.
employees by means of a payroll, which should show in each case,
The claim is contrary to the records. Indeed, the memorandum
among others, the employee s rate of pay, deductions made from
informing respondent of the discontinuance of his service because of
such pay, and the amounts actually paid to the employee. Yet,
the present business or financial condition of petitioner20showed
petitioner did not present the payroll of its employees to bolster its
that the latter had the power to dismiss him from
insistence of respondent not being its employee.
employment.21ςrνll
That respondent worked for less than eight hours/day was of no
Substantive Issue No. 2:
consequence and did not detract from the CA s finding on the
existence of the employer-employee relationship. In providing that
Validity of the Termination
the " normal hours of work of any employee shall not exceed eight
(8) hours a day," Article 83 of the Labor Code only set a maximum of Having established that respondent was an employee whom
number of hours as "normal hours of work" but did not prohibit petitioner terminated to prevent losses, the conclusion that his
work of less than eight hours. termination was by reason of retrenchment due to an authorized
cause under the Labor Code is inevitable.
Thirdly, the power of the employer to control the work of the
employee is considered the most significant determinant of the Retrenchment is one of the authorized causes for the dismissal of
existence of an employer-employee relationship. 18 This is the so- employees recognized by the Labor Code. It is a management
called control test, and is premised on whether the person for whom prerogative resorted to by employers to avoid or to minimize
the services are performed reserves the right to control both the end business losses. On this matter, Article 283 of the Labor Code
achieved and the manner and means used to achieve that states:ςrαlαω
end.19ςrνll
Article 283. Closure of establishment and reduction of personnel.
Page11

Petitioner submits that it did not exercise the power of control over The employer may also terminate the employment of any employee
respondent and cites the following to buttress its submission, due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of respondent separation pay of one month for every year of service
operation of the establishment or undertaking unless the closing is computed from September 1992 until the finality of this decision,
for the purpose of circumventing the provisions of this Title, by and full backwages from the time his compensation was withheld
serving a written notice on the workers and the Ministry of Labor until the finality of this decision.
and Employment at least one (1) month before the intended date
thereof. xxx. In case of retrenchment to prevent losses and in cases Costs of suit to be paid by the petitioners.
of closures or cessation of operations of establishment or
SO ORDERED.
undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at
THIRD DIVISION
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 G.R. No. 198782, October 19, 2016
(1) whole year.
ALLAN BAZAR, Petitioner, v. CARLOS A. RUIZOL, Respondent.
The Court has laid down the following standards that an employer
should meet to justify retrenchment and to foil abuse, DECISION
namely:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
PEREZ, J.:
(a) The expected losses should be substantial and not merely de
minimis in extent; This is a petition for review of the Decision 1 and Resolution2 of the
Court of Appeals in CA-G.R. SP No. 00937-MIN dated 11 November
(b) The substantial losses apprehended must be reasonably 2010 and 8 September 2011, respectively.
imminent;
The antecedent facts follow.
(c) The retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; andcralawlibrary Respondent Carlos A. Ruizol (also identified as Carlos Ruisol in the
Complaint, Labor Arbiter's Decision and in other pleadings) was a
(d) The alleged losses, if already incurred, and the expected
mechanic at Norkis Distributors and assigned at the Surigao City
imminent losses sought to be forestalled must be proved by
branch. He was terminated effective 27 March 2002. At the time of
sufficient and convincing evidence.22ςrνll
his termination, respondent was receiving a monthly salary of
P2,050.00 and was working from 8:00 a.m. to 5:00 p.m. with a one-
chanrobles virtual law library
hour meal break for six (6) days in a week. Respondent claimed that
Anent the last standard of sufficient and convincing evidence, it petitioner Allan Bazar came from Tandag branch before he was
ought to be pointed out that a less exacting standard of proof would assigned as a new manager in the Surigao City branch. Respondent
render too easy the abuse of retrenchment as a ground for added that he was dismissed by petitioner because the latter wanted
termination of services of employees.23ςrνll to appoint his protege as a mechanic. Because of his predicament,
respondent filed a complaint before Regional Arbitration Branch No.
Was the retrenchment of respondent valid? XIII of the National Labor Relations Commission (NLRC) in Butuan
chanroblesvirtualawlibrary City for illegal dismissal and other monetary claims. An Amended
Complaint was filed on 12 August 2002 changing the name of the
In termination cases, the burden of proving that the dismissal was petitioner therein from Norkis Display Center to Norkis Distributors,
for a valid or authorized cause rests upon the employer. Here, Inc. (NDI).
petitioner did not submit evidence of the losses to its business
operations and the economic havoc it would thereby imminently Petitioner, on the other hand, alleged that NDI is a corporation
sustain. It only claimed that respondent s termination was due to its engaged in the sale, wholesale and retail of Yamaha motorcycle
"present business/financial condition." This bare statement fell short units. Petitioner countered that respondent is not an employee but a
of the norm to show a valid retrenchment. Hence, we hold that there franchised mechanic of NDI pursuant to a retainership agreement.
was no valid cause for the retrenchment of respondent. Petitioner averred that respondent, being the owner of a motor
repair shop, performed repair warranty service, back repair of
Indeed, not every loss incurred or expected to be incurred by an
Yamaha units, and ordinary repair at his own shop. Petitioner
employer can justify retrenchment. The employer must prove,
maintained that NDI terminated the retainership contract with
among others, that the losses are substantial and that the
respondent because they were no longer satisfied with the latter's
retrenchment is reasonably necessary to avert such losses. Thus, by
services.
its failure to present sufficient and convincing evidence to prove that
retrenchment was necessary, respondent s termination due to
On 8 October 2003,3 Executive Labor Arbiter Noel Augusto S.
retrenchment is not allowed.
Magbanua ruled in favor of respondent declaring him a regular
employee of NDI and that he was illegally dismissed, to wit:
The Court realizes that the lapse of time since the retrenchment
might have rendered respondent's reinstatement to his former job
chanRoblesvirtualLawlibrary
no longer feasible. If that should be true, then petitioner should
instead pay to him separation pay at the rate of one. month pay for
WHEREFORE, judgment is hereby rendered:
every year of service computed from September 1992 (when he
commenced to work for the petitioners) until the finality of this 1. Declaring [respondent] a regular employee of [NDI and
decision, and full backwages from the time his compensation was petitioner];
withheld until the finality of this decision.
2. Declaring [respondent's] dismissal illegal;
WHEREFORE, we DENY the Petition for Review on Certiorari, and
AFFIRM the decision of the Court of Appeals promulgated on 3. Ordering [NDI] to pay [respondent] Carlos A. Ruisol the
February 11, 2002, subject to the modification that should total amount of TWO HUNDRED THREE THOUSAND FIVE
Page12

