Case Title: Chrisden Cabrera Ditiangkin v. Lazada E-Services Philippines, Inc.

, Allan Ancheto, Richard Delantar and Jade Andrade

G.R. No. 246892, September 21, 2022
Topic: The traditional four-fold test of employer-employee relationship

LEONEN, SAJ.:
When the status of the employment is in dispute, the employer bears the burden to prove that the person whose service it pays for is
an independent contractor rather than a regular employee with or without fixed terms

February 2016, petitioners Chrisden Cabrera Ditiangkin, Hendrix Mlines, Harvey Juanio, Joselito Verde and Brian Nabong, who are
collectively riders, were hired as riders by Lazada E-Services Philippines Inc., (Lazada). They were tasked to pick up items from
sellers and deliver it to Lazada’s warehouse.

Each signed an Independent Contractor Agreement which states that they will be paid Php 1,200 per day as service fee. The
contract also stated that they are engaged for a period of one year. Roders used their own privately-owned motorcycles in the trips.

January 2017 – The riders were told by a dispatcher that they have been removed from their usual routes and will no longer be given
schedules. Despite this, they still reported to work for three days and waited all day for new assignments to no avail. They learned
that their routes were already given to other employees.

The riders filed a complaint before the National Labor Relations Commission against Lazada, its employees, and its officers for 1)
illegal dismissal 2) non-payment of salary 3) overtime pay 4) holiday pay 5) service incentive 6) leave pay 7) 13 th month pay 8)
separation pay 9) illegal deduction, with claims for moral and exemplary damages, and attorney’s fees.

Petitioners claimed they were regular employees of Lazada, arguing that the company exercised control over how they performed
their work. They pointed to various indicators of employment, such as fixed work hours, company-issued tools, and penalties for lost
parcels. They also emphasized their economic dependence on Lazada and the lack of substantial capital to qualify as independent
contractors.

Lazada, however, maintained that the riders were not employees but independent contractors. It explained that its core business is
facilitating transactions between sellers and buyers, and that delivery is merely an ancillary service. Lazada argued that the riders
had control over their own vehicles, routes, and schedules, and that the company only required timely and proper delivery of goods.

The Labor Arbiter dismissed the complaint, finding no employer-employee relationship. It relied on the contract signed by the riders,
which explicitly stated that no such relationship existed. The Arbiter also noted that Lazada did not exercise sufficient control over the
riders' work methods to establish employment.
On appeal, the National Labor Relations Commission (NLRC) affirmed the Labor Arbiter’s decision, applying the four-fold test and
concluding that Lazada lacked control over the riders’ work. The riders’ motion for reconsideration was denied.

The riders then filed a Rule 65 petition with the Court of Appeals, which was dismissed. The court held that the proper remedy was a
Rule 43 petition and found no grave abuse of discretion by the NLRC. It noted that the NLRC had thoroughly evaluated the
evidence.

Undeterred, the riders elevated the case to the Supreme Court via a Rule 45 petition. They argued that the NLRC committed grave
abuse of discretion in ruling that they were independent contractors. They insisted that their contracts should not override labor
protections and that their work was necessary and desirable to Lazada’s business. They also claimed entitlement to backwages,
separation pay, and other benefits due to illegal dismissal.

Citing Article 295 of the Labor Code, petitioners claim that they are regular employees considering that their service is necessary and
desirable in the usual business of respondent Lazada. They stress that Lazada's business is mainly marketing, provision of platform
for sellers, and delivery of goods and services to customers. Further, they have attained regular employment because they have
been doing the same work for years.

Applying the four-fold test, petitioners assert that all elements of an employer-employee relationship are present:
(1) respondents specifically selected and engaged their services as they are former employees of RGSERVE, Inc., the
contractor previously hired by respondents;
(2) petitioners were paid by respondents and were required to pay cash bonds and other deductions;
(3) respondents have the power to dismiss petitioners; and
(4) Respondents have control over the performance of their work

The petitioners further argued that they were required to work 12 hours a day, six days a week, which prevented them from seeking
other employment and made them economically dependent on Lazada. They claimed they lacked the capital or resources to be
considered independent contractors, relying instead on Lazada’s provision of tools such as cellphones, scanners, and uniforms.

Asserting their status as regular employees, the petitioners sought monetary compensation for what they alleged was illegal
dismissal. They demanded full backwages, separation pay, and salaries for days they reported to work in January 2017. They also
claimed unpaid benefits including thirteenth month pay, service incentive leave, and holiday pay. Additionally, they challenged the
legality of cash bond deductions, citing DOLE Labor Advisory No. 11, and argued that other deductions, such as taxes, lacked legal
basis. They also sought moral and exemplary damages, alleging that their dismissal was done in bad faith and contrary to labor
standards, and requested attorney’s fees due to unpaid wages.

In response, Lazada maintained that the riders’ services were not essential to its business, which primarily involves operating an
online marketplace. It argued that delivery services could be handled independently by buyers and sellers. Lazada reiterated that the
riders failed to meet the four-fold test for employment, particularly the control test. It emphasized that the riders were paid service
fees under a civil contract, not wages under the Labor Code, and that the riders voluntarily agreed to the contract terms, including
deductions.

Lazada denied having the power to dismiss the riders, stating that any termination must follow the contract’s provisions. It claimed
that the riders were not dismissed but acted on a dispatcher's statement. Lazada also argued that its guidelines were meant to
ensure smooth delivery operations and did not amount to employer control. It pointed out that riders had discretion over their
transport, routes, and schedules, and could offer services to other parties.

Regarding the tools and route sheets, Lazada explained these were logistical necessities and not indicators of control. It maintained
that penalties for lost parcels were safeguards, and that time cards were used for billing purposes. Lazada concluded that the riders
were not entitled to employee benefits or damages, as they were not regular employees and had not been terminated.

In their reply, the petitioners reiterated that their services were necessary and desirable to Lazada’s business. They emphasized that
the contract itself acknowledged Lazada’s control over their work, and that the level of control exercised supported the existence of
an employer-employee relationship. They maintained that their termination was illegal, having been done without due process.

ISSUES:

1) whether or not the Court of Appeals erred in dismissing the petition for certiorari outright;
2) whether or not petitioners are regular employees of respondent Lazada; subsumed under this issue are the following: (1)
whether or not petitioners are independent contractors; (2) whether or not petitioners satisfied the four-fold test; (3) whether
or not there is economic dependence in petitioners' employment with respondents;
3) whether or not petitioners are entitled to monetary awards.

Ruling:

As to the first issue:

The Court of Appeals initially dismissed the petitioners’ certiorari petition, stating that they should have filed a Rule 43 petition
instead. However, the Supreme Court found this reasoning flawed. Citing precedent from Fuji Television Network, Inc., the Court
clarified that decisions of the National Labor Relations Commission (NLRC) may be properly elevated to the Court of Appeals
through a Rule 65 petition.

The petitioners argued that the Labor Arbiter and the NLRC committed grave abuse of discretion by basing their conclusions on a
gross misapprehension of facts, which were allegedly contradicted by the evidence on record. Upon reviewing the petition, the
Supreme Court acknowledged that there were indeed factual errors in the labor tribunals’ findings.

Given these circumstances, the Supreme Court held that it could reassess the factual findings and legal conclusions of the lower
tribunals to determine whether grave abuse of discretion had occurred.

As to the second issue:

Under the four-fold test, to establish an employer-employee relationship, four factors must be proven:
(a) the employer’s selection and engagement of the employee;
(b) the payment of wages;
( c) the power to dismiss; and
(d) the power to control the employee’s conduct.

All these are present in this case:

Despite how the contract was named, it was clear that Ditiangkin et al were directly hired by Lazada;
(b) Ditiangkin et al were paid Php1,200.00 a day;
(c) The contract stated that Lazada may immediately terminate the contract for any breach; and
(d) Lazada imposed strict rules on how the riders’ work is carried out. Lazada requires the accomplishment of a route sheet which
keeps track of the arrival, departure, and unloading time of the items. Ditiangkin et al shoulder a penalty of P500.00 if an item is lost
on top of its actual value. Ditiangkin et al were also required to submit trip tickets and incident reports to Lazada.

Even if we consider these instructions as mere guidelines, the circumstances of the whole economic activity between petitioners and
respondents confirm the existence of an employer-employee relationship.
The services performed by Ditiangkin et al are integral to Lazada’s business. Lazada insist that the delivery of items is only incidental
to their business as they are mainly an online platform where sellers and buyers transact. However, the delivery of items is clearly
integrated in the services offered by Lazada. Lazada could have left the delivery of the goods to the sellers and buyers is of no
moment because this is evidently not the business model they are implementing.

WHEREFORE, the Petition for Review is GRANTED. The January 14, 2019 and March 15, 2019 Resolutions of the Court of Appeals
in CA-G.R. SP No. 158529 are REVERSED.

Respondents Lazada E-Services Philippines, Inc., Allan Ancheta, Richard Delantar, and Jade Andrade are ORDERED to reinstate
Chrisden Cabrera Ditiangkin, Hendrix Masamayor Molines, Harvey Mosquito Juanio, Joselito Castro Verde, and Brian Anthony
Cubacub Nabong to their former positions, and to pay their full backwages, overtime pay, thirteenth month pay, cash bond deposit,
and other benefits and privileges from the time they were dismissed on January 16, 2017, up to their actual reinstatement.

This case is REMANDED to the Labor Arbiter for the computation of the total monetary benefits awarded and due to Chrisden
Cabrera Ditiangkin, Hendrix Masamayor Molines, Harvey Mosquito Juanio, Joselito Castro Verde, and Brian Anthony Cubacub
Nabong. All monetary awards shall be subject to the interest rate of 6% per annum from the date of finality of this Decision until full
payment.132

Case Title: David v. Macasio, 738 Phil. 293, 307 [2014]

Topic: The traditional four-fold test of employer-employee relationship
In January 2009, Macasio filed a complaint before the Labor Arbiter against Ariel L. David, who was doing business under the name
"Yiels Hog Dealer." Macasio sought payment for unpaid overtime, holiday pay, 13th month pay, service incentive leave (SIL), as well
as moral and exemplary damages and attorney’s fees. He claimed that he had been working as a butcher for David since January 6,
1995, and that David exercised control over his work by setting his schedule, determining the number of hogs to be chopped, and
approving or denying his leaves. Macasio also stated that David owned the hogs and tools used for the job and employed around 25
workers, including butchers and delivery drivers. He was paid daily, with his wage increasing from ₱400 in 2005 to ₱700 in 2009.

In response, David denied that Macasio was a regular employee, asserting that he only started his hog dealing business in 2005 and
had only ten employees. He claimed that Macasio was hired on a "pakyaw" or task-based arrangement, receiving a fixed ₱700 per
engagement regardless of the hours worked, which typically ranged from 10:00 p.m. to 2:00 a.m. David emphasized that Macasio
was not required to report for work daily and was not paid when no hogs were delivered. He also argued that the Certificate of
Employment he issued to Macasio, which indicated employment since 2000, was only provided upon request for overseas
employment purposes. David supported his claims with affidavits from two of Macasio’s co-workers.

Macasio disputed David’s version, pointing to the Certificate of Employment as evidence that David’s business existed before 2005
and insisting that he reported for work daily. He argued that payroll or time records, which David failed to present, could have proven
this.

On April 30, 2009, the Labor Arbiter dismissed Macasio’s complaint for lack of merit. The Arbiter found that Macasio was indeed
hired on a "pakyaw" basis, citing that he received a fixed amount per task regardless of hours worked or hog volume, typically
worked only four hours per day, and earned significantly more than the prevailing minimum wage of ₱382. Given the nature of
David’s hog dealing business, the Arbiter concluded that Macasio was not entitled to overtime pay, holiday pay, SIL, or 13th month
pay.

The NLRC’s Ruling

In its May 26, 2010 decision, the NLRC affirmed the LA ruling. The NLRC observed that David did not require Macasio to observe
an eight hour work schedule to earn the fixed ₱700.00 wage; and that Macasio had been performing a non-time work, pointing out
that Macasio was paid a fixed amount for the completion of the assigned task, irrespective of the time consumed in its performance.
Since Macasio was paid by result and not in terms of the time that he spent in the workplace, Macasio is not covered by the Labor
Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th
month pay law.

Macasio moved for reconsideration but the NLRC denied his motion in its August 11, 2010 resolution, prompting Macasio to elevate
his case to the CA via a petition for certiorari.

The CA’s Ruling

In its November 22, 2010 decision, the CA partly granted Macasio’s certiorari petition and reversed the NLRC’s ruling for having
been rendered with grave abuse of discretion.

While the CA agreed with the LA and the NLRC that Macasio was a task basis employee, it nevertheless found Macasio entitled to
his monetary claims following the doctrine laid down in Serrano v. Severino Santos Transit. The CA explained that as a task basis
employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field personnel." As
defined by the Labor Code, a "field personnel" is one who performs the work away from the office or place of work and whose
regular work hours cannot be determined with reasonable certainty. In Macasio’s case, the elements that characterize a "field
personnel" are evidently lacking as he had been working as a butcher at David’s "Yiels Hog Dealer" business in Sta. Mesa, Manila
under David’s supervision and control, and for a fixed working schedule that starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years, with 10% attorney’s fees on the
total monetary award. The CA, however, denied Macasio’s claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration in the CA’s January 31, 2011 resolution.

David’s Key Arguments (Petitioner):

 Macasio was hired on a "pakyaw" or task basis, not as a regular employee.
 He was paid ₱700 per engagement, regardless of hours worked.
 David had no control over how Macasio performed his work—only the final result mattered.
 Macasio was not required to report daily and could choose when to work.
 The absence of a written contract was justified by the nature of their "pakyawan" arrangement, supported by co-workers’
affidavits.
 Since Macasio was a task-based worker, he is not entitled to holiday pay, SIL, or 13th month pay.
 David argues that no employer-employee relationship existed.
 He also claims that the Labor Arbiter and NLRC’s findings should be upheld as they were supported by substantial
evidence.
Macasio’s Key Arguments (Respondent):
 He was a regular employee, not a task-based or field worker.
 The ₱700 was a daily wage, not based on output or quota.
 David failed to present evidence of a quota system, time records, or a written contract proving a "pakyaw" arrangement.
 The lack of control argument is false—David supervised his work and set schedules.
 The issues raised by David are factual, not legal, and thus not proper for a Rule 45 petition.
 The Court of Appeals’ findings should be respected as they are supported by evidence.
 The existence of an employer-employee relationship had already been affirmed in a separate illegal dismissal case.

The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL and 13th month pay to
a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition before the CA, the issue is whether the CA
correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.
Ruling:

The Supreme Court partially granted the petition.

1. Scope of Review Limited to Legal Questions: Since this is a Rule 45 petition reviewing a Court of Appeals (CA) decision
 rendered under Rule 65, the Supreme Court emphasized that it can only review questions of law, not factual issues. The
Court's role is to determine whether the CA correctly found grave abuse of discretion on the part of the NLRC—not to re-
evaluate the facts of the case.
2. "Pakyaw" Basis Does Not Negate Employment: The Court rejected David’s argument that hiring Macasio on a "pakyaw"
or task basis meant there was no employer-employee relationship. It clarified that payment by task or result is still
consistent with an employment relationship under the Labor Code.
3. Existence of Employment Relationship is Settled: The Court noted that the existence of an employer-employee
relationship had already been affirmed in a separate illegal dismissal case by the LA, NLRC, and CA. Thus, it is a settled
factual matter and not subject to review in this petition.
4. Control Test Confirms Employment: Even if the Court were to review the facts, it found that the four-fold test (selection,
payment of wages, power of dismissal, and control) clearly showed that Macasio was David’s employee. David exercised
control over Macasio’s work schedule, workplace, and methods, satisfying the legal test for employment.
5. NLRC Committed Grave Abuse of Discretion: The Court concluded that the NLRC gravely erred in denying Macasio’s
claims solely because he was paid on a task basis. Being paid by result does not automatically exclude a worker from
receiving benefits like holiday pay, SIL, and 13th month pay.

First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the employee."
David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at
kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang Salaysay" 40 that "[k]ami
po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring
butcher xxx ni xxx David at kasama namin siya sa aming trabaho."

Second, David paid Macasio’s wages.Both David and Macasio categorically stated in their respective pleadings before the
lower tribunals and even before this Court that the former had been paying the latter ₱700.00 each day after the latter had
finished the day’s task. Solano and Antonio also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang
Salaysay."41 This satisfies the element of "payment of wages."

Third, David had been setting the day and time when Macasio should report for work. This power to determine the work
schedule obviously implies power of control. By having the power to control Macasio’s work schedule, David could regulate
Macasio’s work and could even refuse to give him any assignment, thereby effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work as to the means and methods of
performing it. In addition to setting the day and time when Macasio should report for work, the established facts show that
David rents the place where Macasio had been performing his tasks. Moreover, Macasio would leave the workplace only
after he had finished chopping all of the hog meats given to him for the day’s task. Also, David would still engage Macasio’s
services and have him report for work even during the days when only few hogs were delivered for butchering.

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-employee
relationship existing between David and Macasio.

 The Supreme Court affirmed that while Macasio was indeed paid on a "pakyaw" or task basis, this mode of payment alone
does not exempt him from receiving holiday pay and service incentive leave (SIL). The Court emphasized that under
Article 82 of the Labor Code and its Implementing Rules and Regulations (IRR), only workers who are both paid by
results and classified as "field personnel" are exempt from these benefits. The Court reiterated jurisprudence from Auto
Bus Transport Systems, Inc. v. Bautista and Serrano v. Santos Transit, which clarified that the phrases “task or contract
basis” and “purely commission basis” must be interpreted in relation to the definition of field personnel—those whose work
is performed away from the employer’s premises and whose hours cannot be determined with reasonable certainty.
Applying this, the Court found that Macasio was not a field personnel because he worked at David’s place of business,
had a determinable work schedule, and was supervised. Therefore, he is entitled to holiday pay and SIL, and the NLRC
committed grave abuse of discretion in denying these claims based solely on his task-based pay.
 However, the Court partially granted David’s petition with respect to the 13th month pay. It held that under Presidential
Decree No. 851 and its IRR, workers paid on a task basis are expressly exempted from receiving 13th month
pay, regardless of whether they are field personnel or not. Unlike the rules on holiday and SIL pay, the exemption for
13th month pay does not require the additional condition of being a field worker. Thus, the Court ruled that the CA erred in
finding grave abuse of discretion by the NLRC on this point.
 In conclusion, the Court affirmed the CA’s ruling granting Macasio’s claims for holiday pay and SIL, but reversed the
CA’s decision on the 13th month pay, thereby partially granting David’s petition.

