no.2 whole case

7/28/2019 No.2 Whole Case

1/92

G.R. No. L-69870 November 29, 1988

NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,vs.THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRYOF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.

G.R. No. 70295 November 29,1988

EUGENIA C. CREDO, petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION ANDARTURO L. PEREZ, respondents.

The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.

Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA,J.:

Consolidated special civil actions for certiorari seeking to review the decision * of the Third Division,National Labor Relations Commission in Case No. 11-4944-83 dated 28 November 1984 and itsresolution dated 16 January 1985 denying motions for reconsideration of said decision.

Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domesticcorporation which provides security guards as well as messengerial, janitorial and other similarmanpower services to the Philippine National Bank (PNB) and its agencies. She was first employed withNASECO as a lady guard on 18 July 1975. Through the years, she was promoted to Clerk Typist, thenPersonnel Clerk until she became Chief of Property and Records, on 10 March 1980. 1

Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren, Managerof Finance and Special Project and Evaluation Department of NASECO, stemming from her non-compliance with Lloren's memorandum, dated 11 October 1983, regarding certain entry procedures inthe company's Statement of Billings Adjustment. Said charges alleged that Credo "did not comply withLloren's instructions to place some corrections/additional remarks in the Statement of BillingsAdjustment; and when [Credo] was called by Lloren to his office to explain further the saidinstructions, [Credo] showed resentment and behaved in a scandalous manner by shouting anduttering remarks of disrespect in the presence of her co-employees." 2

On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager ofNASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in connectionwith the administrative charges filed against her. After said meeting, on the same date, Credo was

placed on "Forced Leave" status for 1 5 days, effective 8 November 1983. 3

Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint, docketedas Case No. 114944-83, with the Arbitration Branch, National Capital Region, Ministry of Labor andEmployment, Manila, against NASECO for placing her on forced leave, without due process. 4

Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee onPersonnel Affairs deliberated and evaluated a number of past acts of misconduct or infractionsattributed to her. 5 As a result of this deliberation, said committee resolved:

1. That, respondent [Credo] committed the following offenses in the Code of Discipline,viz:

OFFENSE vs. Company Interest & Policies


2/92

No. 3 Any discourteous act to customer, officer and employee of client company orofficer of the Corporation.

OFFENSE vs. Public Moral

No. 7 Exhibit marked discourtesy in the course of official duties or use of profane orinsulting language to any superior officer.

OFFENSE vs. Authority

No. 3 Failure to comply with any lawful order or any instructions of a superior officer.

2. That, Management has already given due consideration to respondent's [Credo]scandalous actuations for several times in the past. Records also show that she wasreprimanded for some offense and did not question it. Management at this juncture, hasalready met its maximum tolerance point so it has decided to put an end to respondent's[Credo] being an undesirable employee. 6

The committee recommended Credo's termination, with forfeiture of benefits. 7

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was beingcharged with certain offenses. Notably, these offenses were those which NASECO's Committee onPersonnel Affairs already resolved, on 22 November 1983 to have been committed by Credo.

In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was made toexplain her side in connection with the charges filed against her; however, due to her failure to doso, 8 she was handed a Notice of Termination, dated 24 November 1983, and made effective 1December 1983. 9 Hence, on 6 December 1983, Credo filed a supplemental complaint for illegaldismissal in Case No. 11-4944-83, alleging absence of just or authorized cause for her dismissal andlack of opportunity to be heard. 10

After both parties had submitted their respective position papers, affidavits and other documentary

evidence in support of their claims and defenses, on 9 May 1984, the labor arbiter rendered a decision:1) dismissing Credo's complaint, and 2) directing NASECO to pay Credo separation pay equivalent toone half month's pay for every year of service. 11

Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former position,or substantially equivalent position, with six (6) months' backwages and without loss of seniority rightsand other privileges appertaining thereto, and 2) dismissing Credo's claim for attorney's fees, moraland exemplary damages. As a consequence, both parties filed their respective motions forreconsideration, 12 which the NLRC denied in a resolution of 16 January 1985. 13

Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave abuse

of discretion the dispositive portion of the 28 November 1984 decision which ordered Credo'sreinstatement with backwages. 14Petitioners contend that in arriving at said questioned order, theNLRC acted with grave abuse of discretion in finding that: 1) petitioners violated the requirementsmandated by law on termination, 2) petitioners failed in the burden of proving that the termination ofCredo was for a valid or authorized cause, 3) the alleged infractions committed by Credo were notproven or, even if proved, could be considered to have been condoned by petitioners, and 4) thetermination of Credo was not for a valid or authorized cause. 15

On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion thedispositive portion of the 28 November 1984 decision which dismissed her claim for attorney's fees,moral and exemplary damages and limited her right to backwages to only six (6) months. 16

As guidelines for employers in the exercise of their power to dismiss employees for just causes, the lawprovides that:


3/92

Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker shallfurnish him a written notice stating the particular acts or omission constituting thegrounds for his dismissal.

xxx xxx xxx

Section 5.Answer and Hearing. The worker may answer the allegations stated againsthim in the notice of dismissal within a reasonable period from receipt of such notice. The

employer shall afford the worker ample opportunity to be heard and to defend himselfwith the assistance of his representative, if he so desires.