reinstatement be no longer feasible, petitioner shall pay to

 HUNDRED FIFTY ONE PESOS & 33/100 (P203,551.33) CORRESPONDING PLEADING IN THE CASE",
representing his monetary award computed above. PURSUANT TO THE RULING OF THIS HONORABLE
SUPREME COURT IN THE CASE OF "HABANA VS.
4. Other claims of [respondent] are dismissed for lack of VAMENTA, ET AL., L-27091, JUNE 30, 1970."
merit.4
b. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FAILING TO APPLY THE LEGAL
The Labor Arbiter stressed that an employer-employee relationship PRINCIPLE THAT "IT IS BASIC THAT A
existed in this case. He did not give any weight to the unsworn CORPORATION IS INVESTED BY LAW WITH A
contract of retainership based on the reason that it is a clear [PERSONALITY] SEPARATE AND DISTINCT FROM
circumvention of respondent's security of tenure. THOSE OF THE PERSONS COMPOSING IT AS WELL
AS FROM THAT OF ANY OTHER LEGAL ENTITY TO
On appeal, petitioner reiterated that there is no employer-employee WHICH IT MAY BE RELATED.", PURSUANT TO THE
relationship between NDI and respondent because the latter is only RULING OF THE HONORABLE SUPREME COURT
a retainer mechanic of NDI. Finding merit in the appeal, the NLRC IN THE CASE OF "ELCEE FARMS, INC. VS.
reversed the ruling of the Labor Arbiter and dismissed the case for NATIONAL LABOR RELATIONS COMMISSION, 512
lack of cause of action. The NLRC held that respondent failed to SCRA 602."
refute petitioner's allegation that he personally owns a motor shop
offering repair and check-up services to other customers and that he c. THE HONORABLE COURT OF APPEALS GRAVELY
worked on the units referred by NDI either at his own motor shop or ERRED IN FAILING TO APPLY THE RULE
at NDI's service shop. The NLRC also ruled that NDI had no power of REGARDING "DECLARATION AGAINST INTEREST",
control and supervision over the means and method by which PURSUANT TO SECTION 38, RULE 130 ON THE
respondent performed job as mechanic. The NLRC concluded that REVISED RULES ON EVIDENCE.
respondent is bound to adhere to and respect the retainership
contract wherein he declared and acknowledged that he is not an d. THE HONORABLE COURT OF APPEALS GRAVELY
employee of NDI. ERRED IN FAILING TO APPLY THE DECISION OF
THE HONORABLE SUPREME COURT THAT "LD.
Respondent filed a petition for certiorari before the Court of CARDS WHERE THE WORDS "EMPLOYEE'S
Appeals, submitting that the Labor Arbiter's ruling had become final NAME" APPEAR PRINTED THEREIN DO NOT
with respect to NDI because the latter failed to appeal the same. · PROVE EMPLOYER EMPLOYEE RELATIONSHIP
Respondent asserted that the NLRC erred in ruling that there is no WHERE SAID I.D. CARDS ARE ISSUED FOR THE
employer-employee relationship between the parties. Respondent PURPOSE OF ENABLING CERTAIN
also prayed for re'i?statement. "CONTRACTORS" SUCH AS SINGERS AND BAND
PERFORMERS, TO ENTER THE PREMISES OF AN
On 11 November 2010, the Court of Appeals:granted the petition. ESTABLISHMENT", PURSUANT TO THE RULING OF
The Court of Appeals ruled that petitioner had no legal personality to THIS HONORABLE SUPREME COURT IN THE CASE
make the appeal for NDI. The Court of Appeals held that te labor OF "TSPIC CORPORATION VS. TSPIC EMPLOYEES
arbiter's decision with respect to NDI is final. The Court of Appeals UNION (FFE), 545 SCRA 215."
found that there was employer-employee relationship between
respondent and NDI and that respondent was unlawfully dismissed.
Finally, the Court of Appeals awarded respondent separation pay in
2. THE HONORABLE COURT OF APPEALS MANIFESTLY
lieu of reinstatement.
OVERLOOKED CERTAIN RELEVANT AND UNDISPUTED FACTS
THAT, IF PROPERLY CONSIDERED, WOULD JUSTIFY A
Petitioner sought reconsideration of the decision but its motion for
DIFFERENT CONCLUSION.
reconsideration was denied. Hence, this petition.
a. THE HONORABLE COURT OF APPEALS GRAVELY
Before this Court, petitioner assigns the following alleged errors ERRED IN FAILING TO DECLARE THAT "NORKIS
committed by the Court of Appeals: DISTRIBUTORS, INC. IS NOT A PARTY IN THE
INSTANT CASE."
chanRoblesvirtualLawlibrary
b. THE HONORABLE COURT OF APPEALS GRAVELY
1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ERRED IN FAILING TO DECLARE THAT "THE
GRANTING THE PETITION FOR CERTIORARI, AND DECISION OF THE LABOR ARBITER IS NOT
REVERSING THE "DECISION" AND "RESOLUTION" (ANNEXES BINDING UPON NORKIS DISTRIBUTORS, INC."
"A" AND "B") OF THE NATIONAL LABOR RELATIONS
COMMISSION - FIFTH DIVISION, CAGAYAN DE ORO CITY, AS c. THE HONORABLE COURT OF APPEALS GRAVELY
THE SAME ARE NOT IN ACCORDANCE WITH EXISTING LAWS ERRED IN DECLARING THAT, "WITH RESPECT TO
ANDIOR DECISIONS [PROMULGATED] BY THE HONORABLE NORKIS DISTRIBUTORS, INC., THE DECISION OF
SUPREME COURT. THE LABOR ARBITER HAD ALREADY BECOME
FINAL", FOR THE REASON THAT NO
a. THE HONORABLE COURT OF APPEALS GRAVELY JURISDICTION HAD BEEN ACQUIRED OVER
ERRED IN FAILING TO APPLY THE. DECISION OF NORKIS DISTRIBUTORS, INC. SINCE THERE WAS
THE HONORABLE SUPREME COURT THAT NO PROPER SERVICE OF SUMMONS UPON THE
"JURISDICTION CANNOT BE ACQUIRED OVER THE CORPORATION.
DEFENDANT WITHOUT SERVICE OF SUMMONS,
EVEN IF HE KNOWS OF THE CASE AGAINST HIM, d. THE HONORABLE COURT OF APPEALS GRAVELY
UNLESS HE VOLUNTARILY SUBMITS TO THE ERRED IN SETTING ASIDE THE "DECISION" OF THE
Page13