Case Title: Parayday v. Shogun Shipping Company, Inc. G.R. No. 204555, July 6, 2020
Topic: The traditional four-fold test of employer-employee relationship

Facts:
Petitioners Pedrito R. Parayday and Jaime Reboso filed a complaint for illegal dismissal, regularization, and monetary
claims (including underpayment of wages, overtime pay, holiday pay, SIL, 13th month pay, and damages) against Shogun
Shipping Co., Inc. They alleged that they were employed as fitters/welders since 1996 and 1997, respectively, by Oceanview/VRC
Lighterage Co., Inc., which later became Shogun Shipping. They claimed to have worked daily, including weekends and holidays,
and were paid ₱350 per day. They also presented IDs and certificates of employment to support their claim of regular employment.
In 2006, while working on a barge in Bataan, an explosion injured both petitioners, resulting in hospitalization. Although Shogun
Shipping paid for medical expenses, it stopped paying their salaries during confinement and later ceased financial assistance. In
2008, they were allegedly verbally dismissed due to lack of work.

Shogun Shipping denied that petitioners were regular employees, claiming they were only occasional helpers brought in by regular
employees for temporary repair work. The company also denied any corporate link to Oceanview, asserting it was a separate entity.
The Labor Arbiter ruled in favor of the petitioners, declaring them regular employees who were illegally dismissed, and ordered
their reinstatement with backwages. The NLRC affirmed this ruling, finding that the nature and continuity of their work made them
regular employees. It also rejected the company’s claim that they were merely casual workers, noting that their services were
necessary and desirable to the business.

The Labor Arbiter held that petitioners were regular employees of Shogun Ships considering that they:
(1) performed tasks necessary and desirable to its business; and
(2) rendered more than one year of service at the time of their dismissal from employment.
On the issue of illegal dismissal, the Labor Arbiter ruled in favor of petitioners and held that respondent failed to prove that petitioners
were dismissed for just or authorized cause and that they were afforded procedural due process. In computing the amount of
petitioners' backwages, the Labor Arbiter took into consideration petitioners' years of service not only with Shogun Ships, but also
with its predecessor, Oceanview.

Ruling of the National Labor Relations Commission

In its appeal17 to the NLRC, respondent averred that the Labor Arbiter committed serious error amounting to grave abuse of
discretion in finding that petitioners were regular employees of Shogun Ships, and that petitioners were illegally dismissed from
employment. Respondent mainly contended that using the four-fold test, petitioners cannot be considered as employees of Shogun
Ships. Respondent also argued that the Labor Arbiter erred in ruling that Shogun Ships is one and the same entity as Oceanview,
since Shogun Ships, unlike Oceanview which is engaged in ship building, is engaged in the business of domestic cargo shipping.
Respondent added that the petitioners' functions as fitters/welders cannot be regarded as necessary and desirable to the business of
cargo shipping as its barges are not consistently in a state of disrepair. As petitioners are not employees of Shogun Ships,
respondent insisted that no dismissal ever took place, much more any illegal dismissal.
In its August 28, 2009 Decision,18 the NLRC dismissed the appeal and affirmed the findings of the Labor Arbiter that petitioners
were regular employees of Shogun Ships and that they were illegally dismissed from employment.

On May 11, 2012, the CA rendered its assailed Decision24 granting respondent's Petition for Certiorari and setting aside the August
28, 2009 Decision and October 27, 2009 Resolution of the NLRC. The dispositive portion of the May 11, 2012 Decision reads as
follows:
WHEREFORE, the petition is GRANTED. [sic] Setting aside the NLRC's Decision elated August 28, 2009 and Resolution dated
October 27, 2009, the complaint for illegal dismissal and other money claims is consequently dismissed.

The CA concluded that petitioners failed to adduce substantial evidence to prove the existence of an employer-employee
relationship between them and Shogun Ships. Considering the same, the CA held that there was no dismissal to speak of, much
more any illegal dismissal.

While it took note of petitioners' Time Keeper's Reports which supposedly indicated that they have been reporting for work for seven
days a week, the CA gave them no credence considering petitioners' failure to establish their genuineness and due execution. The
CA also found that the records of the case were bereft of evidence which would prove that petitioners were continuously employed
by Shogun Ships.

Additionally, the CA held that petitioners failed to prove that Oceanview were one and the same entity as Shogun Ships.

Issues

The [ca] seriously erred in finding the time keeper's repots submitted by the petitioners as insufficient evidence of establishing their
continuous employment with the respondents on the ground that their genuineness and due execution were not established.
Ii
The [ca] seriously erred in relying on the bare assertion of the respondents that petitioners were merely "occasionally called in" to
serve as helpers.
Iii
The [ca] seriously erred in avoiding to pierce the corporate veil, alleging a full[-]blown trial has to be had, notwithstanding that it was
properly pleaded and proved by the petitioners.
Iv
The [ca] erred in entertaining and granting respondents' petition for certiorari under rule 65.
[v]
The [ca] seriously erred in ignoring the notice of change of counsel when it recognized the counsel who has no authority from
petitioners.

Ruling:

The Supreme Court granted the petition.

The Supreme Court granted the petition filed by Parayday and Reboso and ruled on the key issue of whether an employer-
employee relationship existed between them and Shogun Shipping Co., Inc. Although this is generally a factual issue not
reviewable under a Rule 45 petition, the Court made an exception because of conflicting findings between the Labor
Arbiter/NLRC and the Court of Appeals (CA).
The Court first addressed the claim that Oceanview and Shogun Ships were the same entity, as the petitioners argued that
Oceanview merely changed its name to Shogun Ships. However, the Court found no evidence to support this claim—no amended
Articles of Incorporation or proof of corporate succession were presented. It held that Oceanview and Shogun Ships are separate
and distinct corporations, and the doctrine of piercing the corporate veil could not be applied because Oceanview was never
impleaded as a party and the labor tribunals never acquired jurisdiction over it.
The Court emphasized that piercing the corporate veil cannot be used to establish jurisdiction over a party that was not properly
brought before the court. Since Oceanview was not a respondent in the case and was not served summons, any attempt to treat it
as the same entity as Shogun Ships would violate due process.
As a result, the Court ruled that the petitioners failed to prove that they were employees of Shogun Ships from 1996/1997. The
claim that Oceanview was its predecessor was unsupported, and without proper jurisdiction over Oceanview, the labor tribunals
could not validly rule on that basis.

The Supreme Court emphasized that before ruling on the legality of the petitioners’ dismissal, it must first be established whether
an employer-employee relationship existed between them and Shogun Shipping Co., Inc. This is a threshold issue in illegal
dismissal cases, as no such claim can prosper without proving that such a relationship existed.
The Labor Arbiter and the NLRC found that the petitioners were employees of Shogun Ships, citing that their work
as fitters/welders was necessary and desirable to the company’s shipping business and that they had rendered services for over a
year. However, the Court of Appeals (CA) disagreed, applying the four-fold test to determine employment status:
1. Selection and engagement of the employee
2. Payment of wages
3. Power of dismissal
4. Control over the employee’s conduct (the most crucial element)

In its Decision, the CA found that petitioners failed to establish their employment relationship with Shogun Ships.

This Court disagrees.

The application of the four-fold test in this case shows that an employer-employee relationship did exist between petitioners and
Shogun Ships.

While this Court cannot give credence to petitioners' allegations that they were engaged by Shogun Ships through Oceanview as
early as 1996/1997 for reasons already stated above, it is worth noting that respondent have not categorically denied that sometime
in May 2006, petitioners were engaged, or at the least, were permitted by herein respondent to work on repairs on one of the barges
of Shogun Ships, M/T Daniela Natividad. Respondent did not also deny that petitioners worked for Shogun Ships until they were
supposedly verbally dismissed from employment on May 1, 2008. Notably, respondent even admitted that petitioners were called in
to do repairs on the barges of Shogun Ships.

Significantly, respondent have not denied that petitioners were duly compensated for any work done by them on the barges.
Respondent even categorically admitted that Shogun Ships provided petitioners financial assistance when they were hospitalized
from May 11, 2006 until June 6, 2006. Respondent also have not disproved the allegation of petitioners that Shogun Ships continued
to pay petitioners' salaries after they were discharged from hospitalization on June 7, 2006.
Respondent also have not categorically denied that petitioners were verbally dismissed on May 1, 2008, as in fact, respondent's
allegations, i.e., that petitioners' "work to repair was only done when there is work available for them. Once the repair was done,
petitioners were paid for work done, and it ends there"57 corroborated petitioners' claims that cessation of their services was
determined by Shogun Ships.

All told, the fact that the aforesaid allegations of petitioners were not controverted by herein respondent lends credence to
petitioners' assertions that Shogun Ships: (1) engaged them as its employees; (2) paid their salaries for services rendered; and (3)
had ultimate discretion to dismiss their services after the needed repairs on the barges were carried out. It is worth noting that Rule
8, Section 11, of the Rules of Court, which supplements the NLRC Rules of Procedure,58 provides that allegations which are not
specifically denied are deemed admitted.59

As regards Shogun Ship's power of control over petitioners, respondent contended that Shogun Ships did not direct the manner and
method in which petitioners do their work. It bears emphasis, however, that the control test calls merely for the existence of the right
to control the manner of doing the work and not the actual exercise of the right.60

While this Court upholds the control test under which an employer-employee relationship exists "where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such
end," it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the
existence of the right to control the manner of doing the work, not the actual exercise of the right. Considering the finding by the

Clearly, considering that petitioners were working on the barges alongside regular employees of Shogun Ships and that they were
taking orders from its engineers as to the required specifications on how the barges of Shogun Ships should be repaired, which
respondent herein failed to deny, it may be thus logically inferred that Shogun Ships, to some degree, exercised control or had the
right to control the work of petitioners.

The CA concluded that Shogun Ships failed to present substantial evidence proving any of these elements, and thus no employer-
employee relationship existed.
The Supreme Court clarified that while Article 295 of the Labor Code (on regular and casual employment) helps classify types of
employees, it does not determine whether an employment relationship exists in the first place. That determination must be based
on the four-fold test, regardless of whether the work is core or peripheral to the employer’s business.
Ultimately, the Court agreed with the CA that Article 295 is not the proper standard for determining the existence of an
employment relationship when such is disputed. The four-fold test remains the controlling legal standard.

WHEREFORE, the instant Petition is GRANTED. The May 11, 2012 Decision and November 19, 2012 Resolution of the Court of
Appeals in CA G.R. SP No. 112075 are REVERSED and SET ASIDE. The August 28, 2009 Decision and October 27, 2009
Resolution of the NLRC, which declared petitioners Pedrito R. Parayday and Jaime Reboso to have been illegally dismissed from
employment, are REINSTATED and AFFIRMED.
The case is REMANDED to the Labor Arbiter for the purpose of re-computation of petitioners' full backwages.

Case Title: Royale Homes Marketing Corporation v. Alcantara, G. R. No. 195190, July 28, 2014
Topic: The traditional four-fold test of employer-employee relationship

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship. Rules and
regulations that merely serve as guidelines towards the achievement of a mutually desired result without dictating the means and
methods of accomplishing it do not establish employer-employee relationship.

This Petition for Review on Certiorari2 assails the June 23, 2010 Decision of the Court of Appeals (CA) in CA-G.R. SP No. 109998
which (i) reversed and set aside the February 23, 2009 Decision of the National Labor Relations Commission (NLRC), (ii) ordered
petitioner Royale Homes Marketing Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and
separation pay, and (iii) remanded the case to the Labor Arbiter for the proper determination and computation of said monetary
awards.

FACTS:

In 1994, Royale Homes, a real estate marketing corporation, appointed Alcantara as its Marketing Director for a fixed one-year term.
He was reappointed annually, and by 2003, he held the position of Division 5 Vice-President-Sales. On December 17, 2003,
Alcantara filed a complaint for illegal dismissal against Royale Homes and several of its top executives, claiming he was a regular
employee performing tasks essential to the company’s operations. He alleged that he was dismissed without valid cause or due
process after company executives made remarks implying, he was no longer welcome at the office. Alcantara sought reinstatement,
back wages, damages, attorney’s fees, and the transfer of ownership of a company vehicle.

Royale Homes denied that Alcantara was an employee, asserting instead that he was an independent contractor engaged for a fixed
term and paid solely on commission. The company emphasized that Alcantara had full autonomy in performing his duties and was
not entitled to employee benefits. Royale Homes further claimed that Alcantara voluntarily left the company in October 2003 to join
his wife’s competing brokerage business, which had recruited Royale Homes’ agents. His departure was acknowledged with a
despedida party, and a new contractor was appointed. However, two months later, Alcantara returned and filed a complaint alleging
illegal dismissal.

Ruling of the Labor Arbiter

On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of Royale Homes with a fixed-
term employment period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the law.
Hence, Alcantara is entitled to an amount which he may have earned on the average for the unexpired portion of the contract. With
regard to the impleaded corporate officers, the Labor Arbiter absolved them from any liability.

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred in
ruling that there exists an employer-employee relationship between the parties. It insisted that the contract between them expressly
states that Alcantara is an independent contractor and not an ordinary employee. It had no control over the means and methods by
which he performed his work. Royale Homes likewise assailed the award of ₱277,000.00 for lack of basis as it did not pre-terminate
the contract. It was Alcantara who chose not to finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not
entitled to back wages, reinstatement, unpaid commissions, and damages.

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision, ruling that Alcantara is not an employee but a mere independent contractor
of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He
was also free to adopt the selling methods he deemed most effective and can even recruit sales agents to assist him in marketing
the inventories of Royale Homes. The NLRC also considered the fact that Alcantara was not receiving monthly salary, but was being
paid on commission basis as stipulated in the contract. Being an independent contractor, the NLRC concluded that Alcantara’s
Complaint is cognizable by the regular courts.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision granting Alcantara’s Petition and reversing the NLRC’s Decision. Applying the
four-fold and economic reality tests, it held that Alcantara is an employee of Royale Homes. Royale Homes exercised some degree
of control over Alcantara since his job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He
was also bound by the company code of ethics. Moreover, the exclusivity clause of the contract has made Alcantara economically
dependent on Royale Homes, supporting the theory that he is an employee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was carried out in
violation of his right to procedural due process. Thus, the CA ruled that he is entitled to back wages and separation pay, in lieu of
reinstatement. Considering, however, that the CA was not satisfied with the proof adduced to establish the amount of Alcantara’s
annual salary, it remanded the case to the Labor Arbiter to determine the same and the monetary award he is entitled to. With regard
to the corporate officers, the CA absolved them from any liability for want of clear proof that they assented to the patently unlawful
acts or that they are guilty of bad faith or gross negligence.

ISSUES:
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF
RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY
DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN BANCRULING
OF THIS HONORABLE COURT IN THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE
RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR
RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF

The Supreme Court ruled in favor of Royale Homes, finding that Alcantara was not its employee but an independent contractor. The
Court emphasized that the written contract between the parties clearly stated their intention to establish a non-employment
relationship, and since the terms were unambiguous, their literal meaning should prevail. It found it unusual that Alcantara, an
educated and experienced sales broker earning ₱1.2 million annually, did not contest the clause stating he was not an employee if
their true intent had been otherwise. Applying the four-fold test to determine the existence of an employer-employee relationship, the
Court focused on the "control test"—the most crucial factor. While Alcantara was subject to company rules and evaluations, the Court
clarified that not all forms of control indicate employment. Royale Homes’ guidelines did not dictate the means and methods of
Alcantara’s work, which is the essence of labor law control. Alcantara had full autonomy in soliciting sales, was not bound by working
hours, and was not assigned tasks beyond sales solicitation. His repeated rehiring and the exclusivity clause in his contract did not
establish an employment relationship either. Ultimately, Alcantara failed to prove that Royale Homes exercised control over how he
performed his work, leading the Court to conclude that no employer-employee relationship existed.

This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor. The
NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and that the same is cognizable by
the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R. SP No.
109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations Commission is
REINSTATED and AFFIRMED. SO ORDERED.
Case Title: Tongko v. The Manufacturer’s Life Insurance Company, Inc., G.R. No. 167622, June 29, 2010
Topic: The guidelines indicative of labor law “control”

The Principles
 Four-Fold Test
 Labor Code concept of control
 concept of control in insurance industry

Tongko and Manulife’s relationship existed under a Career Agent’s Agreement which provided that Tongko is an independent
contractor and that he can be terminated by mere notice. He was promoted to higher positions over the course of his career in
Manulife and was made to follow the company Rules and Regulations or Codes. Later, Renato (who seems to be part of the
Management) wrote him a letter calling out his poor performance and giving him some guidelines he could follow to improve it.
However, shortly after that, Renato followed it up with another letter saying that he is terminating the services of Tongko.
The latter filed an illegal dismissal complaint arguing that he was an employee of Manulife and that the company is liable for his
backwages and separation pay. The Court found Tongko’s argument inconsistent with the Agreement signed by both parties which
was never substantially altered over the course of his career and Tongko’s consistent declaration in his ITR that he is a self-
employed individual. Following the provisions of Insurance Code, Civil Code and Labor Code, Manulife did not exercise control on
Tongko’s actions as an independent agent that would be construed as having an employer-employee relationship. At the very least,
the instructions given to him from time to time were part of the principal-agent relationship they had.

Q: What is the Four-Fold Test?

In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee
relationship, thus:

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee's conduct. It is the so-called "control test" which constitutes the most important index
of the existence of the employer-employee relationship that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.

Q: What is the Labor Code’s concept of “control” that must necessarily exist in a principal-agent relationship?

In this case, Manulife did not exercise the type of control that the Labor Code contemplates. The Codes and Guidelines
implemented by Manulife seemed like control amounting to an employer-employee relationship but since it does not intrude into the
insurance agents' means and manner of conducting their sales and only control them as to the desired results, it does not amount to
the “control” the Labor Code contemplates.

A commitment to abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent
an employee. Neither do guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term
is defined in jurisprudence.

Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature of dictating the means or methods to be
employed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these means.

Q: Can control be exercised without establishing an employer-employee relationship?

Yes, although Manulife exercised a type of control over Tongko, it did not amount to the control contemplated by the Labor
Code. Tongko remained an agent all along in absence of a subsequent contract; although his subsequent duties made him a lead
agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-manner
control.

Since the factual antecedents were set in an insurance industry, Insurance Code primarily governs. There are built-in
elements of control specific to an insurance agency, which do not amount to the elements of control that characterize an employment
relationship governed by the Labor Code. The Insurance Code provides definite parameters in the way an agent negotiates for the
sale of the company's insurance products.

Under the Insurance Code, "No person, partnership, or association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines." The agent
must, as a matter of qualification, be licensed and must also act within the parameters of the authority granted under the license and
under the contract with the principal.

In addition, under the general law on agency as applied to insurance, an agency must be express in light of the need for a
license and for the designation by the insurance company. In this case, the Career Agent’s Agreement fully serves as a grant of
authority to Tongko as Manulife’s insurance agent.

Background
Manulife terminated Tongko’s Agency Agreement under Section 14 of the contract, effective 15 days from the notice. Tongko
responded by filing an illegal dismissal complaint, claiming he was actually an employee, not just an agent.