Section 6. Decision to dismiss. The employer shall immediately notify a worker inwriting of a decision to dismiss him stating clearly the reasons therefor. 17

These guidelines mandate that the employer furnish an employee sought to be dismissed two (2)written notices of dismissal before a termination of employment can be legally effected. These are thenotice which apprises the employee of the particular acts or omissions for which his dismissal is soughtand the subsequent notice which informs the employee of the employer's decision to dismiss him.

Likewise, a reading of the guidelines in consonance with the express provisions of law on protection to

labor18

(which encompasses the right to security of tenure) and the broader dictates of procedural dueprocess necessarily mandate that notice of the employer's decision to dismiss an employee, withreasons therefor, can only be issued after the employer has afforded the employee concerned ampleopportunity to be heard and to defend himself.

In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal.Although she was apprised and "given the chance to explain her side" of the charges filed against her,this chance was given so perfunctorily, thus rendering illusory Credo's right to security of tenure. ThatCredo was not given ample opportunity to be heard and to defend herself is evident from the fact thatthe compliance with the injunction to apprise her of the charges filed against her and to afford her achance to prepare for her defense was dispensed in only a day. This is not effective compliance withthe legal requirements aforementioned.

The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her)was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO was alreadybent on terminating her services when she was informed on 1 December 1983 of the charges againsther, and that any hearing which NASECO thought of affording her after 24 November 1983 wouldmerely be pro forma or an exercise in futility.

Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures inthe company's Statement of Billings Adjustment did not warrant the severe penalty of dismissal of theNLRC correctly held that:

... on the charge of gross discourtesy, the CPA found in its Report, dated 22 November

1983 that, "In the process of her testimony/explanations she again exhibited a conductunbecoming in front of NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic anddiscourteous manner, notwithstanding, the fact that she was inside the office of theAcctg. General Manager." Let it be noted, however, that the Report did not even describehow the so called "conduct unbecoming" or "discourteous manner" was done bycomplainant. Anent the "sarcastic" argument of complainant, the purportedtranscript 19 of the meeting held on 7 November 1983 does not indicate any sarcasm onthe part of complainant. At the most, complainant may have sounded insistent oremphatic about her work being more complete than the work of Ms. de Castro, yet, thecomplaining officer signed the work of Ms. de Castro and did not sign hers.

As to the charge of insubordination, it may be conceded, albeit unclear, that complainant

failed to place same corrections/additional remarks in the Statement of BillingsAdjustments as instructed. However, under the circumstances obtaining, wherecomplainant strongly felt that she was being discriminated against by her superior inrelation to other employees, we are of the considered view and so hold, that a reprimandwould have sufficed for the infraction, but certainly not termination from services. 20


4/92

As this Court has ruled:

... where a penalty less punitive would suffice, whatever missteps may be committed bylabor ought not to be visited with a consequence so severe. It is not only because of thelaw's concern for the working man. There is, in addition, his family to consider.Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. 21

Of course, in justifying Credo's termination of employment, NASECO claims as additional lawful causesfor dismissal Credo's previous and repeated acts of insubordination, discourtesy and sarcasm towardsher superior officers, alleged to have been committed from 1980 to July 1983. 22

If such acts of misconduct were indeed committed by Credo, they are deemed to have been condonedby NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a scandalous mannerand raised her voice" in a discussion with NASECO's Acting head of the Personnel Administration 23nodisciplinary measure was taken or meted against her. Nor was she even reprimanded when sheallegedly talked 'in a shouting or yelling manner" with the Acting Manager of NASECO's BuildingMaintenance and Services Department in 1980 24or when she allegedly "shouted" at NASECO'sCorporate Auditor "in front of his subordinates displaying arrogance and unruly behavior" in 1980, orwhen she allegedly shouted at NASECO's Internal Control Consultant in 1981. 25But then, in sharpcontrast to NASECO's penchant for ignoring the aforesaid acts of misconduct, when Credo committedfrequent tardiness in August and September 1983, she was reprimanded. 26

Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven,NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given asalary adjustment for having performed in the job "at least [satisfactorily]" 27 and she was then rated"Very Satisfactory" 28as regards job performance, particularly in terms of quality of work, quantity ofwork, dependability, cooperation, resourcefulness and attendance.