JURISDICTION OF THE COURT BY APPEARING NATIONAL LABOR RELATIONS COMMISSION

THEREIN AS THROUGH HIS COUNSEL FILING THE FIFTH DIVISION, CAGAYAN DE ORO CITY, AND
 REINSTATING THE "DECISION" OF THE LABOR
ARBITER, AS RESPONDENT IS NOT AN EMPLOYEE Interestingly, despite vehemently arguing that NDI was not bound by
OF NORKIS DISTRIBUTORS, INC., BUT ONLY A the ruling because it was not impleaded as respondent to the
"RETAINER MECHANIC", JUST LIKE A RETAINER complaint, petitioner in the same breath admits even if impliedly
LAWYER WHO IS NOT AN EMPLOYEE OF THE NDI is covered by the ruling, arguing that there cannot be any illegal
LAWYER'S CLIENT. dismissal because there is no employer-employee relationship
between NDI and respondent. We are not convinced.
e. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN DECLARING THE : EXISTENCE OF We emphasize at the outset that the existence of an employer
EMPLOYER-EMPLOYEE RELATIONSHIP, SINCE employee relationship is ultimately a question of fact. Only errors of
THERE IS AN ABSENCE OF EMPLOYER-EMPLOYEE law are generally reviewed by this Court. Factual findings of
RELATIONSHIP BETWEEN NORKIS DISTRIBUTORS, administrative and quasi-judicial agencies specializing in their
INC. AND RESPONDENT RUIZOL. respective fields, especially when affirmed by the Court of Appeals,
must be accorded high respect, if not finality. 7 We here see an
f. THE HONORABLE COURT OF APPEALS GRAVELY
exception to the rule on the binding effect on us of the factual
ERRED IN DISREGARDING THE "MASTERLIST OF
conclusiveness of the quasi-judicial agency. The findings of the Labor
ALL EMPLOYEES" OF NORKIS DISTRIBUTORS, INC.
Arbiter are in conflict with that of the NLRC and Court of Appeals.
AS PROOF THAT RESPONDENT RUIZOL IS NOT ITS
We can thus look into the factual issues involved in this case.
EMPLOYEE.
The four-fold test used in determining the, existence of employer
g. THE HONORABLE COURT OF APPEALS GRAVELY
employee relationship are: (a) the selection and engagement of the
ERRED IN AFFIRMING THE "DECISION" OF THE
employee; (b) the payment of wages; (c) the power of dismissal; and
LABOR ARBITER REGARDING THE AWARD OF 10%
(d) the employer's power to control the employee with respect to
ATTORNEY'S FEES, FOR THE REASON THAT
the means and. method by which the work is to be
RESPONDENT WAS, AT THAT TIME, REPRESENTED
accomplished.8chanrobleslaw
BY A PUBLIC LAWYER FROM THE PUBLIC
ATTORNEY'S OFFICE OF BUTUAN CITY.
In finding that respondent was an employee of NDI, the Court of
h. THE HONORABLE COURT OF APPEALS GRAVELY Appeals applied the four-fold test in this wise:
ERRED IN REINSTATING THE "DECISION" OF THE
LABOR ARBITER, WHICH AWARDS BACKWAGES, chanRoblesvirtualLawlibrary
SALARY DIFFERENTIAL, 13TH MONTH PAY,
x x x First, the services of [respondent] was indisputably engaged by
SEPARATION PAY, SERVICE INCENTIVE LEAVE AND
the [NDI] without the aid of a third party. Secondly, the fact that the
ATTORNEY'S FEES, AS THERE IS NO EMPLOYER-
[respondent] was paid a retainer fee and on a per diem basis does
EMPLOYEE RELATIONSHIP BETWEEN NDI AND
not altogether negate the existence of an [employer]-employee
RESPONDENT RUIZOL.5
relationship. The retainer agreement only provided the breakdown,
of the [respondent's] monthly income. On a more important note,
Petitioner first raises a question of procedure. Petitioner asserts that the [NDI] did not present its payroll, which it could conveniently do,
no summons was served on NDI. Thus, NDI had no reason to appeal to disprove the [respondent's] claim that he was their employee. x x
the adverse decision of the Labor Arbiter because jurisdiction over x
its person was not acquired by the labor tribunal. Considering the
foregoing, petitioner maintains that he cannot be made personally Third, the [NDI's] power of dismissal can be [gleaned] from the
liable for the monetary awards because he has a personality termination of the [respondent] although couched under the guise
separate and distinct from NDI. of the non-renewal of his contract with the company. Also, the
contract alone showed that the [respondent] provided service to
We partly grant the petition. Yamaha motorbikes brought to the NDI service shop in accordance
with the manual of the unit and subject to the minimum standards
The NLRC, despite ruling against an employer-employee relationship set by the company. Also, tool kits were furnished to the mechanics
had nevertheless upheld the jurisdiction of the Labor Arbiter over which they use in repairs and checking of the units conducted inside
NDI. The NLRC ruled and we agree, thus: or in front of the Norkis Display Center.9