Tongko’s Argument
Tongko claimed:
 He received fixed allowances and commissions.
 He performed administrative and supervisory duties.
 He had a designated office space and used company resources.
 He followed multiple codes of conduct imposed by Manulife.
These, he argued, showed control by Manulife—an indicator of employment.
Manulife’s Defense
Manulife argued:
 Tongko was paid commissions, not a salary.
 He declared himself self-employed for tax purposes.
 He was subject to an agency agreement, not an employment contract.
 Labor tribunals had no jurisdiction due to lack of employment relationship.

Conflicting Rulings
 Labor Arbiter: No employment relationship.
 NLRC: Reversed, found illegal dismissal.
 Court of Appeals: Reversed NLRC, agreed with Labor Arbiter.
 Supreme Court (Nov 7, 2008): Reversed CA, found Tongko was an employee.

Supreme Court’s Basis

1. Control Test: Manulife exercised control over Tongko’s work methods.
2. Codes of Conduct: Tongko was bound by company rules.
3. Administrative Duties: Similar to those performed by employees.
4. Recruitment Role: Indicative of deeper involvement in company operations.

Manulife’s Motion for Reconsideration

Manulife challenged the decision on several grounds:
 Due process violations: Ignored other elements of the four-fold test.
 Misapplication of law: Misinterpreted contract and agency principles.
 Judicial overreach: Claimed the decision amounted to judicial legislation.
 Evidence disregard: Ignored Tongko’s tax filings and other material facts.

Additional Evidence and Clarifications

Lack of Means-and-Manner Control
 Tongko failed to present specific evidence showing Manulife dictated how he performed his duties.
 His promotions (Unit Manager, Branch Manager, Regional Sales Manager) lacked documentation detailing responsibilities
or control mechanisms.
Nature of Managerial Role
 The term “coordinative” used to describe Tongko’s role does not imply control; it reflects leadership among agents, not
subordination to Manulife.
 Tongko was not supervising regular employees, but rather guiding fellow agents under the same agency agreement.
Selective Use of Affidavits
 The Court’s earlier decision highlighted only portions of affidavits suggesting control.
 Omitted portions revealed:
 No fixed salary or working hours.
 Use of personal resources and staff.
 Income reported as self-employed with BIR.
De Dios’ Letter
 The letter was not a directive on methods, but a strategic suggestion to improve results.
 It emphasized sales targets, not how to achieve them.
 The suggestion to hire an assistant was aimed at improving performance, not controlling operations.
Comparison with Other Cases
 Unlike the second Insular Life case, Tongko’s situation lacked:
 Exclusivity of service.
 Control over agent assignments.
 Provision of company capital or facilities.
 These elements were crucial in establishing employment in Insular Life but were absent in Tongko’s case.

Conclusion
The evidence, when fully considered, supports the view that no employer-employee relationship existed between Tongko and
Manulife. Tongko operated as a lead agent under an agency agreement, with autonomy in methods and operations. The control
exercised by Manulife was limited to results and compliance with industry standards, consistent with an agency relationship,
not employment.

In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a
ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an
employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance,
agency and contracts.

WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7,

2008, GRANT Manulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
Case Title: Tongko v. The Manufacturer’s Life Insurance Company, Inc., G.R. No. 167622, January 25, 2011
Topic: The guidelines indicative of labor law “control”

Gregorio Tongko sought reconsideration, claiming employee status with Manulife after 19 years as an insurance agent. The
Supreme Court ruled he was an independent agent, not an employee, as Manulife’s control aligned with agency, not labor law,
standards.

Background
Gregorio V. Tongko worked with Manulife for 19 years, holding various titles such as Unit Manager, Branch Manager, and Regional
Sales Manager. He claimed that these roles involved administrative and supervisory functions, which he argued made him
an employee of Manulife, not just an insurance agent.

Legal Issue
The central question was whether Tongko was an employee of Manulife under labor law, or merely an insurance agent under a
contractual agency relationship.

Supreme Court Ruling

The Court denied Tongko’s Motion for Reconsideration, affirming its earlier decision that:
 Tongko was not an employee of Manulife.
 He was an insurance agent, governed by the Insurance Code and the Civil Code on agency.
Key Points
 Control Test: The Court emphasized that the control test is crucial in determining an employment relationship. This means
control over both the means and manner of work, not just the results.
 Manulife’s control over Tongko (e.g., setting sales targets, prescribing codes of conduct) was deemed insufficient to
establish an employer-employee relationship.
 The titles and commissions Tongko received were consistent with his role as a lead agent, not as an employee.
 Tongko earned substantial income (e.g., over ₱8 million in 2002) through commissions, which supported the conclusion that
he was compensated as an agent, not as an employee.
 The Court rejected the argument that denying employee status created an inequitable situation, stating that Tongko was
adequately compensated under the agency arrangement.

Conclusion
The Supreme Court upheld that Tongko was an insurance agent, not an employee, and thus not entitled to labor law protections
such as security of tenure or monetary awards like backwages or separation pay.

The Supreme Court rejected Tongko’s Motion for Reconsideration, reaffirming that Manulife did not exercise the kind of
control required to establish an employer-employee relationship under labor law.

Understanding Labor Law Control

 Labor law defines an employment relationship based on control over both the means and manner of performing work—
not just the results.
 The Court emphasized that control must go beyond setting goals; it must involve direct supervision over how tasks are
done.

Tongko’s Arguments and Why They Failed

Tongko claimed Manulife controlled him by:
1. Setting objectives and sales targets.
2. Prescribing codes of conduct.
The Court disagreed, explaining:
 These are standard practices in insurance agency relationships, not indicators of employment.
 The Insurance Code and Civil Code already define the agent’s duties and responsibilities, which naturally involve some
level of oversight—but this does not equate to labor law control.

Legal Distinctions Clarified

 Insurance agents operate under agency law, where the principal (Manulife) can set goals and standards but cannot
dictate how the agent achieves them.
 The Code of Conduct is a behavioral guideline, not a directive on how to perform specific tasks.
 The Civil Code allows principals to give instructions, but this is not the same as supervising daily work.

Duties and Titles Do Not Prove Employment

Tongko listed duties like:
 Remitting fees
 Delivering policies
 Overseeing other agents

The Court found:

 These are typical agent responsibilities.
 Even if Tongko supervised other agents, they were also independent agents, and his role was more like a lead agent.
 His titles (unit manager, branch manager, regional sales manager) reflected his expanded role, not a change in
employment status.

 Tongko remained an insurance agent throughout his relationship with Manulife.

 His progression in title and responsibilities did not transform his legal status into that of an employee.
 The Court found no evidence of labor law control, and thus no employment relationship existed.

WHEREFORE, premises considered, we hereby DENY the Motion for Reconsideration WITH FINALITY for lack of merit. No
further pleadings shall be entertained. Let entry of judgment proceed in due course.

Case Title: Marsman & Company Inc. v. Sta. Rita, G.R. No. 194765, April 23, 2018
Topic: The guidelines indicative of labor law “control”
FACTS
Petitioner Marsman, a domestic corporation and when it was engaged in the business of distribution and sale of pharmaceutical and
consumer products for different manufacturers within the country, temporarily hired Sta. Rita on as a warehouse helper with a
contract and paid him a monthly wage.

After the contract expired, Marsman rehired Sta. Rita as a warehouseman and placed him on probationary status with pay. Marsman
then confirmed Sta. Rita's status as a regular employee and adjusted his monthly wage. Later, Sta. Rita joined Marsman Employees
Union (MEU), the recognized sole and exclusive bargaining representative of Marsman's employees. Marsman administered Sta.
Rita's warehouse assignments. Initially, Marsman assigned her to work in its GMA warehouse, later then transferred to the
Warehouses C and E of Kraft General Foods, Inc.

Sometime in July 1995, Marsman purchased Metro, a company that was also engaged in the distribution and sale of pharmaceutical
and consumer products, from Metro Pacific, Inc. The similarity in Marsman's and Metro Drug's business led to the integration of their
employees which was formalized in a Memorandum of Agreement (MOA). Concomitant to the integration of employees is the
transfer of all office, sales and warehouse personnel of Marsman to Metro Drug and the latter's assumption of obligation with regard
to the affected employees' labor contracts and Collective Bargaining Agreement. The integration and transfer of employees ensued
out of the transitions of Marsman and CPDSI into, respectively, a holding company and an operating company. Thereafter, on
November 7, 1997, Metro Drug amended its Articles of Incorporation by changing its name to "Consumer Products Distribution
Services, Inc." (CPDSI) which was approved by the SEC. In the meantime, on an unspecified date, CPDSI contracted its logistic
services to EAC Distributors (EAC). CPDSI and EAC agreed that CPDSI would provide warehousemen to EAC's tobacco business
which operated in EAC-Libis Warehouse.

A letter issued by Marsman confirmed Sta. Rita's appointment as one of the warehousemen for EACLibis Warehouse.
Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the lease contract between EAC and Valiant
Distribution (Valiant), owner of the EAC-Libis Warehouse. Hence, EAC's operations were affected when Valiant decided to terminate
their contract of lease on January 31, 2000. In response to the cessation of the contract of lease, EAC transferred their stocks into
their own warehouse and decided to operate the business by themselves, thereby ending their logistic service agreement with
CPDSI. This sequence of events left CPDSI with no other option but to terminate the employment of those assigned to EAC-Libis
Warehouse, including Sta. Rita. According to CPDSI, she was terminated due to redundancy.

Aggrieved, Sta. Rita filed a complaint in the NLRC against Marsman for illegal dismissal with damages. Sta. Rita alleged that his
dismissal was without just or authorized cause and without compliance with procedural due process. Marsman filed a Motion to
Dismiss on the premise that the Labor Arbiter had no jurisdiction over the complaint for illegal dismissal because Marsman is not Sta.
Rita's employer. Marsman averred that the MOA effectively transferred Sta. Rita's employment from Marsman and Company, Inc. to
CPDSI.

The Labor Arbiter found Marsman as Sta.Rita’s employer and declared it guilty of illegal dismissal.

The NLRC, on the contrary, found that using the four-fold test, there is no employee-employer relationship. Meanwhile, the Court of
Appeals held that Marsman was Sta. Rita's employer because Sta. Rita was allegedly not part of the integration of employees
between Marsman and CPDSI.

ISSUE Whether or not an employer-employee relationship existed between Marsman and Sta. Rita at the time of Sta. Rita's
dismissal? (NO)

RULING

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid
cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. In this
instance, it was incumbent upon Sta. Rita as the complainant to prove the employer-employee relationship by substantial evidence.

Unfortunately, Sta. Rita failed to discharge the burden to prove his allegations. Marsman hired, paid and controlled his warehouse
assignments, acts which can only be attributed to a bona fide employer. Marsman thereafter purchased Metro Drug, now CPDSI,
which at that time, was engaged in a similar business. Marsman then entered into a MOA with MEU, its bargaining representative,
integrating its employees with CPDSI and transferring its employees, their respective employment contracts and the attendant
employment obligation to CPDSI. It is imperative to point out that the integration and transfer was a necessary consequence of the
business transition or corporate reorganization that Marsman and CPDSI had undertaken, which had the characteristics of a
corporate spin-off. In business parlance, a corporate spin-off occurs when a department, division or portions of the corporate
business enterprise is sold-off or assigned to a new corporation that will arise by the process which may constitute it into a subsidiary
of the original corporation. The spin-off and the attendant transfer of employees are legitimate business interests of Marsman.

The transfer of employees through the MOA was proper and did not violate any existing law or jurisprudence. In SCA Hygiene
Products Corporation Employees Association-FFW v. SCA Hygiene Products Corporation, we held that "management prerogatives"
is: The hiring, firing, transfer, demotion, and promotion of employees have been traditionally identified as a management prerogative
subject to limitations found in the law, a collective bargaining agreement, or in general principles of fair play and justice. This is a
function associated with the employer's inherent right to control and manage effectively its enterprise. Even as the law is solicitous of
the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose cannot be denied. x x x.

Analogously, the Court has upheld the transfer/absorption of employees from one company to another, as successor employer, as
long as the transferor was not in bad faith and the employees absorbed by a successor-employer enjoy the continuity of their
employment status and their rights and privileges with their former employer. Sta. Rita's contention that the absence of his signature
on the MOA meant that his employment remained with Marsman is merely an allegation that is neither proof nor evidence. It cannot
prevail over Marsman's evident intention to transfer its employees. To assert that Marsman remained as Sta. Rita's employer even
after the corporate spin-off disregards the separate personality of Marsman and CPDSI. It is a fundamental principle of law that a
corporation has a personality that is separate and distinct from that composing it as well as from that of any other legal entity to
which it may be related. Other than Sta. Rita's bare allegation that Michael Leo T. Luna was Marsman's and CPDSI's VicePresident
and General Manager, Sta. Rita failed to support his claim that both companies were managed and operated by the same persons,
or that Marsman still had complete control over CPDSI's operations. Moreover, the existence of interlocking directors, corporate
officers and shareholders without more, is not enough justification to pierce the veil of corporate fiction in the absence of fraud or
other public policy considerations. Verily, the doctrine of piercing the corporate veil also finds no application in this case because bad
faith cannot be imputed to Marsman. On the contrary, the MOA guaranteed the tenure of the employees, the honoring of the
Collective Bargaining Agreement signed in June 1995, the preservation of salaries and benefits, and the enjoyment of the same
terms and conditions of employment by the affected employees.

Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-employee relationship. The elements
of the four-fold test are: 1) the selection and engagement of the employees; 2) the payment of wages; 3) the power of dismissal; and
4) the power to control the employee's conduct. There is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of
employee status. The MOA effectively transferred Marsman's employees to CPDSI.

However, there was nothing in the agreement to negate CPDSI's power to select its employees and to decide when to engage them.
This is in line with Article 1700 of the Civil Code which provides that: Art. 1700. The relations between capital and labor are not
merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects. A labor contract merely creates an action in personam and does not create any real
right which should be respected by third parties.

This conclusion draws its force from the right of an employer to select his/her employees and equally, the right of the employee to
refuse or voluntarily terminate his/her employment with his/her new employer by resigning or retiring. That CPDSI took Sta. Rita into
its employ and assigned him to one of its clients signified the former's acquiescence to the transfer. The MOA clearly reflected
Marsman's intention to transfer all employees to CPDSI.||| It is clear under the terms of the Memorandum of Agreement that
Marsman may continue to negotiate and address issues with the Union even after the signing and execution of said agreement in
the course of fully implementing the transfer to, and the integration of operations with, CPDSI. To prove the element on the payment
of wages, Sta. Rita submitted forms for leave application, with either Marsman's logo or CPDSI's logo. In any event, the forms for
leave application did not sufficiently establish that Marsman paid Sta. Rita's wages. Sta. Rita could have presented pay slips, salary
vouchers, payrolls, certificates of withholding tax on compensation income or testimonies of his witnesses. The submission of his
SSS ID only proved his membership in the social insurance program. Sta. Rita should have instead presented his SSS records
which could have reflected his contributions, and the name and address of his employer. Thus, Sta. Rita fell short in his claim that
Marsman still had him in its payroll at the time of his dismissal.

As to the power of dismissal, the letter dated January 14, 2000 clearly indicated that CPDSI, and not Marsman, terminated Sta.
Rita's services by reason of redundancy.

Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at the time of his dismissal. The power
of an employer to control the work of the employee is considered the most significant determinant of the existence of an employer-
employee relationship. Control in such relationships addresses the details of day-to-day work like assigning the particular task that
has to be done, monitoring the way tasks are done and their results, and determining the time during which the employee must
report for work or accomplish his/her assigned task. The Court likewise takes notice of the company IDs attached in Sta. Rita's
pleading. The "old" ID bore Marsman's logo while the "new" ID carried Metro Drug's logo. The Court has held that in a business
establishment, an identification card is usually provided not only as a security measure but mainly to identify the holder thereof as a
bona fide employee of the firm that issues it. Thus the "new" ID confirmed that Sta. Rita was an employee of Metro Drug, which, to
reiterate, later changed its name to CPDSI.
Case Title: Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, June 10, 2004
Topic: Nature of relationship between television/radio station and its talents
FACTS:

In May 1994, ABS-CBN signed an Agreement with the Mel and Jay Management and Development Corporation (MJMDC). MJMDC
agreed to provide Jay Sonza’s services exclusively to ABS-CBN as talent for radio and television. ABS-CBN agreed to pay for
Sonza's services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for the second and third year of the Agreement.

On April 1, 1996, Sonza wrote a letter wrote a letter to ABS-CBN President Eugenio Lopez III, accusing ABS-CBN of violating the
Agreement.

On April 30, 1996, Sonza filed a complaint before the Department of Labor and Employment (DOLE), alleging that that ABS-CBN
did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts
due under the Employees Stock Option Plan.

ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties.

LABOR ARBITER: Dismissed Sonza's complaint for lack of jurisdiction, ruling that because Sonza is a "talent," he cannot be
considered an employee.

NLRC: Dismissed Sonza's Motion for Reconsideration.

COURT OF APPEALS: Affirmed NLRC ruling. The CA ruled that the allegations of Sonza against ABS-CBN did not constitute a labor
dispute because there was no employer-employee relationship to begin with. If anything, Sonza's allegations constitute an action for
breach of contractual obligation, which is intrinsically a civil dispute to be resolved by a civil court, not the Labor Arbiter or the NLRC.

ISSUE:

Whether Jay Sonza was an employee of ABS-CBN? -- NO.

HELD:
The Supreme Court held that Sonza was not an employee of ABS-CBN. As a "talent," he was an independent contractor. In coming
up with this conclusion, the Court looked at the essential elements of employer-employee relationship and applied the control test.

(a) Selection and engagement of employee

ABS-CBN engaged Sonza's services to co-host its television and radio programs because of his peculiar skills, talent and celebrity
status. These are indicative, but not conclusive, of an independent contractual relationship

(b) Payment of wages

The Court held that whatever benefits Sonza enjoyed (SSS, Medicare, 13th month pay) arose from contract and not because of an
employer-employee relationship

(c) Power of dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. Sonza failed to show that ABS-CBN
could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under
labor laws.

(d) Power of control

The control test is the most important test our courts apply in distinguishing an employee from an independent contractor. This test is
based on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the
more likely the worker is deemed an employee. The converse holds true as well – the less control the hirer exercises, the more likely
the worker is considered an independent contractor.

In Sonza's case, ABS-CBN did not exercise control over the means and methods of his work. The Court found that ABS-CBN was
not involved in the actual performance that produced the finished product of Sonza's work.

Second, the fact that he was subjected to ABS-CBN's rules and standards of performance was not determinative of control as it was
under his contract that he " shall abide with the rules and standards of performance covering talents of ABS-CBN."

Third, the "exclusivity" clause in the Agreement was not a form of control. In the broadcast industry, exclusivity is not necessarily the
same as control. The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. This practice is
not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station.

Finally, the Supreme Court held that the right of labor to security of tenure as guaranteed in the Constitution arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee
relationship.

To hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results."