Considering that the acts or omissions for which Credo's employment was sought to be legallyterminated were insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent thereason which gave rise to [the employee's] separation from employment, there is no intention on the

part of the employer to dismiss the employee concerned."

29

And, as a result of having been wrongfullydismissed, Credo is entitled to three (3) years of backwages without deduction and qualification. 30

However, while Credo's dismissal was effected without procedural fairness, an award of exemplarydamages in her favor can only be justified if her dismissal was effected in a wanton, fraudulent,oppressive or malevolent manner.31 A judicious examination of the record manifests no such conducton the part of management. However, in view of the attendant circumstances in the case, i.e., lack ofdue process in effecting her dismissal, it is reasonable to award her moral damages. And, for havingbeen compelled to litigate because of the unlawful actuations of NASECO, a reasonable award forattorney's fees in her favor is in order.

In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction to

order Credo's reinstatement. NASECO claims that, as a government corporation (by virtue of its beinga subsidiary of the National Investment and Development Corporation (NIDC), a subsidiary whollyowned by the Philippine National Bank (PNB), which in turn is a government owned corporation), theterms and conditions of employment of its employees are governed by the Civil Service Law, rules andregulations. In support of this argument, NASECO cites National Housing Corporation vs.

JUCO, 33 where this Court held that "There should no longer be any question at this time thatemployees of government-owned or controlled corporations are governed by the civil service law andcivil service rifles and regulations."

It would appear that, in the interest of justice, the holding in said case should not be given retroactiveeffect, that is, to cases that arose before its promulgation on 17 January 1985. To do otherwise wouldbe oppressive to Credo and other employees similarly situated, because under the same 1973

Constitution ,but prior to the ruling inNational Housing Corporation vs. Juco, this Court had recognizedthe applicability of the Labor Code to, and the authority of the NLRC to exercise jurisdiction over,disputes involving terms and conditions of employment in government owned or controlledcorporations, among them, the National Service Corporation (NASECO). 34


5/92

Furthermore, in the matter of coverage by the civil service of government-owned or controlledcorporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon which NationalHousing Corporation vs. Juco is based. Under the 1973 Constitution, it was provided that:

The civil service embraces every branch, agency, subdivision, and instrumentality of theGovernment, including every government-owned or controlled corporation. ... 35

On the other hand, the 1987 Constitution provides that:

The civil service embraces all branches, subdivisions, instrumentalities, and agencies ofthe Government, including government-owned or controlled corporations with originalcharter. 36 (Emphasis supplied)

Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in theNational Housing . Corporation case in the following manner

The infirmity of the respondents' position lies in its permitting a circumvention oremasculation of Section 1, Article XII-B of the constitution. It would be possible for aregular ministry of government to create a host of subsidiary corporations under theCorporation Code funded by a willing legislature. A government-owned corporation could

create several subsidiary corporations. These subsidiary corporations would enjoy thebest of two worlds. Their officials and employees would be privileged individuals, freefrom the strict accountability required by the Civil Service Decree and the regulations ofthe Commission on Audit. Their incomes would not be subject to the competitiverestrains of the open market nor to the terms and conditions of civil service employment.Conceivably, all government-owned or controlled corporations could be created, nolonger by special charters, but through incorporations under the general law. TheConstitutional amendment including such corporations in the embrace of the civil servicewould cease to have application. Certainly, such a situation cannot be allowed to exist. 37

appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Serviceembraces government-owned or controlled corporations with original charter; and, therefore, by clear

implication, the Civil Service does not include government-owned or controlled corporations which areorganized as subsidiaries of government-owned or controlled corporations under the generalcorporation law.

The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent andmeaning in the use of the phrase "with original charter." Thus

THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo isrecognized.

MR. ROMULO. I beg the indulgence of the Committee. I was reading thewrong provision.

I refer to Section 1, subparagraph I which reads:

The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies ofthe government, including government-owned or controlled corporations.

My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will theCommissioner please state his previous question?

MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1, underthe Civil Service Commission, says: "including government-owned orcontrolled corporations.' Does that include a corporation, like the PhilippineAirlines which is government-owned or controlled?

MR. FOZ. I would like to throw a question to the Commissioner. Is thePhilippine Airlines controlled by the government in the sense that themajority of stocks are owned by the government?