chanRoblesvirtualLawlibrary
Petitioner argues that respondent was not engaged as an employee
Indeed, NDI was impleaded as respondent in this case as clearly but the parties voluntarily executed a retainership contract where
indicated in the amended complaint filed by [respondent] on August respondent became NDI's retainer mechanic; that respondent was
12, 2002, contrary to the belief of [NDI and petitioner]. And paid a retainer's fee similar to that of the services of lawyers; that
considering that the summons and other legal processes issued by the termination of the retainership contract does not constitute
the Regional Arbitration Branch a quo were duly served to illegal dismissal of the retained mechanic; and that NDI is only
[petitioner] in his capacity as branch manager of NDI, the Labor interested in the outcome of respondent's work. Petitioner further
Arbiter had validly acquired jurisdiction over the juridical person of explained that respondent is free to use his own means and methods
NDI.6 by which his work is to be accomplished and the manual of the
Yamaha motorbike unit is necessary in order to guide respondent in
the repairs of the motorbikes.
The Court of Appeals correctly added that the Labor Arbiter's ruling
with respect to NDI has become final and executory for the latter's At the outset, respondent denied the existence of a retainership
failure to appeal within the reglementary period; and that petitioner contract. Indeed, the contract presented by NDI was executed by the
had no legal personality to appeal for and/or behalf of the latter and a certain Eusequio Adorable. The name "Carlos Ruizol" was
Page14

corporation. merely added as a retainer/franchised mechanic and the same was

unsigned. Assuming, however, that such a contract did exist, its which his work is to be accomplished. The records show the
provisions should not bind respondent. We agree with the Labor contrary. It was shown that respondent had to abide by the
Arbiter on the following points: standards sets by NDI in conducting repair work on Yamaha
motorbikes done in NDI's service shop. As a matter of fact, on
chanRoblesvirtualLawlibrary allegations that respondent failed to live up to the demands of the
work, he was sent several memoranda14 by NDI. We agree with the
Paragraph 5 and 6 of the unsworned contract of Retainership Labor Arbiter that the presence of control is evident thus:
between [respondent] and [NDI and petitioner] dated March 1, 1989
states as follows:ChanRoblesVirtualawlibrary chanRoblesvirtualLawlibrary

"5. That the franchised mechanic, though not an employee of the This Branch agree with the complainants' contention that there is no
NDI agrees to observe and abide by the rules and regulations by the contract and that he is a regular employee as shown in Annexes "2"
NDI aims to maintain a good quality and efficient service to & "3" respectively of the respondents position paper, as
customer. follows:ChanRoblesVirtualawlibrary

6.) Franchised mechanic hereby acknowledge that he is not an "Furthermore, you are directed and advice to religiously follow
employee of NDI, hence, not entitled to Labor Standard benefits. orders from your immediate superior x x x

It bears stressing that the contents of the unsworn Contract of Failure on your part to submit a written explanation will be
Retainership is a clear circumvention of the security of tenure construed as a waiver of your right and your case will be decided
pursuant to Articles 279 and 280 of the Labor Code. The agreement based on available information"
embodied in the said contract is contrary to law. thus [respondent] is
not bound to comply with the same.10chanroblesvirtuallawlibrary The above memo is so worded in a way that it unmistakably show
that it is addressed to the [respondent] who is an employee of [NDI].
It shows clearly the presence of the element of "control" by [NDI and
NDI admitted to have engaged the services of respondent, although petitioner] over [respondent's] manner of
under the guise of a retainership agreement. The fact of engagement work.15chanroblesvirtuallawlibrary
does not exclude the power ofNDI to hire respondent as its
employee.
Petitioner points out that respondent actually owns a motor repair
Assuming that respondent signed the retainership agreement, it is shop where he performs repair warranty service and back job repairs
not indicative of his employment status. It is the law that defines and of Yamaha motorcycles for NDI and other clients. This allegation was
governs an employment relationship, whose terms are not restricted unsubstantiated. We cannot give credit to such claim.
by those fixed in the written contract, for other factors, like the
nature of the work the employee has been called upon to perform, Petitioner argues that the appellate court erred in holding that
are also considered. The law affords protection to an employee, and respondent is an employee of NDI based on the identification card
does not countenance any attempt to subvert its spirit and intent. issued to him. While it is true that identification cards do not prove
Any stipulation in writing can be ignored when the employer utilizes employer employee relationship, the application of the four-fold test
the stipulation to deprive the employee of his security of tenure. The in this case proves that an employer-employee relationship did exist
inequality that characterizes employer-employee relations generally between respondent and NDI.
tips the scales in favor of the employer, such that the employee is
often scarcely provided real and better options. 11chanrobleslaw Since it was sufficiently established that petitioner is an employee of
NDI, he is entitled to security of tenure. He can only be dismissed for
Petitioner claims that respondent was receiving 1!2,050.00 as his a just or authorized cause. Petitioner was dismissed through a letter
monthly retainer's fee as of his termination in March 2002. This fee informing him of termination of contract of retainership which we
is covered by the term "wages" and defined as remuneration or construe as a termination notice. For lack of a just or authorized
earnings, however designated, capable of being expressed in terms cause coupled with failure to observe the twin-notice rule in
of money, whether· fixed or ascertained on a time, task, piece or termination cases, respondent's dismissal is clearly illegal.
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten An illegally dismissed employee is entitled to two reliefs: backwages
contract 'of employment for work done or to be done, or for service and reinstatement. The two reliefs provided are separate and
rendered or to be rendered. 12 For services rendered to NDI, distinct. In instances where reinstatement is no longer feasible
respondent received compensation. NDI could have easily disproved because of strained relations between the employee and the
that respondent was its employee by presenting the manner by employer, separation pay is granted. In effect, an illegally dismissed
which such compensation was paid to respondent. NDI did not do employee is entitled to either reinstatement, if viable, or separation
so. pay if reinstatement is no longer viable, and
backwages.16chanrobleslaw
That NDI had the power to dismiss respondent was clearly evidenced
by the fact that respondent's services were terminated. Based on the foregoing, we affirm that NDI is not only liable for
respondent's illegal dismissal, but that the Labor Arbiter's decision
The control test is the most crucial and determinative indicator of against it had already become final and executory.
the presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists We now go to the liability of petitioner for payment of the monetary
where the person for whom the services are performed reserves the award. There is solidary liability when the obligation expressly so
right to control not only the end achieved, but also the manner and states, when the law so provides, or when the nature of the
means to be used in reaching that end. 13chanrobleslaw obligation so requires.17 Settled is the rule that a director or officer
shall only be personally liable for the obligations of the corporation,
Page15