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of work but
also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 of ABS-CBN.
The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-
CBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng
mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code
applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and
not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. 43 In this
case, SONZA failed to show that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. 44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to
insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according
to his own initiative.45

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as
independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person
who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd
results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life
and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate
to deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his services without any one controlling the means and methods by which he
performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to render their
services only as employees. If radio and television program hosts can render their services only as employees, the station owners
and managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the
press.

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZA’s Claims

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

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190
is AFFIRMED. Costs against petitioner.
Case Title: ABS-CBN Broadcasting Corporation v. Marquez, G.R. No. 167638, June 22, 2005
Topic: Nature of relationship between television/radio station and its talents

Background of the Case

ABS-CBN Broadcasting Corporation engaged the services of Henrie Marquez and other respondents starting in December 1994 to
produce Cebuano-language television serials for its weekday afternoon slots in Cebu. These respondents were grouped into three
production teams, each with its own directors, writers, editors, actors, and crew. Initially, each group was given a weekly budget
of ₱30,000, later increased to ₱40,000.
The programs were successful, and the production teams were continuously rehired to produce new series. However, when the
respondents requested a 25% budget increase in June 1999, ABS-CBN denied the request and terminated their services
effective August 13, 1999.

Legal Proceedings
1. Complaint Filed: On August 27, 1999, the respondents filed a consolidated complaint for illegal dismissal and various
monetary claims with the Regional Arbitration Branch VII of the Department of Labor and Employment (DOLE).
2. Labor Arbiter Decision (June 15, 2000): Ruled in favor of the respondents, recognizing an employer-employee
relationship and ordering ABS-CBN to pay their claims.
3. NLRC Decision: On appeal, the National Labor Relations Commission (NLRC), 4th Division, Cebu City, reversed the
Labor Arbiter’s decision, dismissing the complaints for lack of merit. It held that the respondents were project
employees or “talents” hired for specific programs.
4. Court of Appeals Decision (December 20, 2004): Reversed the NLRC’s ruling and reinstated the Labor Arbiter’s
decision, affirming the existence of an employer-employee relationship and the illegality of the dismissal.

The Supreme Court upheld the Court of Appeals’ decision, emphasizing the application of the “four-fold test” to determine the
existence of an employer-employee relationship:
1. Selection and Engagement: ABS-CBN directly hired the respondents.
2. Payment of Wages: Respondents were paid via ATM and issued payslips bearing ABS-CBN’s name.
3. Power of Dismissal: ABS-CBN exercised disciplinary actions, including suspensions.
4. Power of Control: ABS-CBN supervised production through executive producers and issued directives regarding
production standards.

The Court also noted:

 ABS-CBN provided the production equipment.
 Respondents were continuously rehired for over five years.
 Their work was necessary and desirable to ABS-CBN’s business.
 The Cebu station was not independent from the Manila station.

We agree with the Court of Appeals when it upheld the conclusion of the Labor Arbiter that petitioner broadcasts and produces its
own television series and other programs, whether in Cebu or in Manila; and that there is no distinction between its Cebu station and
the mother station because they are one and the same, more so due to lack of showing by the petitioner that its Cebu station is
independent from its mother station. It cannot thus be said that petitioner is primarily just involved in mere broadcasting from satellite
feeds or other sources. That the production of the television series is vital, necessary and desirable to petitioner’s usual business is
beyond question.

It is a matter of record that respondents have rendered almost five (5) years of continuous service to petitioner, doing work that is
necessary and desirable to the usual business of the latter. Hence, even granting on the extreme that respondents were not
performing work that is vital, necessary and indispensable to the usual business of petitioner, nonetheless the second paragraph of

Article 280 of the Labor Code still applies. It reads:

ART. 280. REGULAR AND CASUAL EMPLOYMENT
xxx xxx xxx
An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, That, any employee who
has rendered at least one year of service whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall continue while such activity
exists. (Emphasis supplied).

We thus rule and so hold that respondents are petitioner’s regular employees, at least with respect to the production of petitioner’s
Visayan tele-series programs and until such activity exists.
Petitioner relied upon and took undue advantage of Policy Instruction No. 40, by treating herein respondents as talents and
classifying them as independent contractors and freelancers.

The Supreme Court emphasized that program employees are those hired for specific television programs or undertakings, with
flexible working hours and the freedom to engage in other employment. Their engagement must be governed by a written contract
detailing the nature of their work, compensation, and the specific program they are assigned to. This contract must be registered with
the Broadcast Media Council within three days of its execution. However, ABS-CBN failed to present any such written contracts or
proof of registration, which are essential to establish that the respondents were merely program or project employees.

Furthermore, the company did not submit the required reports to government agencies after each production, as mandated by labor
regulations. These omissions supported the respondents’ claim that they were regular employees, not project-based workers.
Given their long tenure and the integral nature of their work to ABS-CBN’s operations, the respondents had acquired regular
employment status.

As regular employees, they were entitled to security of tenure and could only be dismissed for just or authorized causes, with due
process observed. ABS-CBN failed to prove that the dismissal was lawful or that the respondents were given notice and a chance to
be heard. The company merely cited the expiration of contracts as the reason for termination, which is not a valid ground under the
Labor Code. The absence of due process rendered the dismissal illegal. Consequently, the Supreme Court upheld the appellate
court’s decision and denied ABS-CBN’s petition.
Case Title: Thelma Dumpit-Murillo v. Court of Appeals, Associated Broadcasting Company, G.R. No. 164652, June 8, 2007
Topic: Nature of relationship between television/radio station and its talents

Facts:

On October 2, 1995, Thelma Dumpit-Murillo was hired by Associated Broadcasting Company (ABC) as a newscaster and co-anchor
for the news program Balitang-Balita under a three-month talent contract. Her contract was renewed multiple times over four years,
and she also worked on another program, Live on Five. Her final contract expired on September 30, 1999. Two weeks later, she
expressed interest in renewing her contract with a salary increase but stopped reporting for work. On November 5, 1999, she sent a
letter to ABC stating that if she did not receive a formal response by November 8, she would consider herself constructively
dismissed.

In December 1999, Dumpit-Murillo sent a demand letter to ABC requesting reinstatement, unpaid wages, backwages, and various
employee benefits. ABC responded that her talent fees for part of the disputed period had been processed but denied the rest of her
claims. On December 20, 1999, she filed a complaint for illegal constructive dismissal and nonpayment of wages and benefits, along
with claims for damages and attorney’s fees.

The Labor Arbiter dismissed her complaint in March 2000, but the National Labor Relations Commission (NLRC) reversed the
decision in August 2000, declaring her a regular employee who had been illegally dismissed.
The NLRC ordered ABC to reinstate her or pay separation pay, backwages, 13th month pay, service incentive leave pay, and
damages.

ABC appealed to the Court of Appeals, which initially dismissed the petition but later reinstated it in the interest of justice. The
appellate court ultimately reversed the NLRC’s decision, ruling that Dumpit-Murillo was a fixed-term employee based on the talent
contracts she had voluntarily signed. Therefore, she was not entitled to the protections of regular employment under the Labor Code,
including security of tenure.

ISSUES:

THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF APPEALS, THE DECISION OF
WHICH IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC – FIRST DIVISION, ARE "ANTI-
REGULARIZATION DEVICES" WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-MONTH TALENT CONTRACTS, AN
EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE, THERE WAS A DENIAL OF
PETITIONER’S RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.]

The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals; and (2) whether or
not under Rule 45 of the Rules of Court the Court of Appeals committed a reversible error in its Decision.

Ruling:

In response to the first issue, the private respondents argued that the petition raised factual matters and that the Court of Appeals’
findings were well-supported by evidence and jurisprudence. However, the petitioner contended that the Supreme Court could
review the appellate court’s findings because it allegedly committed a legal error in deciding a substantial issue contrary to law and
precedent. The Supreme Court agreed with the petitioner, noting that it may review decisions of the Court of Appeals, especially
when there is a conflict in factual findings between lower courts, such as the NLRC and the appellate court in this case.

On the second issue, the private respondents maintained that the talent contracts were valid and voluntarily entered into by the
petitioner, citing jurisprudence like Sonza v. ABS-CBN, which recognized the absence of an employer-employee relationship in
similar media arrangements. The petitioner, however, argued that the repeated renewal of her contracts over four years created an
employer-employee relationship. The Supreme Court again sided with the petitioner, ruling that she was a regular employee under
labor law. It emphasized that the mere existence of a talent contract does not preclude regular employment status, especially when
the employer exercises control over the worker’s duties and performance.

The contract of employment of petitioner with ABC had the following stipulations:
xxxx
1. SCOPE OF SERVICES – TALENT agrees to devote his/her talent, time, attention and best efforts in the performance of his/her
duties and responsibilities as Anchor/Program Host/Newscaster of the Program, in accordance with the direction of ABC and/or its
authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES – TALENT shall:
a. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews on- and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live telecasts;
g. Be present promptly at the studios and/or other place of assignment at the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized representatives in the production and promotion of the Program; and
j. Perform such other functions as may be assigned to him/her from time to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND REGULATIONS – TALENT agrees that
he/she will promptly and faithfully comply with the requests and instructions, as well as the program standards, policies, rules and
regulations of ABC, the KBP and the government or any of its agencies and instrumentalities.

The Court distinguished the petitioner’s situation from the Sonza case, noting that unlike Sonza, who had autonomy over his work,
Dumpit-Murillo was subject to ABC’s control and direction, as detailed in her contract. Her responsibilities included attending
meetings, reporting to the studio at designated times, participating in news coverage, and performing tasks assigned by ABC.
Additionally, her relatively modest salary compared to Sonza’s further supported the conclusion that she was not an independent
talent but a regular employee.

In this case, the Supreme Court addressed two key issues: the nature of the petitioner’s employment and the validity of her
dismissal. The private respondents argued that the issues raised were factual and that the Court of Appeals’ findings were supported
by evidence and jurisprudence. However, the petitioner contended that the appellate court erred in its legal interpretation, particularly
regarding her employment status. The Supreme Court agreed with the petitioner, emphasizing that it could review the findings of the
Court of Appeals due to the conflicting conclusions reached by the NLRC and the appellate court.

The Court found that the petitioner was not a fixed-term employee but a regular employee. It cited the ruling in Manila Water
Company, Inc. v. Peña, which outlines four elements to determine an employment relationship: selection and engagement, payment
of wages, power of dismissal, and control over the employee’s conduct. The most crucial element is the employer’s control over both
the result and the means of the work. The petitioner’s contract clearly showed that ABC exercised control over her duties, work
schedule, assignments, and performance, satisfying all elements of an employment relationship.

Furthermore, the Court explained that regular employment arises either from the nature of the work being necessary or desirable to
the employer’s business or from the duration of service of at least one year. The petitioner’s role as a newscaster was integral to
ABC’s business, especially in fulfilling its public information mandate. Her continuous service for four years under repeated short-
term contracts demonstrated the necessity and desirability of her work, qualifying her as a regular employee.
The Court rejected the appellate court’s conclusion that the petitioner was under a valid fixed-term contract. It emphasized that for
such contracts to be valid, the terms must be voluntarily and knowingly agreed upon without coercion or imbalance in bargaining
power. In this case, the petitioner had no real choice but to accept the terms prepared by ABC to retain her job, indicating a lack of
equal footing. The repeated renewal of short-term contracts was seen as a deliberate attempt to prevent her from acquiring regular
status, which is contrary to labor law and public policy.

Finally, the Court ruled that the petitioner was illegally dismissed, as ABC failed to observe due process. As a regular employee, she
was entitled to security of tenure and could only be dismissed for just cause and with procedural compliance. The Supreme Court
reversed and set aside the Court of Appeals’ decision and affirmed the NLRC’s ruling, recognizing the petitioner’s regular
employment status and awarding her appropriate remedies.
Case Title: Fuji Television Network, Inc, v. Espiritu, G.R. No. 204944-45, December 03, 2014
Topic: Nature of relationship between television/radio station and its talents

It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather than a regular
employee with or without a fixed term. That a person has a disease does not per se entitle the employer to terminate his or her
services. Termination is the last resort. At the very least, a competent public health authority must certify that the disease cannot be
cured within six ( 6) months, even with appropriate treatment.

Facts:
 Arlene S. Espiritu was hired by Fuji Television Network, Inc. in 2005 as a news correspondent/producer in its Manila
Bureau.
 Her employment was under a fixed-term contract, renewed annually with salary adjustments.
 In January 2009, Arlene was diagnosed with lung cancer and informed Fuji of her condition.
 Fuji expressed concerns about renewing her contract due to her illness, despite her physician certifying she was fit to work.
 On May 5, 2009, Arlene signed a non-renewal contract under protest, receiving US$18,050 in salaries, bonuses, and
separation pay.
 The next day, she filed a complaint for illegal dismissal, claiming coercion and that Fuji withheld her salary to force her to
sign.

Issues:

I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the verification and certification of
non forum shopping of the petition, had no authority to sign the verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was committed by the National Labor
Relations Commission when it ruled that Arlene was a regular employee, not an independent contractor, and that she was illegally
dismissed; and
III. Whether the Court of Appeals properly modified the National Labor Relations Commission’s decision by awarding reinstatement,
damages, and attorney’s fees.

Rulings:
Labor Arbiter:
 Dismissed the complaint, ruling Arlene was an independent contractor, citing Sonza v. ABS-CBN.

National Labor Relations Commission (NLRC):

 Reversed the Labor Arbiter’s decision.
 Held that Arlene was a regular employee, performing tasks necessary and desirable to Fuji’s business.
 Ordered Fuji to pay backwages.

Court of Appeals:
 Affirmed NLRC’s decision with modifications:
 Ordered reinstatement of Arlene as News Producer.
 Awarded backwages, bonuses, sick and vacation leave pay.
 Granted ₱100,000 moral damages, ₱50,000 exemplary damages, attorney’s fees, and 12% legal interest.

Ruling:

In this case, the Supreme Court addressed the issue of whether Arlene Espiritu was a regular employee of Fuji Television Network or
merely an independent contractor. While it was undisputed that Arlene rendered services to Fuji, the nature of her employment was
contested. To resolve this, the Court applied the four-fold test, which is commonly used to determine the existence of an employer-
employee relationship. The most crucial element of this test is the control test, which examines whether the employer has the right
to control not just the result of the work, but also the means and methods by which it is performed.

The Court emphasized that there is no rigid formula for proving the elements of the four-fold test. Instead, various forms of
competent and relevant evidence—such as identification cards, payroll records, employment contracts, and organizational charts—
may be used to establish employee status. Once an employer-employee relationship is found, the next step is to determine the
nature of the employment. The Court scrutinized Arlene’s fixed-term contract to assess whether it was a genuine arrangement or a
means to circumvent regular employment status. A key consideration was whether Arlene’s work was necessary and desirable to
Fuji’s business. If so, she would be presumed to be a regular employee. The burden of proving that she was an independent
contractor rested with Fuji.

In labor disputes, the required standard of proof is substantial evidence, which refers to such relevant evidence that a reasonable
mind might accept as adequate to support a conclusion. Regarding the claim of illegal dismissal, the burden initially lies with the
employee to prove that a dismissal occurred. Once this is established with substantial evidence, the burden shifts to the employer to
demonstrate that the dismissal was for a just or authorized cause and that due process was observed.

Supreme Court clarified that Arlene Espiritu was a regular employee of Fuji Television Network, despite being hired under a fixed-
term contract. The Court applied the test under Article 280 of the Labor Code, which states that an employee is considered
regular if their work is necessary or desirable in the usual business or trade of the employer. This principle was reinforced by
jurisprudence, including ABS-CBN v. Nazareno, which emphasized the importance of a reasonable connection between the
employee’s duties and the employer’s core business.

The Court acknowledged that while some tasks may be necessary, they are not always desirable in the regular course of business—
such as in San Miguel Corporation v. NLRC, where a worker hired to repair furnaces was deemed a project employee because the
task was occasional and not part of the company’s regular operations. In contrast, Fuji is engaged in broadcasting and news
programming, and Arlene’s role as a news producer—which involved planning, reporting, interviewing, and submitting news
reports—was clearly integral to Fuji’s operations. She worked regular hours, used Fuji’s equipment, and operated from its Manila
office, indicating that her work was not a one-off project but part of the company’s ongoing business.

The Court of Appeals and the National Labor Relations Commission both found that the successive renewals of Arlene’s
contract demonstrated the necessity and desirability of her work, qualifying her as a regular employee entitled to security of
tenure. The Court rejected Fuji’s argument that the fixed-term nature of the contract negated an employer-employee relationship,
stressing that such contracts are strictly construed and cannot be used to circumvent labor protections. The Court cited Dumpit-
Murillo and Philips Semiconductors v. Fadriquela, which held that repeated renewals of fixed-term contracts for the same position
and duties are indicative of regular employment.

Finally, the Court reiterated the principle from Price v. Innodata Corp. that employment status is defined by law, not by the terms
agreed upon by the parties. Labor contracts are imbued with public interest, and statutory protections cannot be waived or avoided
through contractual arrangements. Thus, Arlene’s fixed-term contract did not prevent her from being recognized as a regular
employee under the law.

Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an oppressive approach with her salary and other
benefits being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal contract. Thus, there was legal
basis for the Court of Appeals to modify the National Labor Relations Commission’s decision.

However, Arlene received her salary for May 2009. Considering that the date of her illegal dismissal was May 5, 2009, this amount
may be subtracted from the total monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor Code states
that "[i]n cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the
amount of wages recovered." Likewise, this court has recognized that "in actions for recovery of wages or where an employee was
forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorney’s fees is legally and morally
justifiable." Due to her illegal dismissal, Arlene was forced to litigate.

In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of 12% per annum. In view of this
court’s ruling in Nacar v. Gallery Frames, the legal interest shall redact to a rate of 6% per annum from July 1, 2013 until full
satisfaction.

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012 is AFFIRMED with the
modification that back wages shall be computed from June 2009. Legal interest shall be computed at the rate of 6% per annum of
the total monetary award from date of finality of this decision until full satisfaction.
Case Title: Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989
Topic: Not every form of control may establish employer-employee relationship

Facts:
Insular Life, the petitioner, entered into a contract with Basiao, the respondent which authorized the respondent “to solicit within the
Philippines applications for insurance policies and annuities” and he would receive "compensation, in the form of commissions ... as
provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;".
Additionally, Basiao was allowed to exercise his own judgment for soliciting insurance; was prohibited from giving, directly or
indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts
prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner; can be terminated by the Company at
will, without any previous notice to the Agent, for or on account of… (explicitly specified causes); and no Assignment of the Agency
herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company.

Four years later, the parties entered to an an Agency Manager's Contract which caused Basiao to organize an agency to which he
gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company.

The Company terminated the agreement. Basiao sued the Company in a civil action and this, he was later to claim, prompted the
latter to terminate also his engagement under the first contract and to stop payment of his commissions.
Basiao thereafter filed with the then Ministry of Labor a complaint against the Company and its president. Without contesting the
termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder. The respondents disputed
the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and
that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract.