6/92

MR. ROMULO. It is owned by the GSIS. So, this is what we might call atertiary corporation. The GSIS is owned by the government. Would this becovered because the provision says "including government-owned orcontrolled corporations."

MR. FOZ. The Philippine Airlines was established as a private corporation.Later on, the government, through the GSIS, acquired the controllingstocks. Is that not the correct situation?

MR. ROMULO. That is true as Commissioner Ople is about to explain.There was apparently a Supreme Court decision that destroyed thatdistinction between a government-owned corporation created under theCorporation Law and a government-owned corporation created by its owncharter.

MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA vs.Juco to the effect that all government corporations irrespective of themanner of creation, whether by special charter or by the privateCorporation Law, are deemed to be covered by the civil service because ofthe wide-embracing definition made in this section of the existing 1973Constitution. But we recall the response to the question of CommissionerOple that our intendment in this provision is just to give a generaldescription of the civil service. We are not here to make any declaration asto whether employees of government-owned or controlled corporations arebarred from the operation of laws, such as the Labor Code of thePhilippines.

MR. ROMULO. Yes.

MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name hasbeen mentioned by both sides.

MR. ROMULO. I yield part of my time.

THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is recognized.

MR. OPLE. In connection with the coverage of the Civil Service Law inSection 1 (1), may I volunteer some information that may be helpful bothto the interpellator and to the Committee. Following the proclamation ofmartial law on September 21, 1972, this issue of the coverage of theLabor Code of the Philippines and of the Civil Service Law almostimmediately arose. I am, in particular, referring to the period following thecoming into force and effect of the Constitution of 1973, where the Articleon the Civil Service was supposed to take immediate force and effect. In

the case of LUZTEVECO, there was a strike at the time. This was agovernment-controlled and government-owned corporation. I think it wasowned by the PNOC with just the minuscule private shares left. So, theSecretary of Justice at that time, Secretary Abad Santos, and myself satdown, and the result of that meeting was an opinion of the Secretary ofJustice which 9 became binding immediately on the government thatgovernment corporations with original charters, such as the GSIS, werecovered by the Civil Service Law and corporations spun off from the GSIS,which we called second generation corporations functioning as privatesubsidiaries, were covered by the Labor Code. Samples of such secondgeneration corporations were the Philippine Airlines, the Manila

Hotel and the Hyatt. And that demarcation worked very well. In fact, all of thesecompanies I have mentioned as examples, except for the Manila Hotel, had collectivebargaining agreements. In the Philippine Airlines, there were, in fact, three collectivebargaining agreements; one, for the ground people or the PALIA one, for the flightattendants or the PASAC and one for the pilots of the ALPAC How then could a


7/92

corporation like that be covered by the Civil Service law? But, as the Chairman of theCommittee pointed out, the Supreme Court decision in the case of NHA vs. Juco unrobedthe whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt arenow considered under that decision covered by the Civil Service Law. I also recall that inthe emergency meeting of the Cabinet convened for this purpose at the initiative of theChairman of the Reorganization Commission, Armand Fabella, they agreed to allow theCBA's to lapse before applying the full force and effect of the Supreme Court decision.So, we were in the awkward situation when the new government took over. I can agreewith Commissioner Romulo when he said that this is a problem which I am not exactly

sure we should address in the deliberations on the Civil Service Law or whether weshould be content with what the Chairman said that Section 1 (1) of the Article on theCivil Service is just a general description of the coverage of the Civil Service and nomore.

Thank you, Mr. Presiding Officer.

MR. ROMULO. Mr. Presiding Officer, for the moment, I would be satisfied ifthe Committee puts on records that it is not their intent by this provisionand the phrase "including government-owned or controlled corporations"to cover such companies as the Philippine Airlines.

MR. FOZ. Personally, that is my view. As a matter of fact, when this draftwas made, my proposal was really to eliminate, to drop from theprovision, the phrase "including government- owned or controlledcorporations."

MR. ROMULO. Would the Committee indicate that is the intent of thisprovision?

MR. MONSOD. Mr. Presiding Officer, I do not think the Committee canmake such a statement in the face of an absolute exclusion ofgovernment-owned or controlled corporations. However, this does not

preclude the Civil Service Law to prescribe different rules and procedures,including emoluments for employees of proprietary corporations, takinginto consideration the nature of their operations. So, it is a generalcoverage but it does not preclude a distinction of the rules between thetwo types of enterprises.

MR. FOZ. In other words, it is something that should be left to thelegislature to decide. As I said before, this is just a general description andwe are not making any declaration whatsoever.