Petitioner asserts that NDI did not exercise the power of control over if the following conditions concur: (1) the complainant alleged in the
respondent because he is free to use his own means and methods by complaint that the director or officer assented to patently unlawful
acts of the corporation, or that the officer was guilty of gross agreement. According to petitioners, during their dialogue on August
negligence or bad faith; and (2) the complainant clearly and 18, 1997, Lu terminated their services right there and then because
convincingly proved such unlawful acts, negligence or bad of their refusal to sign the agreement. On the other hand, Lu alleged
faith.18chanrobleslaw that the master fisherman (piado) Ruben Salili informed him that
petitioners still refused to sign the agreement and have decided to
In the instant case, there is an allegation that petitioner dismissed return the vessel F/B MG-28.
respondent because he wanted to hire his own mechanic. However,
this remained to be an allegation absent sufficient proof of motive On August 25, 1997, petitioners filed their complaint for illegal
behind respondent's termination. Petitioner may have directly issued dismissal, monetary claims and damages. Despite serious efforts
the order to dismiss respondent but respondent must prove with made by Labor Arbiter (LA) Arturo P. Aponesto, the case was not
certainty bad faith on the part of petitioner. No bad faith can be amicably settled, except for the following matters: (1) Balansi 8 and
presumed from the lone fact that immediately after respondent's 9; (2) 10% piado share; (3) sud-anon refund; and (4) refund of
termination, a new mechanic was hired. That the new mechanic was payment of motorcycle in the amount of P15,000.00. LA Aponesto
actually petitioner's protege is a mere allegation with no proof. further inhibited himself from the case out of "delicadeza," and the
Therefore, petitioner, as branch manager, cannot be held solidarily case was raffled to LA Amado M. Solamo.
liable with NDI.
In their Position Paper, petitioners alleged that their refusal to sign
the Joint Venture Fishing Agreement is not a just cause for their
WHEREFORE, the instant Petition is PARTLY GRANTED. The Decision
termination. Petitioners also asked for a refund of the amount of
dated 11 November 2010 and Resolution dated 8 September 2011 of
P8,700,407.70 that was taken out of their 50% income share for the
the Court of Appeals in CA-G.R. SP No. 00937-MIN reinstating the
repair and maintenance of boat as well as the purchase of fishing
Decision of the Labor Arbiter declaring respondent Carlos Ruizol's
materials, as Lu should not benefit from such deduction.
dismissal as illegal are AFFIRMED. Petitioner Allan Bazar is
however ABSOLVED from the liability adjudged against Norkis
On the other hand, Lu denied having dismissed petitioners, claiming
Distributors, Inc.
that their relationship was one of joint venture where he provided
the vessel and other fishing paraphernalia, while petitioners, as
SO ORDERED.chanRoblesvirtualLawlibrary
industrial partners, provided labor by fishing in the high seas. Lu
alleged that there was no employer-employee relationship as its
Velasco, Jr., (Chairperson), Peralta, Reyes, and Jardeleza, JJ., concur.
elements were not present, viz.: it was the piado who hired
petitioners; they were not paid wages but shares in the catch, which
SECOND DIVISION
they themselves determine; they were not subject to his discipline;
G.R. No. 197899, March 06, 2017 and respondent had no control over the day-to-day fishing
operations, although they stayed in contact through respondent's
JOAQUIN LU, Petitioner, v. TIRSO ENOPIA, ROBERTO ABANES, radio operator or checker. Lu also claimed that petitioners should not
ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL CAHAYAG, be reimbursed for their share in the expenses since it was their joint
ALEJANDRO CAMPUGAN, RUPERTO CERNA, JR., REYNALDO CERNA, venture that shouldered these expenses.3
PETER CERVANTES, LEONARDO CONDESTABLE, ROLANDO ESLOPOR,
ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO On June 30, 1998, the LA rendered a Decision 4 dismissing the case
FUDOLIN, LEO GRAPANI, FELIX HUBAHIB, JERRY JUAGPAO, for lack of merit finding that there was no employer-employee
MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO MONIVA, relationship existing between petitioner and the respondents but a
VICTORIANO ORTIZ, JR., RENALDO PIALAN, ALFREDO PRUCIA, joint venture.
PONCIANO REANDO, HERMENIO REMEGIO, DEMETRIO RUAYA,
In so ruling, the LA found that: (1) respondents were not hired by
EDGARDO RUSIANA, NESTOR SALILI, VICENTE SASTRELLAS, ROMEO
petitioner as the hiring was done by the piado or master fisherman;
SUMAYANG, and DESIDERIO TABAY, Respondents.
(2) the earnings of the fishermen from the labor were in the form of
DECISION wages they earned based on their respective shares; (3) they were
never disciplined nor sanctioned by the petitioner; and, (4) the
PERALTA, J.: income-sharing and expense splitting was no doubt a working set up
in the nature of an industrial partnership. While petitioner issued
Before us is a petition for review on certiorari filed by Joaquin Lu memos, orders and directions, however, those who were related
which seeks to reverse and set aside the Decision 1 dated October 22, more on the aspect of management and supervision of activities
2010 and the Resolution2 dated May 12, 2011, respectively, of the after the actual work was already done for purposes of order in
Court of Appeals issued in CA-G.R. SP No. 55486-MIN. hauling and sorting of fishes, and thus, not in the nature of control as
to the means and method by which the actual fishing operations
The facts of the case, as stated by the Court of Appeals, are as
were conducted as the same was left to the hands of the master
follows:
fisherman.
Petitioners (now herein respondents) were hired from January 20,
The LA also ruled that the checker and the use of radio were for the
1994 to March 20, 1996 as crew members of the fishing mother boat
purpose of monitoring and supplying the logistics requirements of
F/B MG-28 owned by respondent Joaquin "Jake" Lu (herein
the fishermen while in the sea; and that the checkers were also
petitioner Lu) who is the sole proprietor of Mommy Gina Tuna
tasked to monitor the recording of catches and ensure that the
Resources [MGTR] based in General Santos City. Petitioners and Lu
proper sharing system was implemented; thus, all these did not
had an income-sharing arrangement wherein 55% goes to Lu, 45% to
mean supervision on how, when and where to fish.
the crew members, with an additional 4% as "backing incentive."
They also equally share the expenses for the maintenance and repair Respondents appealed to the National Labor Relations Commission
of the mother boat, and for the purchase of nets, ropes and payaos. (NLRC), which affirmed the LA Decision in its Resolution 5 dated
March 12, 1999. Respondents' motion for reconsideration was
Sometime in August 1997, Lu proposed the signing of a Joint Venture
denied in a Resolution6 dated July 9, 1999.
Page16