The Labor Arbiter ruled in favor of Basiao. He ruled that the underwriting agreement had established an employer-employee
relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said
official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining
unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus
10% attorney's fees.

The Company appealed but NLRC affirmed the decision of the LA.

Issue:
Whether or not Basiao had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for
unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the
Labor Code.

Held:
According to the pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan:
... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees' conduct — although the latter is the most important element (35 Am. Jur. 445). ...

It is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not
every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered
may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the
term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to
vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular
relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the
insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and
enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules
to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to
processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the
schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship
between him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of
employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, the Court ruled that a person engaged to
sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own
methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250
cases of soft drinks sold daily, was not an employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System a case almost on all fours with the present one,
this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that
the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of
commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives
in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing
the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not
required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their
activities, and who, finally, shouldered their own selling and transportation expenses.

More recently, in Sara vs. NLRC, it was held that one who had been engaged by a rice miller to buy and sell rice and palay without
compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision
or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent,
an independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to
such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his
choice of methods — or the methods themselves — of selling insurance. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own
judgment as to the time, place and means of soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years.
Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2,
1968, not the length of his relationship with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission
agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The
Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent
NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for
commissions on its merits.
Case Title: AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission, G.R. No. 102199, January 28, 1997
Topic: Not every form of control may establish employer-employee relationship

The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or tribunal is fatal,
even for a patently meritorious claim. More specifically, labor arbiters and the National Labor Relations Commission have no
jurisdiction to entertain and rule on money claims where no employer-employee relations is involved. Thus, any such award
rendered without jurisdiction is a nullity.

Eutiquio Bustamante had been working as an insurance underwriter for AFP Mutual Benefit Association, Inc. (AFPMBAI) since 1975
under a Sales Agent's Agreement. This agreement stipulated that he would solicit insurance exclusively for AFPMBAI, follow its
policies, and operate primarily within military areas. He was considered an independent contractor and was compensated through
commissions based on a percentage of premiums paid, ranging from 30% in the first year to 1% from the fifth to the tenth year.

On July 5, 1989, Bustamante was dismissed for misrepresentation and for selling insurance for another company, which violated the
exclusivity clause of his agreement. At the time of his dismissal, he was entitled to commissions for 24 months, totaling ₱438,835.00,
but had only received ₱78,039.89. Believing he was only entitled to ₱75,000 to ₱100,000, he signed a quitclaim. However, he later
discovered from an account summary that his actual commission should have been ₱354,796.09 after deductions, yet he was only
paid ₱35,000.00.

Bustamante initially filed a complaint with the Insurance Commission, which referred him to the Department of Labor and
Employment (DOLE). On February 26, 1990, he filed a formal complaint with DOLE, seeking unpaid commissions, damages, and
other claims.

The Labor Arbiter ruled that his dismissal was valid and denied his claim for separation pay, but ordered AFPMBAI to pay
₱319,796.00 in commissions plus ₱31,976.60 in attorney’s fees.

The National Labor Relations Commission (NLRC) affirmed this decision, rejecting AFPMBAI’s appeal. Consequently, AFPMBAI filed
a petition challenging the NLRC’s ruling.

The Issue

Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had jurisdiction
over this case. At the heart of the controversy is the issue of whether there existed an employer-employee relationship between
petitioner and private respondent.

Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employer-employee relationship
between private respondent and itself. Hence, respondent commission gravely abused its discretion when it held that the labor
arbiter had jurisdiction over the case.

B. Duties and Obligations:

1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for AFPMBAI (petitioner),
and shall be bound by the latter's policies, memo circulars, rules and regulations which it may from time to time, revise, modify or
cancel to serve its business interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp, installation or residence of
military personnel. He is free to solicit in the area for which he/she is licensed and as authoriied, provided however, that AFPMBAI
may from time to time, assign him a specific area of responsibility and a production quota on a case to case basis.

Ruling:

As to the first issue:

The Supreme Court found merit in the petition filed by AFP Mutual Benefit Association, Inc. (AFPMBAI), ruling that there was no
employer-employee relationship between the company and Eutiquio Bustamante. While the Labor Arbiter and the National Labor
Relations Commission (NLRC) had concluded that such a relationship existed—citing the exclusivity clause, adherence to company
policies, and the assignment of territories and quotas—the Court disagreed. It emphasized the "four-fold test" for determining
employment relationships, particularly the element of control. The Court clarified that exclusivity in insurance solicitation was
mandated by the Insurance Commission, not by AFPMBAI, and thus did not indicate control. Similarly, the company’s policies and
circulars were found to be administrative guidelines related to business operations, not directives controlling how Bustamante
performed his work. The Court also noted that Bustamante failed to prove he was ever assigned a specific territory. It reiterated that
true control refers to the right to dictate the means and methods of work, not just the desired result. Since Bustamante was free to
determine how and when to sell insurance, he was deemed an independent contractor. The Court concluded that the NLRC had
misappreciated the facts and misapplied the law, and thus reversed its ruling.

The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and mode of
soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in this situation. Thus,
the Court is constrained to rule that no employment relationship had ever existed between the parties.

As to the second issue, The Supreme Court ruled that the Labor Arbiter and the National Labor Relations Commission (NLRC) had
no jurisdiction over Eutiquio Bustamante’s claim, as there was no employer-employee relationship between him and AFP Mutual
Benefit Association, Inc. (AFPMBAI). Since Bustamante was an independent contractor and not an employee, his claim for unpaid
commissions should have been filed through an ordinary civil action, not a labor case. The Court emphasized that under Article 217
of the Labor Code, labor tribunals only have jurisdiction over disputes arising from an employer-employee relationship. Because this
essential element was absent, the Labor Arbiter’s assumption of jurisdiction and the NLRC’s affirmation were both erroneous. The
Court also clarified that jurisdictional defects cannot be cured by estoppel and may be raised at any stage of the proceedings.
AFPMBAI had consistently challenged the jurisdiction throughout the case. As a result, the Court declared the labor rulings null and
void, stating that a judgment rendered without jurisdiction has no legal effect. However, the Court noted that Bustamante still retains
the right to pursue his claim for unpaid commissions in the proper civil forum within the appropriate time frame. Accordingly, the
petition was granted and the NLRC’s resolution was set aside.
Case Title: Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, June 10, 2004
Topic: Not every form of control may establish employer-employee relationship
FACTS:

In May 1994, ABS-CBN signed an Agreement with the Mel and Jay Management and Development Corporation (MJMDC). MJMDC
agreed to provide Jay Sonza’s services exclusively to ABS-CBN as talent for radio and television. ABS-CBN agreed to pay for
Sonza's services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for the second and third year of the Agreement.

On April 1, 1996, Sonza wrote a letter wrote a letter to ABS-CBN President Eugenio Lopez III, accusing ABS-CBN of violating the
Agreement.

On April 30, 1996, Sonza filed a complaint before the Department of Labor and Employment (DOLE), alleging that that ABS-CBN
did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts
due under the Employees Stock Option Plan.

ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties.

LABOR ARBITER: Dismissed Sonza's complaint for lack of jurisdiction, ruling that because Sonza is a "talent," he cannot be
considered an employee.

NLRC: Dismissed Sonza's Motion for Reconsideration.

COURT OF APPEALS: Affirmed NLRC ruling. The CA ruled that the allegations of Sonza against ABS-CBN did not constitute a labor
dispute because there was no employer-employee relationship to begin with. If anything, Sonza's allegations constitute an action for
breach of contractual obligation, which is intrinsically a civil dispute to be resolved by a civil court, not the Labor Arbiter or the NLRC.

ISSUE:

Whether Jay Sonza was an employee of ABS-CBN? -- NO.

HELD:
The Supreme Court held that Sonza was not an employee of ABS-CBN. As a "talent," he was an independent contractor. In coming
up with this conclusion, the Court looked at the essential elements of employer-employee relationship and applied the control test.

(a) Selection and engagement of employee

ABS-CBN engaged Sonza's services to co-host its television and radio programs because of his peculiar skills, talent and celebrity
status. These are indicative, but not conclusive, of an independent contractual relationship

(b) Payment of wages

The Court held that whatever benefits Sonza enjoyed (SSS, Medicare, 13th month pay) arose from contract and not because of an
employer-employee relationship

(c) Power of dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. Sonza failed to show that ABS-CBN
could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under
labor laws.

(d) Power of control

The control test is the most important test our courts apply in distinguishing an employee from an independent contractor. This test is
based on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the
more likely the worker is deemed an employee. The converse holds true as well – the less control the hirer exercises, the more likely
the worker is considered an independent contractor.

In Sonza's case, ABS-CBN did not exercise control over the means and methods of his work. The Court found that ABS-CBN was
not involved in the actual performance that produced the finished product of Sonza's work.

Second, the fact that he was subjected to ABS-CBN's rules and standards of performance was not determinative of control as it was
under his contract that he " shall abide with the rules and standards of performance covering talents of ABS-CBN."

Third, the "exclusivity" clause in the Agreement was not a form of control. In the broadcast industry, exclusivity is not necessarily the
same as control. The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. This practice is
not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station.

Finally, the Supreme Court held that the right of labor to security of tenure as guaranteed in the Constitution arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee
relationship.

To hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results."

The Court rejected Sonza’s claim that ABS-CBN exercised control over the means and methods of his work, which would have
indicated an employer-employee relationship. It found that Sonza was engaged specifically to co-host the “Mel & Jay” programs and
was not assigned any other tasks. His work relied primarily on his own talent and discretion—how he delivered his lines, appeared
on screen, and conducted himself on air were not dictated by ABS-CBN. The network did not supervise his performance but only
required attendance at rehearsals, tapings, and meetings. Although ABS-CBN retained the right to modify the program format and
schedule, it could not control how Sonza performed his role. Even if ABS-CBN chose not to air his show, it was still contractually
obligated to pay his talent fees in full, which further demonstrated the absence of disciplinary authority typical of an employer. The
Court emphasized that control over the result, rather than the manner of performance, does not establish an employment
relationship.
Sonza also argued that ABS-CBN’s provision of equipment, crew, and airtime showed control. However, the Court clarified that these
were not the tools essential to Sonza’s performance, which depended on his skills and appearance. The network’s concern was
limited to the final product, not the process. Additionally, the rules Sonza was required to follow were industry standards under the
Kapisanan ng mga Broadcaster ng Pilipinas (KBP) Code of Ethics, applicable to broadcasters in general—not internal employee
policies. The Court reiterated that not all rules imposed by a hiring party imply control over work methods. In this case, the rules
served only as guidelines to achieve a high-quality broadcast, not as directives on how Sonza should perform. Lastly, the Court
dismissed Sonza’s claim that the exclusivity clause in his contract was a form of control, affirming that such clauses are common in
independent contractor agreements and do not, by themselves, establish an employment relationship.
Case Title: Consulta v. Court of Appeals, G.R. No. 145443, March 18, 2005
Topic: Not every form of control may establish employer-employee relationship
FACTS:
This is a petition for review assailing the Decision and Resolution of the Court of Appeals reversing the Resolution of the NLRC
which in turn affirmed the Labor Arbiter’s Decision.

Respondent Pamana Philippines, Inc. is engaged in health care business. While petitioner Raquel Consulta was a Managing
Associate of Pamana with an area of operation within Metro Manila. Consulta was duly authorized by Pamana to negotiate with the
Federation of Filipino Civilian Employees Association working at the United States Subic Naval Base for a Health Care Plan for the
FFCEA members. Pamana and the U.S. Naval Supply Depot signed the FFCEA account. Consulta, claiming that Pamana did not
pay her commission for the FFCEA account, filed a complaint for unpaid wages or commission against Pamana, its President Razul
Requesto and its Executive Vic The Labor Arbiter Alex Arcadio Lopez ordered the respondents to pay petitioner her unpaid
commission to be computed as against actual transactions between respondent Pamana and the contracting Department of U.S.
Naval Supply Depot upon presentation of pertinent document. Respondents appealed the Decision of the Labor Arbiter to the NLRC.
The NLRC dismissed the appeal and affirmed the Decision of the Labor Arbiter. It also denied the motion for reconsideration of the
respondents. On appeal, the appellate court reversed the NLRC Decision and ruled that Consulta was a commission agent, not an
employee of Pamana. The appellate court also ruled that Consulta should have litigated her claim for unpaid commission in an
ordinary civil action. Hence, Consulta’s recourse to the Supreme Court.

ISSUES:
1. Whether or not Consulta was an employee of Pamana.
2. Whether or not the Labor Arbiter had jurisdiction over Consulta’s claim for unpaid commission.

HELD:

1. No. Consulta was an independent agent and not an employee of Pamana. In Viaña v. Al-Lagadan, the Court first laid down the
four-fold test to determine the existence of an employer-employee relationship. The four elements of an employer-employee
relationship are: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control. The power to
control is the most important of the four elements. In the present case, the power to control is missing. Pamana tasked Consulta to
organize, develop, manage, and maintain a sales division, submit a number of enrollments and revenue attainments in accordance
with company policies and guidelines, and to recruit, train and direct her Supervising Associates and Health Consultants. However,
the manner in which Consulta was to pursue these activities was not subject to the control of Pamana. Consulta failed to show that
she had to report for work at definite hours. The amount of time she devoted to soliciting clients was left entirely to her discretion.
The means and methods of recruiting and training her sales associates, as well as the development, management and maintenance
of her sales division, were left to her sound judgment. Pamana paid Consulta not for labor she performed but only for the results of
her labor. Without results, Consulta’s labor was her own burden and loss. Her right to compensation, or to commission, depended on
the tangible results of her work. Also, the fact that the appointment required Consulta to solicit business exclusively for Pamana did
not mean that Pamana exercised control over the means and methods of Consulta’s work as the term control is understood in labor
jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not prohibit Consulta from engaging in any other
business, or from being connected with any other company, for as long as the business or company did not compete with Pamana’s
business. The exclusivity provision was a reasonable restriction designed to prevent similar acts prejudicial to Pamana’s business
interest. Article 1306 of the Civil Code provides that “the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.”

2. No. There being no employer-employee relationship between Pamana and Consulta, the Labor Arbiter and the NLRC had no
jurisdiction to entertain and rule on Consulta’s money claim. Article 217 of the Labor Code provides: (a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice
cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and
other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation,
Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement. (b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters. (c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements. Consulta filed her action under Article 217(a) (6) of the Labor Code. However, since there was no employer-
employee relationship between Pamana and Consulta, the Labor Arbiter should have dismissed Consulta’s claim for unpaid
commission. Consulta’s remedy is to file an ordinary civil action to litigate her claim.

Consulta filed her action under Article 217(a)(6) of the Labor Code. However, since there was no employer-employee relationship
between Pamana and Consulta, the Labor Arbiter should have dismissed Consulta’s claim for unpaid commission. Consulta’s
remedy is to file an ordinary civil action to litigate her claim.

WHEREFORE, the petition is DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 50462 is AFFIRMED in toto.
Case Title: Orozco v. Court of Appeals, G.R. No. 155207, August 13, 2008
Topic: Not every form of control may establish employer-employee relationship
Facts:
 Wilhelmina S. Orozco was engaged by the Philippine Daily Inquirer (PDI) in March 1990 to write a weekly column
titled Feminist Reflections for its Lifestyle section.
 She submitted articles regularly and was paid ₱250 per column, later increased to ₱300.
 Her column was discontinued in November 1992. Orozco claimed she was dismissed without cause, while PDI argued her
column was dropped due to poor quality and lack of readership.
 On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to improve
said section. They agreed to cut down the number of columnists by keeping only those whose columns were well-written,
with regular feedback and following. In their judgment, petitioner’s column failed to improve, continued to be superficially
and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided to terminate petitioner’s
column
 Orozco filed a complaint for illegal dismissal and monetary claims before the National Labor Relations Commission
(NLRC).
 The Labor Arbiter ruled in her favor, declaring her an employee and ordering reinstatement with backwages and benefits.
 The NLRC affirmed the Labor Arbiter’s decision but noted PDI failed to post the required appeal bond.
 The Court of Appeals (CA) reversed the NLRC, ruling that Orozco was not an employee of PDI.
 Orozco elevated the case to the Supreme Court.

Issues:
1. Procedural: Whether PDI’s failure to post an appeal bond rendered its appeal defective and should have led to outright
dismissal.
2. Substantive: Whether Orozco was an employee of PDI and thus entitled to protection under labor laws.

Ruling:
 The Supreme Court addressed both procedural and substantive issues.
 On the procedural issue, the Court acknowledged that while posting a bond is jurisdictional, there are exceptions where
the requirement may be relaxed, especially when the monetary award is not clearly specified.
 On the substantive issue, the Court upheld the Court of Appeals’ ruling that Orozco was not an employee of PDI.
 The Court applied the “control test” and found that PDI did not exercise sufficient control over the means and
methods of Orozco’s work.
 Her engagement was based on a verbal agreement, she was not required to report to work regularly, and she had
autonomy over her writing.
 The limitations on article length and topic were editorial standards, not employment controls.

The central issue in the case was whether Wilhelmina Orozco was an employee of the Philippine Daily Inquirer (PDI), and if so,
whether her dismissal was illegal. The Supreme Court ruled in favor of PDI, concluding that no employer-employee relationship
existed. Although the National Labor Relations Commission (NLRC) and the Labor Arbiter had previously found in favor of Orozco,
the Court emphasized that employment status is determined by law, not by the parties’ own declarations. Applying the four-fold test
—particularly the control test—the Court found that PDI did not exercise control over the means and methods by which Orozco
performed her work. The editorial guidelines, deadlines, space limitations, and topic relevance cited by Orozco were deemed
inherent to the nature of newspaper publishing and not indicative of employment control. These were considered general standards
aimed at achieving a desired result, rather than directives on how the work should be done. Therefore, the Court concluded that
Orozco was not an employee of PDI and was not illegally dismissed.

The newspaper’s power to approve or reject publication of any specific article she wrote for her column cannot be the control
contemplated in the "control test," as it is but logical that one who commissions another to do a piece of work should have the right to
accept or reject the product. The important factor to consider in the "control test" is still the element of control over how the work itself
is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note the common practice in the
newspaper business of assigning its regular reporters to cover specific subjects, geographical locations, government agencies, or
areas of concern, more commonly referred to as "beats." A reporter must produce stories within his or her particular beat and cannot
switch to another beat without permission from the editor. In most newspapers also, a reporter must inform the editor about the story
that he or she is working on for the day. The story or article must also be submitted to the editor at a specified time. Moreover, the
editor can easily pull out a reporter from one beat and ask him or her to cover another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded from submitting her
column ahead of time or from submitting columns to be published at a later time. More importantly, respondents did not dictate upon
petitioner the subject matter of her columns, but only imposed the general guideline that the article should conform to the standards
of the newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to
definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists.
Case Title: Tongko v. The Manufacturer’s Life Insurance Company, Inc., G.R. No. 167622, June 29, 2010
Topic: Not every form of control may establish employer-employee relationship
The Principles
 Four-Fold Test
 Labor Code concept of control
 concept of control in insurance industry

Tongko and Manulife’s relationship existed under a Career Agent’s Agreement which provided that Tongko is an independent
contractor and that he can be terminated by mere notice. He was promoted to higher positions over the course of his career in
Manulife and was made to follow the company Rules and Regulations or Codes. Later, Renato (who seems to be part of the
Management) wrote him a letter calling out his poor performance and giving him some guidelines he could follow to improve it.
However, shortly after that, Renato followed it up with another letter saying that he is terminating the services of Tongko.
The latter filed an illegal dismissal complaint arguing that he was an employee of Manulife and that the company is liable for his
backwages and separation pay. The Court found Tongko’s argument inconsistent with the Agreement signed by both parties which
was never substantially altered over the course of his career and Tongko’s consistent declaration in his ITR that he is a self-
employed individual. Following the provisions of Insurance Code, Civil Code and Labor Code, Manulife did not exercise control on
Tongko’s actions as an independent agent that would be construed as having an employer-employee relationship. At the very least,
the instructions given to him from time to time were part of the principal-agent relationship they had.