MR. MONSOD. Perhaps if Commissioner Romulo would like a definitiveunderstanding of the coverage and the Gentleman wants to exclude

government-owned or controlled corporations like Philippine Airlines, thenthe recourse is to offer an amendment as to the coverage, if theCommissioner does not accept the explanation that there could be adistinction of the rules, including salaries and emoluments.

MR. ROMULO. So as not to delay the proceedings, I will reserve my rightto submit such an amendment.

xxx xxx xxx

THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is recognized.

MR. ROMULO. On page 2, line 5, I suggest the following amendment after"corporations": Add a comma (,) and the phrase EXCEPT THOSEEXERCISING PROPRIETARY FUNCTIONS.

THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?


8/92

SUSPENSION OF SESSION

MR. MONSOD. May we have a suspension of the session?

THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.

It was 7:16 p.m.

RESUMPTION OF SESSION

At 7:21 p.m., the session was resumed.

THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.

Commissioner Romulo is recognized.

MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment tonow read as follows: "including government-owned or controlled corporations WITHORIGINAL CHARTERS." The purpose of this amendment is to indicate that governmentcorporations such as the GSIS and SSS, which have original charters, fall within the

ambit of the civil service. However, corporations which are subsidiaries of thesechartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt are excludedfrom the coverage of the civil service.

THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?

MR. FOZ. Just one question, Mr. Presiding Officer. By the term "originalcharters," what exactly do we mean?

MR. ROMULO. We mean that they were created by law, by an act ofCongress, or by special law.

MR. FOZ. And not under the general corporation law.

MR. ROMULO. That is correct. Mr. Presiding Officer.

MR. FOZ. With that understanding and clarification, the Committee acceptsthe amendment.

MR. NATIVIDAD. Mr. Presiding officer, so those created by the generalcorporation law are out.

MR. ROMULO. That is correct: 38

On the premise that it is the 1987 Constitution that governs the instant case because it is theConstitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief to theparties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the NASECO is agovernment-owned or controlled corporation without original charter.

Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinionin Gomez vs. Government Insurance Board(L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694;also published in 78 Phil. 221) on the effectivity of the principle of social justice embodied in the 1935Constitution, said:

Certainly, this principle of social justice in our Constitution as generously conceived and

so tersely phrased, was not included in the fundamental law as a mere popular gesture.It was meant to (be) a vital, articulate, compelling principle of public policy. It should beobserved in the interpretation not only of future legislation, but also of all laws alreadyexisting on November 15, 1935. It was intended to change the spirit of our laws, presentand future. Thus, all the laws which on the great historic event when the Commonwealth


9/92

of the Philippines was born, were susceptible of two interpretations strict or liberal,against or in favor of social justice, now have to be construed broadly in order topromote and achieve social justice. This may seem novel to our friends, the advocates oflegalism but it is the only way to give life and significance to the above-quoted principleof the Constitution. If it was not designed to apply to these existing laws, then it wouldbe necessary to wait for generations until all our codes and all our statutes shall havebeen completely charred by removing every provision inimical to social justice, beforethe policy of social justice can become really effective. That would be an absurdconclusion. It is more reasonable to hold that this constitutional principle applies to all

legislation in force on November 15, 1935, and all laws thereafter passed.

WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED withmodifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, areordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her termination, or ifsuch reinstatement is not possible, to place her in a substantially equivalent position, with three (3)years backwages, from 1 December 1983, without qualification or deduction, and without loss ofseniority rights and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 formoral damages and P5,000.00 for attorney's fees.

If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R.No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo, inaddition to her backwages and damages as above described, separation pay equivalent to one-halfmonth's salary for every year of service, to be computed on her monthly salary at the time of hertermination on 1 December 1983.

SO ORDERED.

Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Grio-Aquino,Medialdea and Regalado, JJ., concur.

Narvasa, J., is on leave.

Gutierrez, Jr., J., in the result.


10/92

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

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

D E C I S I O N

CARPIO,J.:

The Case

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

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement(Agreement) with the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBNwas represented by its corporate officers while MJMDC was represented by SONZA, as President andGeneral Manager, and Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in theAgreement as AGENT, MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talentfor radio and television. The Agreement listed the services SONZA would render to ABS-CBN, asfollows:

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

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

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first yearand P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees onthe 10th and 25th days of the month.

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

Dear Mr. Lopez,

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

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

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

Thank you for your attention.

Very truly yours,

(Sgd.)JOSE Y. SONZA

President and Gen. Manager[4]
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn3http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn3http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn1


11/92

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

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

Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account atPCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with thesame bank where ABS-CBN deposited SONZAs talent fees and other payments due him under theAgreement.