Fishing Agreement between them, but petitioners refused to sign

the same as they opposed the one-year term provided in the
Respondents filed a petition for certiorari with the CA which (assistant piado) employed by him; (3) respondents were paid based
dismissed7 the same for having been filed beyond the 60-day on a percentage share of the fish catch did not in any way affect their
reglementary period as provided under Rule 65 of the Rules of Court, regular employment status; and (4) petitioner had already invested
and that the sworn certification of non-forum shopping was signed millions of pesos in its deep-sea fishing industry, hence, it is highly
only by two (2) of the respondents who had not shown any authority improbable that he had no control over respondents' fishing
to sign in behalf of the other respondents. As their motion for operations.
reconsideration was denied, they went to Us via a petition
for certiorari assailing the dismissal which We granted in a Petitioner's motion for reconsideration was denied by the CA in its
Resolution8 dated July 31, 2006 and remanded the case to the CA for Resolution dated May 12, 2011.
further proceedings.
Aggrieved, petitioner filed the instant petition for review
Petitioner filed its Comment to the petition. The parties submitted on certiorari citing the following as reasons for granting the same, to
their respective memoranda as required by the CA. wit:

On October 22, 2010, the CA rendered its assailed Decision reversing I

the NLRC, the decretal portion of which reads as follows:
THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED
WHEREFORE, premises considered, the assailed March 12, 1999 DECISION CONTRARY TO LAW AND LOGIC BY CITING THE ABSENCE
Resolution of public respondent National Labor Relations OF PROOF OF REQUISITES OF A VALID DISMISSAL AS BASIS FOR
Commission (NLRC), Fifth Division, Cagayan de Oro City, is hereby CONCLUDING THAT THE NLRC GRAVELY ABUSED ITS DISCRETION.
REVERSED and SET ASIDE, and a new one is entered.
II
Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru
THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION
its sole proprietor/general manager, Joaquin T. Lu (Lu), is hereby
BY TREATING RESPONDENTS' PETITION FOR CERTIORARI UNDER
ORDERED to pay each of the petitioners, namely, TIRSO ENOPIA,
RULE 65 AS AN ORDINARY APPEAL, AND BY INSISTING ON ITS OWN
ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL
EVALUATION OF THE EVIDENCE.
CAHAYAG, ALEJANDRO CAMPUNGAN, RUPERTO CERNA, JR.,
REYNALDO CERNA, PETER CERVANTES, LEONARDO CONDESTABLE,
III
ROLANDO ESLOPOR, ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO
FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX HUBAHIB, JERRY THE HONORABLE COURT OF APPEALS RENDERED THE DECISION
JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO DATED 22 OCTOBER 2010 CONTRARY TO LAW AND THE EVIDENCE
MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO ON RECORD.
PIALAN, ALFREDO PRUCIA, POCIANO REANDO, HERMENIO REMEGIO,
DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI, RICHARD IV
SALILI, SAMUEL SALILI, VICENTE SASTRELLAS, ROMEO SUMAYANG
and DESIDERIO TABAY the following: THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS BY
(1) SEPARATION PAY (in lieu of the supposed reinstatement) MAKING ITS ASSAILED DECISION IMMEDIATELY EXECUTORY PENDING
equivalent to one (1) month pay for every year of service reckoned APPEAL IN SPITE OF THE FACT THAT RESPONDENTS DID NOT ASK FOR
from the very moment each petitioner was hired as fishermen-crew IMMEDIATE PAYMENT OF SEPARATION PAY AND OTHER CLAIMS, AND
member of F/B MG-28 by MGTR until the finality of this judgment. A DESPITE THE CLAIM OF RESPONDENTS THAT MOST OF THEM ARE
fraction of at least six (6) months shall be considered one (1) whole CURRENTLY EMPLOYED IN OTHER DEEP-SEA FISHING COMPANIES. 10
year. Any fraction below six months shall be paid pro rata;
Petitioner contends that no grave abuse of discretion can be
(2) FULL BACKWAGES (inclusive of all allowances and other benefits attributed to the NLRC's finding affirming that of the LA that the
required by law or their monetary equivalent) computed from the arrangement between petitioner and respondents was a joint
time they were dismissed from employment on August 18, 1997 venture partnership; and that the CA, in assuming the role of an
until finality of this Judgment; appellate body, had re-examined the facts and re-evaluated the
evidence thereby treating the case as an appeal instead of an
(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos original action for certiorari under Rule 65.
(P50,000.00);
We are not persuaded.
(4) ATTORNEY'S FEES equivalent to 10% of the total monetary award.
In Prince Transport, Inc. v. Garcia,11 We held:
Considering that a person's income or earning is his "lifeblood," so to
speak, i.e., equivalent to life itself, this Decision is The power of the CA to review NLRC decisions via a petition
deemed immediately executory pending appealshould MGTR for certiorari under Rule 65 of the Rules of Court has been settled as
decide to elevate this case to the Supreme Court. early as this Court's decision in St. Martin Funeral Homes v. NLRC. In
said case, the Court held that the proper vehicle for such review is a
Let this case be referred back to the Office of the Labor Arbiter for special civil action for certiorari under Rule 65 of the said Rules, and
proper computation of the awards.9 that the case should be filed with the CA in strict observance of the
doctrine of hierarchy of courts. Moreover, it is already settled that
The CA found that petitioner exercised control over respondents
under Section 9 of Batas Pambansa Blg. 129, as amended by
based on the following: (1) respondents were the fishermen crew
Republic Act No. 7902, the CA, pursuant to the exercise of its original
members of petitioner's fishing vessel, thus, their services to the
jurisdiction over petitions for certiorari, is specifically given the
latter were so indispensable and necessary that without them,
power to pass upon the evidence, if and when necessary, to resolve
petitioner's deep-sea fishing industry would not have come to
factual issues. Section 9 clearly states:
existence much less fruition; (2) he had control over the entire
fishing operations undertaken by the respondents through the xxx
Page17