Q: What is the Four-Fold Test?

In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee
relationship, thus:

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee's conduct. It is the so-called "control test" which constitutes the most important index
of the existence of the employer-employee relationship that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.

Q: What is the Labor Code’s concept of “control” that must necessarily exist in a principal-agent relationship?

In this case, Manulife did not exercise the type of control that the Labor Code contemplates. The Codes and Guidelines
implemented by Manulife seemed like control amounting to an employer-employee relationship but since it does not intrude into the
insurance agents' means and manner of conducting their sales and only control them as to the desired results, it does not amount to
the “control” the Labor Code contemplates.

A commitment to abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent
an employee. Neither do guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term
is defined in jurisprudence.

Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature of dictating the means or methods to be
employed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these means.

Q: Can control be exercised without establishing an employer-employee relationship?

Yes, although Manulife exercised a type of control over Tongko, it did not amount to the control contemplated by the Labor
Code. Tongko remained an agent all along in absence of a subsequent contract; although his subsequent duties made him a lead
agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-manner
control.

Since the factual antecedents were set in an insurance industry, Insurance Code primarily governs. There are built-in
elements of control specific to an insurance agency, which do not amount to the elements of control that characterize an employment
relationship governed by the Labor Code. The Insurance Code provides definite parameters in the way an agent negotiates for the
sale of the company's insurance products.

Under the Insurance Code, "No person, partnership, or association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines." The agent
must, as a matter of qualification, be licensed and must also act within the parameters of the authority granted under the license and
under the contract with the principal.

In addition, under the general law on agency as applied to insurance, an agency must be express in light of the need for a
license and for the designation by the insurance company. In this case, the Career Agent’s Agreement fully serves as a grant of
authority to Tongko as Manulife’s insurance agent.

Background
Manulife terminated Tongko’s Agency Agreement under Section 14 of the contract, effective 15 days from the notice. Tongko
responded by filing an illegal dismissal complaint, claiming he was actually an employee, not just an agent.

Tongko’s Argument
Tongko claimed:
 He received fixed allowances and commissions.
 He performed administrative and supervisory duties.
 He had a designated office space and used company resources.
 He followed multiple codes of conduct imposed by Manulife.
These, he argued, showed control by Manulife—an indicator of employment.

Manulife’s Defense
Manulife argued:
 Tongko was paid commissions, not a salary.
 He declared himself self-employed for tax purposes.
 He was subject to an agency agreement, not an employment contract.
 Labor tribunals had no jurisdiction due to lack of employment relationship.

Conflicting Rulings
 Labor Arbiter: No employment relationship.
 NLRC: Reversed, found illegal dismissal.
 Court of Appeals: Reversed NLRC, agreed with Labor Arbiter.
 Supreme Court (Nov 7, 2008): Reversed CA, found Tongko was an employee.

Supreme Court’s Basis

5. Control Test: Manulife exercised control over Tongko’s work methods.
6. Codes of Conduct: Tongko was bound by company rules.
7. Administrative Duties: Similar to those performed by employees.
8. Recruitment Role: Indicative of deeper involvement in company operations.

Manulife’s Motion for Reconsideration

Manulife challenged the decision on several grounds:
 Due process violations: Ignored other elements of the four-fold test.
 Misapplication of law: Misinterpreted contract and agency principles.
 Judicial overreach: Claimed the decision amounted to judicial legislation.
 Evidence disregard: Ignored Tongko’s tax filings and other material facts.

Additional Evidence and Clarifications

Lack of Means-and-Manner Control
 Tongko failed to present specific evidence showing Manulife dictated how he performed his duties.
 His promotions (Unit Manager, Branch Manager, Regional Sales Manager) lacked documentation detailing responsibilities
or control mechanisms.
Nature of Managerial Role
 The term “coordinative” used to describe Tongko’s role does not imply control; it reflects leadership among agents, not
subordination to Manulife.
 Tongko was not supervising regular employees, but rather guiding fellow agents under the same agency agreement.
Selective Use of Affidavits
 The Court’s earlier decision highlighted only portions of affidavits suggesting control.
 Omitted portions revealed:
 No fixed salary or working hours.
 Use of personal resources and staff.
 Income reported as self-employed with BIR.
De Dios’ Letter
 The letter was not a directive on methods, but a strategic suggestion to improve results.
 It emphasized sales targets, not how to achieve them.
 The suggestion to hire an assistant was aimed at improving performance, not controlling operations.
Comparison with Other Cases
 Unlike the second Insular Life case, Tongko’s situation lacked:
 Exclusivity of service.
 Control over agent assignments.
 Provision of company capital or facilities.
 These elements were crucial in establishing employment in Insular Life but were absent in Tongko’s case.

Conclusion
The evidence, when fully considered, supports the view that no employer-employee relationship existed between Tongko and
Manulife. Tongko operated as a lead agent under an agency agreement, with autonomy in methods and operations. The control
exercised by Manulife was limited to results and compliance with industry standards, consistent with an agency relationship,
not employment.

In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a
ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an
employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance,
agency and contracts.

WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7,

2008, GRANT Manulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
Case Title: Royale Homes Marketing Corporation v. Alcantara, G. R. No. 195190, July 28, 2014
Topic: Not every form of control may establish employer-employee relationship

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship. Rules and
regulations that merely serve as guidelines towards the achievement of a mutually desired result without dictating the means and
methods of accomplishing it do not establish employer-employee relationship

FACTS:

In 1994, Royale Homes, a real estate marketing corporation, appointed Alcantara as its Marketing Director for a fixed one-year term.
He was reappointed annually, and by 2003, he held the position of Division 5 Vice-President-Sales. On December 17, 2003,
Alcantara filed a complaint for illegal dismissal against Royale Homes and several of its top executives, claiming he was a regular
employee performing tasks essential to the company’s operations. He alleged that he was dismissed without valid cause or due
process after company executives made remarks implying, he was no longer welcome at the office. Alcantara sought reinstatement,
back wages, damages, attorney’s fees, and the transfer of ownership of a company vehicle.

Royale Homes denied that Alcantara was an employee, asserting instead that he was an independent contractor engaged for a fixed
term and paid solely on commission. The company emphasized that Alcantara had full autonomy in performing his duties and was
not entitled to employee benefits. Royale Homes further claimed that Alcantara voluntarily left the company in October 2003 to join
his wife’s competing brokerage business, which had recruited Royale Homes’ agents. His departure was acknowledged with a
despedida party, and a new contractor was appointed. However, two months later, Alcantara returned and filed a complaint alleging
illegal dismissal.

Ruling of the Labor Arbiter

On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of Royale Homes with a fixed-term employment
period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the law. Hence, Alcantara is entitled to an
amount which he may have earned on the average for the unexpired portion of the contract. With regard to the impleaded corporate officers, the
Labor Arbiter absolved them from any liability.

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred in ruling that there
exists an employer-employee relationship between the parties. It insisted that the contract between them expressly states that Alcantara is an
independent contractor and not an ordinary employee. It had no control over the means and methods by which he performed his work. Royale
Homes likewise assailed the award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to finish
the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not entitled to back wages,
reinstatement, unpaid commissions, and damages.

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision, ruling that Alcantara is not an employee but a mere independent contractor
of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He
was also free to adopt the selling methods he deemed most effective and can even recruit sales agents to assist him in marketing
the inventories of Royale Homes. The NLRC also considered the fact that Alcantara was not receiving monthly salary, but was being
paid on commission basis as stipulated in the contract. Being an independent contractor, the NLRC concluded that Alcantara’s
Complaint is cognizable by the regular courts.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision granting Alcantara’s Petition and reversing the NLRC’s Decision. Applying the four-fold and
economic reality tests, it held that Alcantara is an employee of Royale Homes. Royale Homes exercised some degree of control over Alcantara since
his job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He was also bound by the company code of
ethics. Moreover, the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the theory that he
is an employee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was carried out in violation of his right to
procedural due process. Thus, the CA ruled that he is entitled to back wages and separation pay, in lieu of reinstatement. Considering, however, that
the CA was not satisfied with the proof adduced to establish the amount of Alcantara’s annual salary, it remanded the case to the Labor Arbiter to
determine the same and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from any liability for want
of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith or gross negligence.

ISSUES:
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN
FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF THIS HONORABLE COURT IN
THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN
REFUSING TO CORRECT ITSELF

The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor involves an
evaluation of factual matters which, ordinarily, is not within the province of this Court.

The determination of an employer-employee relationship primarily hinges on the control test, which is part of the broader four-fold
test that includes: (1) selection and engagement of the worker, (2) payment of wages, (3) power of dismissal, and (4) the employer’s
power to control the means and methods of work. Among these, the control over the means and methods is the most crucial. If a
person is merely subject to general rules or guidelines that aim to ensure a desired result—without dictating how the work should be
done—this does not establish an employer-employee relationship. In the case of Alcantara and Royale Homes, the Court found that
although Alcantara followed company rules and was evaluated periodically, Royale Homes did not control how he performed his
tasks. He had the freedom to solicit sales in any manner he deemed appropriate, was not bound by fixed working hours, and was not
assigned other duties. Thus, the Court concluded that Alcantara was an independent contractor, not an employee, as Royale
Homes’ oversight was limited to the results of his work, not the methods used to achieve them.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R. SP No.
109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations Commission is
REINSTATED and AFFIRMED. SO ORDERED.
Case Title: Nestle Philippines, Inc. v. Puedan, Jr. , G. R. No. 220617, January 30, 2017
Topic: Not every form of control may establish employer-employee relationship
FACTS:

On July 6, 2012, the respondents filed a complaint against the petitioner for illegal dismissal and demanding for separation pay,
nominal damages and attorney’s fees. The respondents alleged that Ocho de Setiembre Inc. (ODSI) and Nestle Philippines Inc.
(NPI) hired them to sell various products of NPI in the assigned covered area. After sometime, the respondents demanded that they
be considered regular employees of NPI but they were directed to sign contracts of employment with ODSI instead. However, the
respondents refused to comply with such directives resulting from their dismissal from their position. The contention of the
respondents is that ODSI is a labor-only contractor and, thus, they should be deemed regular employees of NPI and there was no
just or authorized cause for their dismissal. The ODSI averred that it is a company engaged in the business of buying, selling,
distributing, and marketing of goods and commodities of every kind and it enters into all kinds of contracts for the acquisition thereof.
According to ODSI the respondents were hired as its employees to execute the Distributorship Agreement with the NPI.
Unfortunately, the business relationship between the NPI and ODSI turned sour and eventually NPI downsized its marketing and
promotional support from ODSI and termination of the Distributorship Agreement. Meanwhile, ODSI argues with the respondents that
they were not dismissed but merely on floating status. However, the NPI did not file any position paper or appear in the scheduled
conferences.

The Labor Arbiter concluded that all the impleaded respondents therein (i.e. including NPI) should be held liable for the payment of
nominal damages plus attorney’s fees.

The aggrieved respondents appealed to National Labor Relation Commission (NLRC) and the NLRC reversed and set aside the
Labor Arbiter ruling. The NLRC ordered ODSI and NPI to pay each of the respondents and entitled to separation pay and to nominal
damages. The respondents moved for a partial reconsideration arguing since it was ODSI that closed down operations and not the
NPI, therefore NPI should reinstate them. However, the NLRC denied the motion.

Moreover, the NPI was dissatisfied hence filed a petition for certiorari before the Court of Appeals.

The CA Ruling
In a Decision32 dated March 26, 2015, the CA affirmed the NLRC ruling. Anent the issue on due process, the CA held that NPI was
not deprived of its opportunity to be heard as it was able to receive a copy of the complaint and other pleadings, albeit it failed to
respond thereto. 33 As regards the substantive issue, the CA ruled that despite ODSI and NPI's contract being denominated as a
"Distributorship Agreement," it contained provisions demonstrating a labor-only contracting arrangement between them, as well as
NPI' s exercise of control over the business of ODSI. Moreover, the CA pointed out that: (a) there was nothing in the records which
showed that ODSI had substantial capital to undertake an independent business; and (b) respondents performed tasks essential to
NPI's business.34 Undaunted, NPI moved for reconsideration, 35 which was, however, denied in a Resolution36 dated September 17,
2015; hence, this petition.

ISSUE:

The essential issues for the Court's resolution are whether or not the CA correctly ruled that: (a) NPI was accorded due process by
the tribunals a quo; and (b) ODSI is a labor-only contractor of NPI, and consequently, NPI is respondents' true employer and, thus,
deemed jointly and severally liable with ODSI for respondents' monetary claims.

HELD:

No. The Distributorship Agreement between the Nestle Philippines inc. (NPI) and Ocho de Setiembre Inc. (ODSI) is not that of
a principal and a contractor, but that of a seller and a buyer/re-seller. Based on the stipulated in the Distributorship Agreement NPI
agreed to sell its products to ODSI at discounted prices. According to NPI the goods it manufactures are distributed to the market
through various distributor including ODSI, that in turn, re-sell the same to the designated outlets through its own employees as the
respondents. Therefore, the reselling activities allegedly performed by the respondents properly pertain to ODSI only.

In effect, ODSI was not a labor-only contractor of NPI hence the NPI cannot be deemed the true employer of the respondents.
Therefore, NPI cannot be held jointly and severely liable to ODSI’s monetary obligation towards the respondents.

Thus, the foregoing circumstances show that ODSI was not a labor-only contractor of NPI; hence, the latter cannot be deemed the
true employer of respondents. As a consequence, NPI cannot be held jointly and severally liable to ODSI's monetary obligations
towards respondents.

WHEREFORE, the petition is GRANTED. The Decision dated March 26, 2015 and the Resolution dated September 17, 2015 of the
Court of Appeals in CA-G.R. SP No. 132686 are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated May 30, 2013
and the Resolution dated August 30, 2013 of the National Labor Relations Commission in LAC No. 02-000699-13/ NCR-03-04761-
12 are MODIFIED, DELETING petitioner Nestle Philippines, Inc.'s solidary liability with Ocho de Septiembre, Inc. (ODSI) for the
latter's monetary obligations to respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C. Aquino, Ryan A.
Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B. Delos Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B. Cordova,
Jr., Jeffry B. Languisan, Edison U. Villapando, Jheimey S. Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag,
Raquel A. Abellera, and Ricandro G. Guatno, Jr.
Case Title: Sevilla v. Court of Appeals, G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA
Topic: Economic dependence test
FACTS:

On October 19, 1960, a contract was signed between Segundina Noguera, Tourist World Service, Inc. (represented by Eliseo
Canilao), and Lina Sevilla, under which Tourist World leased premises on Mabini Street, Manila, for use as a branch office. Sevilla
was solidarily liable for rental payments and managed the branch, earning a 4% commission from airline fares she secured, while
Tourist World retained 3%. In November 1961, Tourist World learned that Sevilla was allegedly affiliated with a rival firm, prompting
its decision to close the branch due to financial losses. This was formalized through board resolutions abolishing Sevilla’s position
and authorizing the retrieval of company property. The lease was terminated effective January 31, 1962, but Tourist World had
ceased using the office since November 1961. On June 4, 1962, unable to contact Sevilla, the corporate secretary padlocked the
premises. Sevilla and her staff were denied access, leading to a legal complaint and counterclaims. The initial case was dismissed
for lack of interest, but Noguera’s counterclaim was later reinstated. Sevilla refiled her complaint on June 17, 1963, and both cases
were jointly heard and ultimately dismissed for lack of merit, prompting the current appeal.

ISSUE:
Whether or not an employer-employee relationship exists between Sevilla and TWS.

Ruling:

The records show that petitioner, Sevilla, was not subject to control by the private respondent TWS. In the first place, under the
contract of lease, she had bound herself in solidum as and for rental payments, an arrangement that would belie claims of a master-
servant relationship. That does not make her an employee of TWS, since a true employee cannot be made to part with his own
money in pursuance of his employer’s business, or otherwise, assume any liability thereof. In the second place, when the branch
office was opened, the same was run by the appellant Sevilla payable to TWS by any airline for any fare brought in on the effort of
Sevilla. Thus, it cannot be said that Sevilla was under the control of TWS. Sevilla in pursuing the business, relied on her own
capabilities. It is further admitted that Sevilla was not in the company’s payroll. For her efforts, she retained 4% in commissions from
airline bookings, the remaining 3% going to TWS. Unlike an employee, who earns a fixed salary, she earned compensation in
fluctuating amount depending on her booking successes. The fact that Sevilla had been designated “branch manager” does not
make her a TWS employee. It appears that Sevilla is a bona fide travel agent herself, and she acquired an interest in the business
entrusted to her. She also had assumed personal obligation for the operation thereof, holding herself solidary liable for the payment
of rentals. Wherefore, TWS and Canilao are jointly and severally liable to indemnify the petitioner, Sevilla.

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service,
Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of
the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to
the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee
Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita
branch office of the appellee Tourist World Service, Inc.7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA
was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease
executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the between
parties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World
Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in reference to the
padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the
relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try
the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations,
pursuant to statutes then in force.

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we have
relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to control
not only the end to be achieved but also the means to be used in reaching such end." 10 Subsequently, however, we have
considered, in addition to the standard of right-of control, the existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, in determining the existence of an employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service,
Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound herself in solidum as and for rental payments, an arrangement that
would be like claims of a master-servant relationship. True the respondent Court would later minimize her participation in the lease
as one of mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee cannot be
made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event,
the parties must be bound by some other relation, but certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina
Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the
means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.

The Court ruled that Lina Sevilla was not an employee of Tourist World Service, Inc., despite being designated as a "branch
manager." Titles alone do not establish employment; instead, the nature of the relationship is determined by control and economic
factors. The Court also rejected Sevilla’s claim that she and Tourist World were in a joint venture or partnership, noting that Sevilla
herself acknowledged Tourist World's authority over the business operations in a letter dated November 28, 1961. This
acknowledgment contradicted the notion of equal standing and shared ownership typical of partnerships.