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

In this instant case, complainant for having invoked a claim that he was an employee of respondentcompany until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as toconfer jurisdiction over the instant case in this Office. And as to whether or not such claim wouldentitle complainant to recover upon the causes of action asserted is a matter to be resolved only afterand as a result of a hearing. Thus, the respondents plea of lack of employer-employee relationshipmay be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is

no employer-employee relationship between it and the complainant.

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

On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to ExpungeRespondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNswitnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that theprevailing practice in the television and broadcast industry is to treat talents like SONZA asindependent contractors.

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

x x x

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

It must be noted that complainant was engaged by respondent by reason of his peculiar skillsand talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was freeto perform the services he undertook to render in accordance with his own style. Thebenefits conferred to complainant under the May 1994 Agreement are certainly very much higher thanthose generally given to employees. For one, complainant Sonzas monthly talent fees amount to a

staggering P317,000. Moreover, his engagement as a talent was covered by a specificcontract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only forsuch number of hours as may be necessary.

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

The fact that complainant was made subject to respondents Rules and Regulations,likewise, does not detract from the absence of employer-employee relationship. As held bythe Supreme Court, The line should be drawn between rules that merely serve as guidelines towardsthe achievement of the mutually desired result without dictating the means or methods to be employed
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn6


12/92

in attaining it, and those that control or fix the methodology and bind or restrict the party hired to theuse of such means. The first, which aim only to promote the result, create no employer-employeerelationship unlike the second, which address both the result and the means to achieve it. (InsularLife Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the

Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in itsResolution dated 3 July 1998.

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

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existedbetween SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the followingfindings of the NLRC:

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

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, andnot between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which

specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant hereinunilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission inbehalf of Mr. Sonza, who himself signed the same in his capacity as President.

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

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that thereexist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find itindubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as

expressly admitted by the latter and MJMDC in the May 1994 Agreement.

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

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself topay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND

PESOS (P500,000.00).

Similarly, complainant is also entitled to be paid 13 th month pay based on an amount not lower thanthe amount he was receiving prior to effectivity of (the) Agreement.
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn8http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn8


13/92

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travelbenefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractualrelations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead ofmerely resigning from ABS-CBN, complainant-appellant served upon the latter a notice of rescission ofAgreement with the station, per his letter dated April 1, 1996, which asserted that instead of referringto unpaid employee benefits, he is waiving and renouncing recovery of the remaining amountstipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the otherbenefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the StockPurchase Agreement by respondent-appellee that complainant-appellant filed hiscomplaint. Complainant-appellants claims being anchored on the alleged breach of contract on thepart of respondent-appellee, the same can be resolved by reference to civil law and not to laborlaw. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As heldin the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, anaction for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship betweenSONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve. [10] Aspecial civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.[11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence whichserved as basis of the NLRCs conclusion. [12] The Court of Appeals added that it could not re-examinethe parties evidence and substitute the factual findings of the NLRC with its own.[13]

The Issue

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

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TOFIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH AFINDING.[14]

The Courts Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming

the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.

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

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

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee

of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction becauseSONZA was an independent contractor.

Employee or Independent Contractor?
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn9http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn13http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn14http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn9http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn13http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn14


14/92

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

SONZA maintains that all essential elements of an employer-employee relationship are present in

this case. Case law has consistently held that the elements of an employer-employee relationshipare: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power ofdismissal; and (d) the employers power to control the employee on the means and methods by whichthe work is accomplished.[18]The last element, the so-called control test, is the most importantelement.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because ofSONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion used by

respondent in specifically selecting and hiring complainant over other broadcasters of possibly similarexperience and qualification as complainant belies respondents claim of independent contractorship.

Independent contractors often present themselves to possess unique skills, expertise or talent todistinguish them from ordinary employees. The specific selection and hiring of SONZA, because ofhis unique skills, talent and celebrity status not possessed by ordinary employees, is acircumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA didnot possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into theAgreement with SONZA but would have hired him through its personnel department just like any otheremployee.

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

most important element.

B. Payment of Wages

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

All the talent fees and benefits paid to SONZA were the result of negotiations that led to theAgreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate

on benefits such as SSS, Medicare, x x x and 13th month pay[20] which the law automaticallyincorporates into every employer-employee contract.[21] Whatever benefits SONZA enjoyed arose fromcontract and not because of an employer-employee relationship.[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so hugeand out of the ordinary that they indicate more an independent contractual relationship rather than anemployer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees preciselybecause of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees.Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such hugetalent fees for his services. The power to bargain talent fees way above the salary scales of ordinaryemployees is a circumstance indicative, but not conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of

SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Underthe Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talentfee accruing under the Agreement.
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn15http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn15http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn16http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn17http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn18http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn19http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn20http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn22


15/92

C. Power of Dismissal

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

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENTand Jay Sonza shall faithfully and completely perform each condition of this Agreement.[24] Even if it

suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remainedobligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates anindependent contractual relationship between SONZA and ABS-CBN.