master fisherman (piado) and the assistant master fisherman

The Court of Appeals shall have the power to try cases and conduct respondents with SSS is proof that they were indeed his employees.
hearings, receive evidence and perform any and all acts necessary to The coverage of the Social Security Law is predicated on the
resolve factual issues raised in cases falling within its original and existence of an employer-employee relationship.18
appellate jurisdiction, including the power to grant and conduct new
trials or further proceedings. x x x. Moreover, the records show that the 4% backing incentive fee which
was divided among the fishermen engaged in the fishing operations
However, equally settled is the rule that factual findings of labor approved by petitioner was paid to respondents after deducting the
officials, who are deemed to have acquired expertise in matters latter's respective vale or cash advance.19 Notably, even
within their jurisdiction, are generally accorded not only respect but the piado's name was written in the backing incentive fee sheet with
even finality by the courts when supported by substantial the corresponding vale which was deducted from his incentive fee. If
evidence, i.e., the amount of relevant evidence which a reasonable indeed a joint venture was agreed upon between petitioner and
mind might accept as adequate to justify a conclusion. But these respondents, why would these fishermen obtain vale or cash
findings are not infallible. When there is a showing that they were advance from petitioner and not from the piado who allegedly hired
arrived at arbitrarily or in disregard of the evidence on record, they and had control over them.
may be examined by the courts. The CA can grant the petition
for certiorari if it finds that the NLRC, in its assailed decision or It was established that petitioner exercised control over
resolution, made a factual finding not supported by substantial respondents. It should be remembered that the control test merely
evidence. It is within the jurisdiction of the CA, whose jurisdiction calls for the existence of the right to control, and not necessarily the
over labor cases has been expanded to review the findings of the exercise thereof. It is not essential that the employer actually
NLRC.12 supervises the performance of duties by the employee. It is enough
that the former has a right to wield the power. 20
Here, the LA's factual findings was affirmed by the NLRC, however,
the CA found that the latter's resolution did not critically examine Petitioner admitted in his pleadings that he had contact with
the facts and rationally assess the evidence on hand, and thus found respondents at sea via the former's radio operator and their checker.
that the NLRC gravely abused its discretion when it sustained the He claimed that the use of the radio was only for the purpose of
LA's decision dismissing respondents' complaint for illegal dismissal receiving requisitions for the needs of the fishermen in the high seas
on the ground of lack of merit. The judicial function of the CA in the and to receive reports of fish catch so that they can then send
exercise of its certiorari jurisdiction over the NLRC extends to the service boats to haul the same. However, such communication would
careful review of the NLRC's evaluation of the evidence because the establish that he was constantly monitoring or checking the progress
factual findings of the NLRC are accorded great respect and finality of respondents' fishing operations throughout the duration thereof,
only when they rest on substantial evidence. 13 Accordingly, the CA is which showed their control and supervision over respondents'
not to be restrained from revising or correcting such factual findings activities. Consequently, We give more credence to respondents'
whenever warranted by the circumstances simply because the NLRC allegations in their petition filed with the CA on how such control
is not infallible. Indeed, to deny to the CA this power is to diminish was exercised, to wit:
its corrective jurisdiction through the writ of certiorari.14
The private respondent (petitioner) controls the entire fishing
The main issue for resolution is whether or not an employer- operations. For each mother fishing boat, private respondent
employee relationship existed between petitioner and respondents. assigned a master fisherman (piado) and assistant master fisherman
(assistant piado), who every now and then supervise the fishing
At the outset, We reiterate the doctrine that the existence of an operations. Private respondent also assigned a checker and assistant
employer-employee relationship is ultimately a question of fact. checker based on the office to monitor and contact every now and
Generally, We do not review errors that raise factual questions. then the crew at sea through radio. The checker and assistant
However, when there is a conflict among the factual findings of the checker advised then the private respondent of the condition. Based
antecedent deciding bodies like the LA, the NLRC and the CA, it is on the report of the checker, the private respondent, through radio,
proper, in the exercise of Our equity jurisdiction, to review and re- will then instruct the "piado" how to conduct the fishing
evaluate the factual issues and to look into the records of the case operations.21
and re-examine the questioned findings. In dealing with factual
issues in labor cases, substantial evidence or that amount of relevant Such allegations are more in consonance with the fact that, as the CA
evidence which a reasonable mind might accept as adequate to found, MGTR had already invested millions of pesos in its deep-sea
justify a conclusion is sufficient. 15 fishing industry.