Instead, the Court found that Sevilla operated under a contract of agency, where she acted on behalf of Tourist World, soliciting
airline fares and earning commissions. This agency was not a simple power of attorney but one coupled with an interest, meaning
it was created for the mutual benefit of both parties and could not be revoked at will. Sevilla had a personal stake in the business,
including assuming responsibility for rental payments and continuing operations under her own name after Tourist World ceased its
involvement. Her interest extended beyond commissions to the actual management of the business, entitling her to damages due to
the improper revocation of the agency.

Regarding the telephone disconnection, the Court noted that while there was no direct evidence that Tourist World disconnected
the lines, the company failed to restore them, thereby condoning the situation and bearing responsibility. As for the padlocking of
the premises, the Court held that Tourist World had no right to terminate the lease and lock the office without notifying Sevilla, who
was named in the lease and had a financial and operational role. She could not be treated as a mere outsider and removed without
due process.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent
Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are
ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of
P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.
Case Title: Visayan Stevedore Transportation Company v. Court of Industrial Relations, 125 Phil. 817, 820 (1967)
Topic: Economic dependence test
Facts:

Visayan Stevedoring Transportation Co. and its branch manager Rafael Xaudaro were engaged in vessel loading and unloading
operations in Hinigaran, Negros Occidental. For years, the company regularly employed workers affiliated with the United Workers
and Farmers Association (UWFA) during milling seasons. These workers, including Venancio Dano-og, Buenaventura Agarcio, and
137 others, were directly supervised and paid by the company, despite being organized through UWFA. In November 1955, the
company refused to rehire these workers, allegedly due to their union activities. A complaint for unfair labor practice was filed with
the Court of Industrial Relations (CIR), which found the company guilty.

Issues:
1. Was there an employer-employee relationship between the company and the complainants?
2. Did the company commit unfair labor practices by refusing to rehire the workers?
3. Was the order for reinstatement with back wages a reversible error?

Ruling:

The Supreme Court affirmed the CIR’s decision. It held that:

 An employer-employee relationship existed, as the company exercised control over the workers and paid them directly.
 The relationship was not terminated at the end of each milling season but merely suspended, meaning the workers were on
seasonal leave.
 The company committed unfair labor practices by refusing to rehire workers due to their union affiliations, as evidenced by
statements from the branch manager.
 The CIR had the discretion to order reinstatement with back pay, and there was no valid reason to overturn that decision.

Final Judgment: The order for reinstatement with back wages was upheld, and the appeal was denied.
Case Title: Orozco v. Court of Appeals, G.R. No. 155207, August 13, 2008
Topic: Economic dependence test
Facts:
 Wilhelmina S. Orozco was engaged by the Philippine Daily Inquirer (PDI) in March 1990 to write a weekly column
titled Feminist Reflections for its Lifestyle section.
 She submitted articles regularly and was paid ₱250 per column, later increased to ₱300.
 Her column was discontinued in November 1992. Orozco claimed she was dismissed without cause, while PDI argued her
column was dropped due to poor quality and lack of readership.
 On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to improve
said section. They agreed to cut down the number of columnists by keeping only those whose columns were well-written,
with regular feedback and following. In their judgment, petitioner’s column failed to improve, continued to be superficially
and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided to terminate petitioner’s
column
 Orozco filed a complaint for illegal dismissal and monetary claims before the National Labor Relations Commission
(NLRC).
 The Labor Arbiter ruled in her favor, declaring her an employee and ordering reinstatement with backwages and benefits.
 The NLRC affirmed the Labor Arbiter’s decision but noted PDI failed to post the required appeal bond.
 The Court of Appeals (CA) reversed the NLRC, ruling that Orozco was not an employee of PDI.
 Orozco elevated the case to the Supreme Court.

Issues:
3. Procedural: Whether PDI’s failure to post an appeal bond rendered its appeal defective and should have led to outright
dismissal.
4. Substantive: Whether Orozco was an employee of PDI and thus entitled to protection under labor laws.

Ruling:

Aside from the control test, this Court has also used the economic reality test. The economic realities prevailing within the activity or
between the parties are examined, taking into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties.37 This is especially appropriate when, as in this case, there is no written agreement or contract on
which to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships
for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer. 38
Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate working in various women’s
organizations.39 Likewise, she herself admits that she also contributes articles to other publications. 40 Thus, it cannot be said that
petitioner was dependent on respondent PDI for her continued employment in respondent’s line of business. 41
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent contractor, engaged to do
independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the characterization of the
relationship must be made based on the particular circumstances of each case. 42 There are several factors43 that may be considered
by the courts, but as we already said, the right to control is the dominant factor in determining whether one is an employee or an
independent contractor.44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and independent business and
undertakes to perform the job, work, or service on one’s own account and under one’s own responsibility according to one’s own
manner and method, free from the control and direction of the principal in all matters connected with the performance of the work
except as to the results thereof.45

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill, experience, and her unique
viewpoint as a feminist advocate. How she utilized all these in writing her column was not subject to dictation by respondent. As
in Sonza, respondent PDI was not involved in the actual performance that produced the finished product. It only reserved the right to
shorten petitioner’s articles based on the newspaper’s capacity to accommodate the same. This fact, we note, was not unique to
petitioner’s column. It is a reality in the newspaper business that space constraints often dictate the length of articles and columns,
even those that regularly appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to perform her work. Petitioner
only needed her talent and skill to come up with a column every week. As such, she had all the tools she needed to perform her
work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and Resolution of the Court of Appeals
in CA-G.R. SP No. 50970 are hereby AFFIRMED.
Case Title: Orozco v. Court of Appeals, G.R. No. 155207, August 13, 2008
Topic: Two-tiered test: Economic dependence test and control test

The Court of Appeals has broad discretion to address all relevant issues in a case to ensure a just and complete resolution.
However, its decision to deny the existence of an employer-employee relationship between Richard N. Wahing, Ronald L. Calago,
and Pablo P. Mait (collectively, Wahing et al.) and the Daguio Spouses was incorrect and warrants reversal. Wahing et al. worked as
rubber tree tappers under the operational and economic control of Amador and Esing Daguio, which established an employer-
employee relationship. Their dismissal from work—Mait in October 2006 and Wahing and Calago in February 2007—was therefore
illegal. Following their termination, Wahing et al. filed a complaint for illegal dismissal and other labor-related claims. The Labor
Arbiter initially dismissed the complaint, viewing the relationship as that of landlord and tenant. On appeal, the National Labor
Relations Commission reversed this decision and ordered the case to be decided on its merits. Despite multiple notices, the Daguio
Spouses failed to submit their position papers, while Wahing et al. complied. Consequently, the Labor Arbiter ruled in favor of Wahing
et al., declaring their dismissal illegal and awarding them a total of ₱777,090.52 in monetary compensation.

the National Labor Relations Commission issued an August 24, 2011 Resolution, ordering the case remanded once more for
reception of the Daguio Spouses' evidence. The dispositive portion reads:
WHEREFORE, the Decision dated September 28, 2010 is hereby SET ASIDE. Let the records of the case be REMANDED to the
Executive Labor Arbiter a quo for appropriate action and to dispose of the case on the merits.
SO ORDERED.12

Wahing et al. then moved for the reconsideration of the August 24, 2011 Resolution, but were denied relief. Thus, they filed a Petition
for Certiorari before the Court of Appeals, arguing that: (1) the National Labor Relations Commission had no jurisdiction to render the
assailed Resolution because the Daguio Spouses failed to perfect their appeal; and (2) that contrary to the assailed Resolution, the
Labor Arbiter respected the Daguio Spouses' right of due process by giving them adequate time and notice to submit their evidence,
which they allegedly disregarded.

Instead of ruling on the procedural defects raised in the Petition for Certiorari, the Court of Appeals decided the case on the merits
because the case had already been remanded multiple times and the parties' evidence had already been attached to the pleadings
made part of the record. It found that the Daguio Spouses' evidence adequately refuted the existence of an employer-employee
relationship, while Wahing et al. merely relied on procedural technicalities and "self-serving allegations."14
Further, since Wahing et al. failed to overcome their burden of proving the existence of the employer-employee relationship, the
Court of Appeals found that they could not have been illegally dismissed from employment. Thus, the dispositive portion from the
Court of Appeals January 23, 2015 Decision reads:

WHEREFORE, premises considered, the assailed Resolution dated August 24, 2011 of the National Labor Relations Commission,
Eighth Division, Cagayan De Oro City is hereby REVERSED and SET ASIDE. Petitioner's Complaint for illegal dismissal,
reinstatement or separation pay, underpayment of wages, premium pay for holiday, holiday pay, rest day pay, service inventive leave
pay, vacation/sick leave pay, 13th month pay, moral and exemplary damages and attorney's fees is hereby DISMISSED for lack of
basis.

ISSUES:

The issue to be resolved by this Court is whether or not the Court of Appeals gravely erred in resolving issues which were not raised
on appeal by the petitioners.

Subsumed under this is the issue of whether or not petitioners were respondents' employees.

Ruling:

The Supreme Court, after addressing the merits of the Court of Appeals' decision, proceeded to review whether an employer-
employee relationship existed between the parties. Although factual issues are generally beyond the scope of a Rule 45 petition, the
conflicting findings of the lower tribunals justified a review. Contrary to the Court of Appeals' conclusion, the Supreme Court found
that the respondents had employed the petitioners as farm workers, thereby establishing an employer-employee relationship
governed by labor laws. This determination was guided by the four-fold test: the power to hire, the payment of wages, the power to
dismiss, and the power to control—with control being the most crucial element.
The respondents argued that the petitioners merely shared in the proceeds of rubber sales and were not paid wages, nor were they
under the respondents' control. They claimed the relationship was one of agricultural tenancy rather than employment. However,
jurisprudence such as De Los Reyes v. Espineli clarified that agricultural employment is defined by the same four elements,
particularly the degree of control exercised by the employer. In contrast, a tenancy relationship involves a joint venture where the
tenant shares in the harvest and cannot be dismissed at will.

Both parties presented testimonial evidence. The petitioners' co-workers testified that they received daily wages, worked set hours,
were supervised during work, and could be dismissed for absences. Meanwhile, the respondents' witnesses—including a former
caretaker and local officials—claimed the petitioners only shared in the rubber sales and were not employees. Nonetheless, the
Supreme Court found the petitioners' evidence more compelling, showing that they were subject to work schedules, wage payments,
supervision, and dismissal policies—clear indicators of an employer-employee relationship.

As to the element of control, rubber tapping does not lend itself to the usual standard of assessing an employer's control over the
"means and methods" of an employee's work. As discussed in the Court of Appeals Decision, petitioners’ work only required the
collection of"rubber lumps from the 'bagol’ or small containers attached to the trunk" and their placement in another container.50 The
activity may be better assessed for employer control through an alternative test, as provided by Francisco v. National Labor
Relations Commission51:

There are instances when, aside from the employer's power to control the employee with respect to the means and methods by
which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the
true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer's power to control the
employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship
based on the various positions and responsibilities given to the worker over the period of the latter's employment.52 (Emphasis
supplied)

The "economic reality" test discussed in Francisco requires proof of the "the totality of economic circumstances of the
worker[,]"53 in order to determine the existence of an employer-employee relationship:

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole
economic activity, such as: (1) the extent to which the services performed are an integral part of the employer's business; (2) the
extent of the worker's investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the
worker's opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that line of business.

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business. In the United States, the touchstone of economic reality in analyzing possible employment
relationships for purposes of the Federal Labor Standards Act is dependency. By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker
on his employer.

The petitioners presented testimonial evidence that satisfied the economic reality test from Francisco, showing they were
economically dependent on the respondents and performed work integral to the rubber plantation business. Although there was no
proof that the petitioners invested in their own tools or facilities, this was deemed inconclusive due to the simplicity of their labor.
More importantly, the evidence showed that the respondents exercised control over the petitioners' work hours and methods, paid
them fixed daily wages, and could dismiss them for non-compliance with work requirements—key indicators of an employer-
employee relationship.

Both parties submitted similar types of testimonial evidence, but when the evidence is evenly balanced, jurisprudence requires
that doubts be resolved in favor of labor, in line with the constitutional and statutory mandate to protect workers. The Labor Code
and the 1987 Constitution emphasize social justice, recognizing labor as a primary social and economic force and guaranteeing
workers' security of tenure. Employment is considered a property right, and workers cannot be arbitrarily deprived of it without due
process.

Given the established employer-employee relationship, the respondents' act of ordering the petitioners to stop working without just or
authorized cause constituted illegal dismissal. As a result, the petitioners are entitled to reinstatement, or separation pay if
reinstatement is no longer feasible, along with back wages, labor standard benefits, and attorney’s fees equivalent to 10% of the
total monetary award. However, there was no basis for awarding moral or exemplary damages, as there was no evidence of malice
or bad faith on the part of the respondents.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Court of Appeals' January 23, 2015 Decision, and its July 7,
2015 Resolution, are hereby REVERSED and SET ASIDE.
The September 28, 2010 Decision of the Labor Arbiter finding the existence of the employer-employee relationship and petitioners'
illegal dismissal, and awarding back wages and other benefits is hereby REINSTATED, subject to the possibility of reinstatement in
lieu of separation pay. Petitioners are likewise entitled to Attorney's Fees at the rate of ten percent (10%) of the entire monetary
award.
SO ORDERED.
Case Title: Insular Life Assurance Company, Ltd. v. NLRC, G.R. No. 119930 March 12, 1998
Topic: Jurisprudential doctrines on status of insurance agents

On June 17, 1994, the Labor Arbiter dismissed the complaint filed by Pantaleon de los Reyes against Insular Life Assurance Co.,
Ltd. for illegal dismissal and nonpayment of wages, citing lack of jurisdiction due to the absence of an employer-employee
relationship. However, upon appeal, the National Labor Relations Commission (NLRC) reversed this decision, ruling that De los
Reyes was indeed an employee of Insular Life and remanded the case for further proceedings. Insular Life challenged this ruling
through a special civil action for certiorari, arguing that the NLRC acted without jurisdiction and committed grave abuse of discretion.
The company maintained that De los Reyes was an independent contractor, as explicitly stated in their agency and management
contracts, and cited a previous Supreme Court decision involving a similarly situated individual, Melecio Basiao, who was declared
an independent contractor.

Despite these arguments, the Court upheld the NLRC’s decision, emphasizing that the actual working conditions and obligations of
De los Reyes indicated an employer-employee relationship. De los Reyes had entered into an agency contract in 1992, which
restricted him from working for other insurance companies and required him to perform various tasks such as soliciting insurance,
collecting premiums, and submitting applications. In 1993, he was appointed Acting Unit Manager, tasked with recruiting and
supervising underwriters, and was compensated through commissions, bonuses, and allowances. He was also prohibited from
accepting other employment without Insular Life’s consent. These conditions, along with his termination in December 1993 and
subsequent complaint in March 1994, led the Court to conclude that De los Reyes was not merely an independent contractor but an
employee entitled to labor protections.

Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction, citing the absence of employer-employee
relationship. It reasoned out that based on the criteria for determining the existence of such relationship or the so-called "four-fold
test," i.e., (a) selection and engagement of employee, (b) payment of wages, (c) power of dismissal, and, (d) power of control, De los
Reyes was not an employee but an independent contractor.

On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case was dismissed on the ground that the
element of control was not sufficiently established since the rules and guidelines set by petitioner in its agency agreement with
respondent Delos Reyes were formulated only to achieve the desired result without dictating the means or methods of attaining it.
Respondent NLRC however appreciated the evidence from a different perspective. It determined that respondent De los Reyes was
under the effective control of petitioner in the critical and most important aspects of his work as Unit Manager. This conclusion was
derived from the provisions in the contract which appointed private respondent as Acting Unit Manager, to wit: (a) De los Reyes was
to serve exclusively the company, therefore, he was not an independent contractor; (b) he was required to meet certain manpower
and production quota; and, (c) petitioner controlled the assignment to and removal of soliciting agents from his unit.

The NLRC also took into account other circumstances showing that petitioner exercised employer's prerogatives over De los Reyes,
e.g., (a) limiting the work of respondent De los Reyes to selling a life insurance policy known as "Salary Deduction Insurance" only to
members of the Philippine National Police, public and private school teachers and other employees of private companies; (b)
assigning private respondent to a particular place and table where he worked whenever he was not in the field; (c) paying private
respondent during the period of twelve (12) months of his appointment as Acting Unit Manager the amount of P1,500.00 as Unit
Development Financing of which 20% formed his salary and the rest, i.e., 80%, as advance of his expected commissions; and, (d)
promising that upon completion of certain requirements, he would be promoted to Unit Manager with the right of petitioner to revert
him to agent status when warranted.

Ruling:

The Court clarified that while both Insular Life and the NLRC initially treated the agency and management contracts with Pantaleon
de los Reyes as contracts of agency, only the first contract—the agency agreement—fit that classification. The second contract,
which appointed De los Reyes as Acting Unit Manager, contained terms that clearly indicated an employer-employee relationship.
Therefore, the NLRC was correct in recognizing De los Reyes as an employee, but only in relation to the management contract. This
recognition also affirmed the Labor Arbiter’s jurisdiction over the case.

The Court emphasized that an employer-employee relationship cannot be invalidated simply by labeling someone an independent
contractor in a contract, especially when the actual terms and conditions reflect otherwise. Employment status is determined by law,
not by contractual language. Applying the “four-fold test” (selection and engagement, payment of wages, power of dismissal, and
control over work), the Court found that De los Reyes was effectively selected and engaged by Insular Life through the
recommendation of its District Manager. His appointment as Acting Unit Manager was temporary and conditional, implying a
probationary employment status. This status was based on his prior performance as an agent, which the Court viewed as a trial
phase leading to his managerial role. Thus, the management contract established an employer-employee relationship, validating the
NLRC’s decision and the Labor Arbiter’s authority to hear the case.

The Supreme Court denied the petition of Insular Life Assurance Co., Ltd. and affirmed the decision of the National Labor Relations
Commission (NLRC, dated March 3, 1995) and its subsequent order denying reconsideration. Insular Life had argued that Pantaleon
de los Reyes was not an employee but an independent contractor, citing a previous case (Basiao) where similar contractual terms
led to a ruling of non-employment. However, the Court found significant differences between the two cases. Unlike Basiao, De los
Reyes was appointed as an Acting Unit Manager and did not establish his own office; instead, he worked at Insular Life’s Cebu office
and was provided with company resources.