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

SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admissionthat he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true that complainantwas really an employee, he would merely resign, instead. SONZA did actually resign from ABS-CBNbut he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26]

However, the manner by which SONZA terminated his relationship with ABS-CBN isimmaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine hisstatus as employee or independent contractor.

D. Power of Control

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

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

Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertyscontracts with WIPR specifically provided that WIPR hired her professional services as Hostess for theProgram Desde Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to workrelated to these tapings. x x x[28] (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but anindependent contractor. The control test is themost important test our courts apply in distinguishingan employee from an independent contractor.[29] This test is based on the extent of control the hirerexercises over a worker. The greater the supervision and control the hirer exercises, the more likelythe worker is deemed an employee. The converse holds true as well the less control the hirerexercises, the more likely the worker is considered an independent contractor.[30]
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn26http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn30http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn23http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn24http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn25http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn26http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn30


16/92

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

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host theMel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his work,SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, andsounded on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of workper day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as wellas pre- and post-production staff meetings.[31] ABS-CBN could not dictate the contents of SONZAsscript. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its

interests.[32]

The clear implication is that SONZA had a free hand on what to say or discuss in his showsprovided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finishedproduct of SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his job. ABS-CBNmerely reserved the right to modify the program format and airtime schedule for more effectiveprogramming.[34] ABS-CBNs sole concern was the quality of the shows and their standing in theratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance ofSONZAs work.

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over themeans and methods of the performance of his work. Although ABS-CBN did have the option not tobroadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-

CBN was completely dissatisfied with the means and methods of SONZAs performance of his work, oreven with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. Allthat ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees infull.[35]

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

In Vaughan, et al. v. Warner, et al.,[36]

the United States Circuit Court of Appeals ruled thatvaudeville performers were independent contractors although the management reserved the right todelete objectionable features in their shows. Since the management did not have control over themanner of performance of the skills of the artists, it could only control the result of the work bydeleting objectionable features.[37]

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipmentand crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the

Mel & Jay programs. However, the equipment, crew and airtime are not the tools andinstrumentalities SONZA needed to perform his job. What SONZA principally needed were his talent orskills and the costumes necessary for his appearance. [38] Even though ABS-CBN provided SONZA withthe place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his

talent during the airing of the programs.[39]

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

Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjectedhim to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs control notonly [over] his manner of work but also the quality of his work.

The Agreement stipulates that SONZA shall abide with the rules and standards of performancecovering talents[41] of ABS-CBN. The Agreement does not require SONZA to comply with the rules

and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed onSONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng mgaBroadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code ofEthics.[42] The KBP code applies to broadcasters, not to employees of radio and televisionstations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn37http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn38http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn39http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn40http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn41http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn42http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn37http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn38http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn39http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn40http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn41http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn42


17/92

rules and standards of performance referred to in the Agreement are those applicable to talents andnot to employees of ABS-CBN.

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

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

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

The Vaughan case also held that one could still be an independent contractor although the hirer

reserved certain supervision to insure the attainment of the desired result. The hirer, however, mustnot deprive the one hired from performing his services according to his own initiative.[45]

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

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

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.[46] This practice is not designed to control the means and methods of work of the talent, but simply toprotect the investment of the broadcast station. The broadcast station normally spends substantial

amounts of money, time and effort in building up its talents as well as the programs they appear inand thus expects that said talents remain exclusive with the station for a commensurate period oftime.[47] Normally, a much higher fee is paid to talents who agree to work exclusively for a particularradio or television station. In short, the huge talent fees partially compensates for exclusivity, as inthe present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out hisservices to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of

ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the

employee who is ostensibly under the employ of the labor-only contractor; and (3) the principal whois deemed the real employer. Under this scheme, the labor-only contractor is the agent of theprincipal. The law makes the principal responsible to the employees of the labor-only contractor asif the principal itself directly hired or employed the employees. [48] These circumstances are not presentin this case.

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


18/92

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

Policy Instruction No. 40

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

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

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and RolandoCruz without giving his counsel the opportunity to cross-examine these witnesses. SONZA brandsthese witnesses as incompetent to attest on the prevailing practice in the radio and televisionindustry. SONZA views the affidavits of these witnesses as misleading and irrelevant.