In determining the existence of an employer-employee relationship, The payment of respondents' wages based on the percentage share
the following elements are considered: (1) the selection and of the fish catch would not be sufficient to negate the employer-
engagement of the workers; (2) the power to control the worker's employee relationship existing between them. As held in Ruga v.
conduct; (3) the payment of wages by whatever means; and (4) the NLRC:22
power of dismissal.16 We find all these elements present in this case.
x x x [I]t must be noted that petitioners received compensation on a
It is settled that no particular form of evidence is required to prove percentage commission based on the gross sale of the fish-catch, i.e.,
the existence of an employer-employee relationship. Any competent 13% of the proceeds of the sale if the total proceeds exceeded the
and relevant evidence to prove the relationship may be admitted. 17 cost of the crude oil consumed during the fishing trip, otherwise,
only 10% of the proceeds of the sale. Such compensation falls within
In this case, petitioner contends that it was the piado who hired the scope and meaning of the term "wage" as defined under Article
respondents, however, it was shown by the latter's evidence that the 97(f) of the Labor Code, thus:
employer stated in their Social Security System (SSS) online inquiry
system printouts was MGTR, which is owned by petitioner. We have (f) "Wage" paid to any employee shall mean the remuneration or
gone over these printouts and found that the date of the SSS earnings, however designated, capable of being expressed in terms
remitted contributions coincided with the date of respondents' of money, whether fixed or ascertained on a time, task, piece or
employment with petitioner. Petitioner failed to rebut such commission basis, or other method of calculating the same, which is
Page18

evidence. Thus, the fact that petitioner had registered the payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and included the fair and reasonable The CA correctly found that respondents are entitled to the payment
value, as determined by the Secretary of Labor, of board, lodging, or of backwages from the time they were dismissed until the finality of
other facilities customarily furnished by the employer to the this decision.
employee. x x x23
The CA's award of exemplary damages to each respondent is likewise
Petitioner wielded the power of dismissal over respondents when he affirmed. Exemplary damages are granted by way of example or
dismissed them after they refused to sign the joint fishing venture correction for the public good if the employer acted in a wanton,
agreement. fraudulent, reckless, oppressive or malevolent manners. 30

The primary standard for determining regular employment is the We also agree with the CA that respondents are entitled to
reasonable connection between the particular activity performed by attorney's fees in the amount of 10% of the total monetary award. It
the employee in relation to the usual trade or business of the is settled that where an employee was forced to litigate and, thus,
employer.24Respondents' jobs as fishermen-crew members of F/B incur expenses to protect his rights and interest, the award of
MG 28 were directly related and necessary to petitioner's deep-sea attorney's fees is legally and morally justifiable.31
fishing business and they had been performing their job for more
than one year. We quote with approval what the CA said, to wit: The legal interest shall be imposed on the monetary awards herein
granted at the rate of six percent (6%) per annum from the finality of
Indeed, it is not difficult to see the direct linkage or causal this judgment until fully paid.32
connection between the nature of petitioners' (now respondents)
work visa-vis MGTR's line of business. In fact, MGTR's line of Petitioner's contention that there is no justification to incorporate in
business could not possibly exist, let alone flourish without people the CA decision the immediate execution pending appeal of its
like the fishermen crew members of its fishing vessels who actually decision is not persuasive. The petition for certiorari filed with the
undertook the fishing activities in the high seas. Petitioners' services CA contained a general prayer for such other relief and remedies just
to MGTR are so indispensable and necessary that without them and equitable under the premises. And this general prayer is broad
MGTR's deep-sea fishing industry would not have come to existence, enough to justify extension of a remedy different from or together
much less fruition. Thus, We do not see any reason why the ruling of with the specific remedy sought.33 Indeed, a court may grant relief to
the Supreme Court in Ruga v. National Labor Relations a party, even if the party awarded did not pray for it in his
Commission should not apply squarely to the instant case, viz.: pleadings.34

x x x The hiring of petitioners to perform work which is necessary or WHEREFORE, the petition for review on certiorari is DENIED. The
desirable in the usual business or trade of private respondent x x x Decision dated October 22, 2010 and the Resolution dated May 12,
[qualifies] them as regular employees within the meaning of Article 2011 of the Court of Appeals in CA-G.R. SP No. 55486-MIN are
28025 of the Labor Code as they were indeed engaged to perform hereby AFFIRMED. The monetary awards which are herein granted
activities usually necessary or desirable in the usual fishing business shall earn legal interest at the rate of six percent (6%) per
or occupation of private respondent.26 annum from the date of the finality of this Decision until fully paid.

As respondents were petitioner's regular employees, they are SO ORDERED.

entitled to security of tenure under Section 3,27 Article XIII of the
Carpio, (Chairperson), Mendoza, Leonen, and Jardeleza, JJ., concur.
1987 Constitution. It is also provided under Article 279 of the Labor
Code, that the right to security of tenure guarantees the right of
employees to continue in their employment absent a just or
authorized cause for termination. Considering that respondents
were petitioner's regular employees, the latter's act of asking them
to sign the joint fishing venture agreement which provides that the
venture shall be for a period of one year from the date of the
agreement, subject to renewal upon mutual agreement of the
parties, and may be pre-terminated by any of the parties before the
expiration of the one-year period, is violative of the former's security
of tenure. And respondents' termination based on their refusal to
sign the same, not being shown to be one of those just causes for
termination under Article 282,28 is, therefore, illegal.

An employee who is unjustly dismissed from work shall be 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.29

Respondents who were unjustly dismissed from work are entitled to

reinstatement and backwages, among others. However, We agree
with the CA that since most (if not all) of the respondents are already
employed in different deep-sea fishing companies, and considering
the strained relations between MGTR and the respondents,
reinstatement is no longer viable. Thus, the CA correctly ordered the
payment to each respondent his separation pay equivalent to one
month for every year of service reckoned from the time he was hired
as fishermen-crew member of F/B MG-28 by MGTR until the finality
Page19

of this judgment.