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

Section 3. Submission of Position Papers/Memorandum

x x x

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

Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties oftheir position papers/memorandum, the Labor Arbiter shall motu propio determine whether there isneed for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of

making such determination, ask clarificatory questions to further elicit facts or information, includingbut not limited to the subpoena of relevant documentary evidence, if any from any party or witness.[50]

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

Talents as Independent Contractors
http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn49http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn50http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn51http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn52http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn49http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn50http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn51http://sc.judiciary.gov.ph/jurisprudence/2004/jun2004/138051.htm#_ftn52


19/92

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

The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if there isan employer-employee relationship under labor laws. Not every performance of services for a feecreates an employer-employee relationship. To hold that every person who renders services toanother for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurdresults.

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

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZAs Claims

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

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

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna


20/92

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN,NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,vs.NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/orARSENIO DE GUZMAN, respondents.

J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.

FERNAN, C.J.:

The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawlfishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises,and if so, whether or not they were illegally dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one ofseveral fishing vessels owned and operated by private respondent De Guzman Fishing Enterpriseswhich is primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur.Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga andJose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; JaimeBarbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin,fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing,petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier ofprivate respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the saleof the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip,

otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chiefengineer and master fisherman received a minimum income of P350.00 per week while the assistantengineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 perweek. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman,president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, forinvestigation on the report that they sold some of their fish-catch at midsea to the prejudice of privaterespondent. Petitioners denied the charge claiming that the same was a countermove to their havingformed a labor union and becoming members of Defender of Industrial Agricultural Labor Organizationsand General Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and nocriminal charges were formally filed against them. Notwithstanding, private respondent refused toallow petitioners to return to the fishing vessel to resume their work on the same day, September 11,1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month pay, emergency cost of living allowance and service incentive pay, with thethen Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V, LegaspiCity, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that they werearbitrarily dismissed without being given ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman,

submitted its position paper denying the employer-employee relationship between private respondentand petitioners on the theory that private respondent and petitioners were engaged in a jointventure. 3


21/92

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for jointhearing furnishing the parties with notice and summons. On December 27, 1983, after two (2)previously scheduled joint hearings were postponed due to the absence of private respondent, one ofthe petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others,on the manner the fishing operations were conducted, mode of payment of compensation for servicesrendered by the fishermen-crew members, and the circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralderendered a joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishingventure" and not one of employer-employee relationship existed between private respondent andpetitioners.

From the adverse decision against them, petitioners appealed to the National Labor RelationsCommission.

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming thedecision of the labor arbiter that a "joint fishing venture" relationship existed between privaterespondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondentand petitioners is a joint venture arrangement and not an employer-employee relationship. To stressthat there is an employer-employee relationship between them and private respondent, petitionersinvite attention to the following: that they were directly hired by private respondent through its generalmanager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except forLaurente Bautu, they had been employed by private respondent from 8 to 15 years in variouscapacities; that private respondent, through its operations manager, supervised and controlled theconduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction ofthe fishing vessel, the volume or number of tubes of the fish-catch the time to return to the fishingport, which were communicated to the patron/pilot by radio (single side band); that they were notallowed to join other outfits even the other vessels owned by private respondent without the

permission of the operations manager; that they were compensated on percentage commission basisof the gross sales of the fish-catch which were delivered to them in cash by private respondent'scashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and regulationsimposed on them by private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between privaterespondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/orabused its discretion when it added facts not contained in the records when it stated that the pilot-crewmembers do not receive compensation from the boat-owners except their share in the catch producedby their own efforts; that public respondent ignored the evidence of petitioners that private respondentcontrolled the fishing operations; that public respondent did not take into account established

jurisprudence that the relationship between the fishing boat operators and their crew is one of directemployer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter isnow final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendardays from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and MarineServices, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of publicrespondent that a "joint fishing venture" exists between private respondent and petitioners rests onthe resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman FishingEnterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein, fromcompulsory coverage of the SSS on the ground that there is no employer-employee relations betweenthe boat-owner and the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS,17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that thereis no employer-employee relationship between the boat-owner and the pilot and crew members whenthe boat-owner supplies the boat and equipment while the pilot and crew members contribute thecorresponding labor and the parties get specific shares in the catch for their respective contribution tothe venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the caseat bar, did not control the conduct of the fishing operations and the pilot and crew members shared inthe catch.


22/92

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the instant case on the meritsrather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded tothis Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and RubberCo. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor casesbefore this Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep, theidea being that its power be exercised according to justice and equity and substantial merits of thecontroversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularlyengaged in trawl fishing, as in the case of petitioners herein, who spend one (1) whole

no.2 whole case

Documents