De los Reyes was subject to company-imposed quotas, exclusive service requirements, and restrictions on outside employment. His
role involved not only soliciting insurance but also performing administrative and supervisory functions essential to Insular Life’s
business operations. These conditions demonstrated control and integration into the company’s structure, which are hallmarks of an
employer-employee relationship. The Court also found the case more aligned with Great Pacific Life Insurance Co. v. NLRC, where
similar roles were deemed employment. Thus, the Court concluded that De los Reyes was indeed an employee of Insular Life and
ordered the case to be remanded to the Labor Arbiter for resolution on the merits.
Case Title: Tongko v. The Manufacturer’s Life Insurance Company, Inc., G.R. No. 167622, June 29, 2010
Topic: Jurisprudential doctrines on status of insurance agents
The Principles
 Four-Fold Test
 Labor Code concept of control
 concept of control in insurance industry

Tongko and Manulife’s relationship existed under a Career Agent’s Agreement which provided that Tongko is an independent
contractor and that he can be terminated by mere notice. He was promoted to higher positions over the course of his career in
Manulife and was made to follow the company Rules and Regulations or Codes. Later, Renato (who seems to be part of the
Management) wrote him a letter calling out his poor performance and giving him some guidelines he could follow to improve it.
However, shortly after that, Renato followed it up with another letter saying that he is terminating the services of Tongko.
The latter filed an illegal dismissal complaint arguing that he was an employee of Manulife and that the company is liable for his
backwages and separation pay. The Court found Tongko’s argument inconsistent with the Agreement signed by both parties which
was never substantially altered over the course of his career and Tongko’s consistent declaration in his ITR that he is a self-
employed individual. Following the provisions of Insurance Code, Civil Code and Labor Code, Manulife did not exercise control on
Tongko’s actions as an independent agent that would be construed as having an employer-employee relationship. At the very least,
the instructions given to him from time to time were part of the principal-agent relationship they had.

Q: What is the Four-Fold Test?

In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee
relationship, thus:

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee's conduct. It is the so-called "control test" which constitutes the most important index
of the existence of the employer-employee relationship that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.

Q: What is the Labor Code’s concept of “control” that must necessarily exist in a principal-agent relationship?

In this case, Manulife did not exercise the type of control that the Labor Code contemplates. The Codes and Guidelines
implemented by Manulife seemed like control amounting to an employer-employee relationship but since it does not intrude into the
insurance agents' means and manner of conducting their sales and only control them as to the desired results, it does not amount to
the “control” the Labor Code contemplates.

A commitment to abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent
an employee. Neither do guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term
is defined in jurisprudence.

Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature of dictating the means or methods to be
employed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these means.

Q: Can control be exercised without establishing an employer-employee relationship?

Yes, although Manulife exercised a type of control over Tongko, it did not amount to the control contemplated by the Labor
Code. Tongko remained an agent all along in absence of a subsequent contract; although his subsequent duties made him a lead
agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-manner
control.

Since the factual antecedents were set in an insurance industry, Insurance Code primarily governs. There are built-in
elements of control specific to an insurance agency, which do not amount to the elements of control that characterize an employment
relationship governed by the Labor Code. The Insurance Code provides definite parameters in the way an agent negotiates for the
sale of the company's insurance products.

Under the Insurance Code, "No person, partnership, or association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines." The agent
must, as a matter of qualification, be licensed and must also act within the parameters of the authority granted under the license and
under the contract with the principal.

In addition, under the general law on agency as applied to insurance, an agency must be express in light of the need for a
license and for the designation by the insurance company. In this case, the Career Agent’s Agreement fully serves as a grant of
authority to Tongko as Manulife’s insurance agent.

Background
Manulife terminated Tongko’s Agency Agreement under Section 14 of the contract, effective 15 days from the notice. Tongko
responded by filing an illegal dismissal complaint, claiming he was actually an employee, not just an agent.

Tongko’s Argument
Tongko claimed:
 He received fixed allowances and commissions.
 He performed administrative and supervisory duties.
 He had a designated office space and used company resources.
 He followed multiple codes of conduct imposed by Manulife.
These, he argued, showed control by Manulife—an indicator of employment.

Manulife’s Defense
Manulife argued:
 Tongko was paid commissions, not a salary.
 He declared himself self-employed for tax purposes.
 He was subject to an agency agreement, not an employment contract.
 Labor tribunals had no jurisdiction due to lack of employment relationship.

Conflicting Rulings
 Labor Arbiter: No employment relationship.
 NLRC: Reversed, found illegal dismissal.
 Court of Appeals: Reversed NLRC, agreed with Labor Arbiter.
 Supreme Court (Nov 7, 2008): Reversed CA, found Tongko was an employee.

Additional Evidence and Clarifications

Lack of Means-and-Manner Control
 Tongko failed to present specific evidence showing Manulife dictated how he performed his duties.
 His promotions (Unit Manager, Branch Manager, Regional Sales Manager) lacked documentation detailing responsibilities
or control mechanisms.
Nature of Managerial Role
 The term “coordinative” used to describe Tongko’s role does not imply control; it reflects leadership among agents, not
subordination to Manulife.
 Tongko was not supervising regular employees, but rather guiding fellow agents under the same agency agreement.
Selective Use of Affidavits
 The Court’s earlier decision highlighted only portions of affidavits suggesting control.
 Omitted portions revealed:
 No fixed salary or working hours.
 Use of personal resources and staff.
 Income reported as self-employed with BIR.
De Dios’ Letter
 The letter was not a directive on methods, but a strategic suggestion to improve results.
 It emphasized sales targets, not how to achieve them.
 The suggestion to hire an assistant was aimed at improving performance, not controlling operations.
Comparison with Other Cases
 Unlike the second Insular Life case, Tongko’s situation lacked:
 Exclusivity of service.
 Control over agent assignments.
 Provision of company capital or facilities.
 These elements were crucial in establishing employment in Insular Life but were absent in Tongko’s case.

The ruling emphasizes that the legal relationship between an insurance company and its agents cannot be assessed solely through
labor law. Instead, it must be viewed through a broader legal framework that includes the Insurance Code, the Civil Code, and
the Labor Code, along with the contractual agreement between the parties and established industry practices. The Insurance
Code specifically regulates the conduct and qualifications of insurance agents and brokers, requiring them to be licensed and to
operate within defined parameters. These controls—such as licensing, fiduciary duties, and limitations on solicitation and negotiation
—are inherent to the insurance agency model and do not imply an employment relationship.

Under the Civil Code, an agent is someone who acts on behalf of a principal with consent and authority. While this definition may
seem broad, the law and jurisprudence clearly distinguish agency from employment. The key difference lies in the concept
of control: an employer controls both the outcome and the means of achieving it, whereas a principal in an agency relationship
controls only the outcome, with the agent retaining discretion over the means. In the insurance context, the control exercised by the
company—such as setting sales targets or enforcing ethical standards—is consistent with agency, not employment.
The agreement between the parties in this case explicitly establishes an agency relationship, supported by industry norms and
practices. The agent is compensated for services, and the principal may appoint multiple agents and issue specific instructions.
These elements reflect a lawful agency arrangement governed by the Insurance and Civil Codes. Therefore, interpreting the
relationship as one of employment under the Labor Code would be legally inaccurate and overly simplistic.

Conclusion
The evidence, when fully considered, supports the view that no employer-employee relationship existed between Tongko and
Manulife. Tongko operated as a lead agent under an agency agreement, with autonomy in methods and operations. The control
exercised by Manulife was limited to results and compliance with industry standards, consistent with an agency relationship,
not employment.

In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a ground for
termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance, agency and contracts.

WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANT Manulife’s motion
for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
Case Title: Tongko v. The Manufacturer’s Life Insurance Company, Inc., G.R. No. 167622, January 25, 2011
Topic: Jurisprudential doctrines on status of insurance agents
Gregorio Tongko sought reconsideration, claiming employee status with Manulife after 19 years as an insurance agent. The
Supreme Court ruled he was an independent agent, not an employee, as Manulife’s control aligned with agency, not labor law,
standards.

Background
Gregorio V. Tongko worked with Manulife for 19 years, holding various titles such as Unit Manager, Branch Manager, and Regional
Sales Manager. He claimed that these roles involved administrative and supervisory functions, which he argued made him
an employee of Manulife, not just an insurance agent.

Legal Issue
The central question was whether Tongko was an employee of Manulife under labor law, or merely an insurance agent under a
contractual agency relationship.

Supreme Court Ruling

The Court denied Tongko’s Motion for Reconsideration, affirming its earlier decision that:
 Tongko was not an employee of Manulife.
 He was an insurance agent, governed by the Insurance Code and the Civil Code on agency.
Key Points
 Control Test: The Court emphasized that the control test is crucial in determining an employment relationship. This means
control over both the means and manner of work, not just the results.
 Manulife’s control over Tongko (e.g., setting sales targets, prescribing codes of conduct) was deemed insufficient to
establish an employer-employee relationship.
 The titles and commissions Tongko received were consistent with his role as a lead agent, not as an employee.
 Tongko earned substantial income (e.g., over ₱8 million in 2002) through commissions, which supported the conclusion that
he was compensated as an agent, not as an employee.
 The Court rejected the argument that denying employee status created an inequitable situation, stating that Tongko was
adequately compensated under the agency arrangement.

Conclusion
The Supreme Court upheld that Tongko was an insurance agent, not an employee, and thus not entitled to labor law protections
such as security of tenure or monetary awards like backwages or separation pay.

The Supreme Court rejected Tongko’s Motion for Reconsideration, reaffirming that Manulife did not exercise the kind of
control required to establish an employer-employee relationship under labor law.

Understanding Labor Law Control

 Labor law defines an employment relationship based on control over both the means and manner of performing work—
not just the results.
 The Court emphasized that control must go beyond setting goals; it must involve direct supervision over how tasks are
done.

Tongko’s Arguments and Why They Failed

Tongko claimed Manulife controlled him by:
3. Setting objectives and sales targets.
4. Prescribing codes of conduct.
The Court disagreed, explaining:
 These are standard practices in insurance agency relationships, not indicators of employment.
 The Insurance Code and Civil Code already define the agent’s duties and responsibilities, which naturally involve some
level of oversight—but this does not equate to labor law control.

Legal Distinctions Clarified

 Insurance agents operate under agency law, where the principal (Manulife) can set goals and standards but cannot
dictate how the agent achieves them.
 The Code of Conduct is a behavioral guideline, not a directive on how to perform specific tasks.
 The Civil Code allows principals to give instructions, but this is not the same as supervising daily work.

Duties and Titles Do Not Prove Employment

Tongko listed duties like:
 Remitting fees
 Delivering policies
 Overseeing other agents

The Court found:

 These are typical agent responsibilities.
 Even if Tongko supervised other agents, they were also independent agents, and his role was more like a lead agent.
 His titles (unit manager, branch manager, regional sales manager) reflected his expanded role, not a change in
employment status.

 Tongko remained an insurance agent throughout his relationship with Manulife.

 His progression in title and responsibilities did not transform his legal status into that of an employee.
 The Court found no evidence of labor law control, and thus no employment relationship existed.

WHEREFORE, premises considered, we hereby DENY the Motion for Reconsideration WITH FINALITY for lack of merit. No
further pleadings shall be entertained. Let entry of judgment proceed in due course.

Case Title: Sagun v. ANZ Global Services & Operations, G.R. No. 220399, August 22, 2016
Topic: No employer-employee relationship exists when a suspensive condition in a perfected contract of employment is not fulfilled
Petitioner was previously employed at HSBC-EDPI when he applied for a position at ANZ Global Services and Operations (Manila),
Inc. After successfully passing the interview and examination, ANZ offered him the role of Customer Service Officer, which he
accepted on June 8, 2011. The employment offer was conditional, subject to satisfactory results from pre-employment screenings,
including background and reference checks. The agreement also stated that employment would not commence unless these
conditions were met. Petitioner resigned from HSBC-EDPI and submitted the necessary documents to ANZ. However, on his
scheduled start date, July 11, 2011, ANZ retracted the job offer, citing inconsistencies in his background information, particularly
regarding his previous employment at Siemens. ANZ claimed he misrepresented his job title and the reason for his departure from
Siemens. Asserting that a valid employment contract had already been formed, the petitioner filed a complaint for illegal dismissal.
ANZ countered that no employer-employee relationship existed since the conditions for employment were not fulfilled, and thus, the
offer was validly withdrawn. They also denied any liability for the petitioner’s monetary claims.

The Labor Arbiter (LA) dismissed the petitioner’s complaint, ruling that no employment contract was perfected due to the valid
withdrawal of the job offer before the petitioner began working. The LA found that the petitioner’s material misrepresentation justified
the retraction, and thus, no employer-employee relationship was formed.

On appeal, the National Labor Relations Commission (NLRC) affirmed the LA’s decision, emphasizing that the petitioner failed to
report for work by the agreed date and that the job offer was conditional upon a satisfactory background check, which he failed. The
NLRC also denied the petitioner’s motion for reconsideration. The petitioner then elevated the case to the Court of Appeals (CA),
which upheld the NLRC’s ruling.

The CA clarified that while the employment contract was perfected upon acceptance, the actual employment relationship did not
commence due to the petitioner’s failure to meet the conditions, particularly the background check. Citing jurisprudence, the CA also
affirmed that the NLRC had jurisdiction over the case even in the absence of an employer-employee relationship. The petitioner’s
motion for reconsideration was likewise denied, prompting him to file a petition before the Supreme Court.

Issue:

The core issue for the Court's resolution is whether or not the CA erred in not finding grave abuse of discretion on the part of the
NLRC in holding that no employer-employee relationship existed between petitioner and respondent.

Ruling:

The Supreme Court ruled that the petition lacked merit. While it acknowledged that a contract of employment was perfected when
the petitioner accepted ANZ’s job offer, it emphasized that the contract was subject to suspensive conditions—specifically, the
satisfactory completion of background checks and reporting for work by a specified date. These conditions had to be fulfilled before
any employer-employee relationship could be deemed to exist. Since the petitioner failed to meet these conditions—particularly due
to discrepancies in his employment history and failure to report for work—ANZ was not obligated to proceed with the employment.
The Court clarified that in contracts with suspensive conditions, obligations only take effect once the conditions are met. Therefore,
ANZ’s withdrawal of the job offer was valid, and no illegal dismissal occurred. The Court upheld the decisions of the NLRC and the
Court of Appeals, affirming that no employer-employee relationship was created under the circumstances.

An employment contract, like any other contract, is perfected at the moment the parties come to agree upon its terms and conditions,
and thereafter, concur in the essential elements thereof. In this relation, the contracting parties may establish such stipulations,
clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public
order or public policy.

In this case, the Court agrees with the finding of the CA that there was already a perfected contract of employment when petitioner
signed ANZ's employment offer and agreed to the terms and conditions that were embodied therein. Nonetheless, the offer of
employment extended to petitioner contained several conditions before he may be deemed an employee of ANZ. Among those
conditions for employment was the "satisfactory completion of any checks (e.g. background, bankruptcy, sanctions and reference
checks) that may be required by ANZ." 40 Accordingly, petitioner's employment with ANZ depended on the outcome of his
background check, which partakes of the nature of a suspensive condition, and hence, renders the obligation of the would-be
employer, i.e., ANZ in this case, conditional. Article 1181 of the Civil Code provides:

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the condition.

Here, the subject employment contract required a satisfactory completion of petitioner's background check before he may be
deemed an employee of ANZ. Considering, however, that petitioner failed to explain the discrepancies in his declared information
and documents that were required from him relative to his work experience at Siemens, namely: (a) that he was only a Level 1 and
not a Level 2 Technical Support Representative that conducts troubleshooting for both computer hardware and software problems;
and (b) that he was found to have been terminated for cause and not merely resigned from his post, that rendered his background
check unsatisfactory, ANZ's obligations as a would-be employer were held in suspense and thus, had yet to acquire any obligatory
force. 45 To reiterate, in a contract with a suspensive condition, if the condition does not happen, the obligation does not come into
effect. Thus, until and unless petitioner complied with the satisfactory background check, there exists no obligation on the part of
ANZ to recognize and fully accord him the rights under the employment contract. In fact, records also show that petitioner failed to
report for work on or before July 11, 2011, which was also a suspensive condition mandated under sub-paragraph 4 of Schedule 1 of
the contract.

Consequently, no employer-employee relationship was said to have been created between petitioner and ANZ under the
circumstances, and the dismissal of the farmer's complaint for illegal termination from work, as held by the NLRC, was correctly
sustained by the CA.

WHEREFORE, the petition is DENIED. The Decision dated May 25, 2015 and the Resolution dated August 27, 2015 of the Court of
Appeals in CA-G.R. SP No. 127777 are hereby AFFIRMED.
Case Title: National Labor Union vs. Dinglasan, 98 Phil. 649, 652 (1996)
Topic: Kind of relationship under a “boundary system” arrangement
Facts:
 The National Labor Union filed a complaint against Benedicto Dinglasan for unfair labor practices after he locked out 46
jeepney drivers on June 27, 1953.
 The drivers had recently formed a union, which Dinglasan opposed.
 Dinglasan claimed the drivers were not employees but lessees under the boundary system.
 The Court of Industrial Relations (CIR) initially sided with Dinglasan, but the Supreme Court reversed that decision in a
prior case (G.R. No. L-7945), affirming the existence of an employer-employee relationship.
 After this ruling, Dinglasan continued to deny the unfair labor practice charges, asserting he acted in good faith.

Issues:
1. Whether an employer-employee relationship existed between Dinglasan and the jeepney drivers.
2. Whether Dinglasan committed unfair labor practices by locking out the drivers due to union formation.
3. Whether the drivers were entitled to reinstatement and back wages, and from what date.

Ruling:
 The Supreme Court affirmed that:
 An employer-employee relationship existed.
 Dinglasan committed unfair labor practices by locking out the drivers and refusing to negotiate.
 However, the Court acknowledged Dinglasan’s good faith, as he genuinely believed the drivers were not his employees.
 The Court ordered:
1. Cessation of unfair labor practices.
2. Reinstatement of the drivers (except those already reinstated).
3. Back wages from May 29, 1956 (date of the Supreme Court’s ruling affirming the employment relationship),
at ₱4.00/day, with deductions for other employment.
4. No back wages for the period when drivers voluntarily refused to return to work.

Doctrine:
 The existence of an employer-employee relationship under the boundary system can be affirmed based on control and
economic dependence.
 Good faith belief in the absence of such a relationship may mitigate liability but does not excuse unfair labor practices.

The respondent union alleged that Benedicto Dinglasan committed an unlawful lockout and unfair labor practice on June 27, 1953,
by refusing to allow his jeepney drivers—who had recently formed a labor union—to operate their assigned vehicles. Dinglasan
denied this claim, asserting that he acted in good faith based on his honest belief that no employer-employee relationship existed
between him and the drivers. Concerned that the drivers might initiate a strike and abandon his jeepneys on the streets, he
temporarily suspended operations to seek legal advice. Upon receiving counsel, he informed the drivers the following day, June 28,
that they could resume operations. While a few drivers complied, they were later pressured by striking union members to return the
vehicles and join the strike. This situation persisted for several days, but by October 8, 1953, thirty-four out of forty-six drivers had
returned to work under the same conditions as before.

In the case of Benedicto Dinglasan vs. National Labor Union (G.R. No. L-14183, November 27, 1959), the Supreme Court
affirmed the existence of an employer-employee relationship under the boundary system, which is commonly used in the
public transport sector in the Philippines.
The Court clarified that even though drivers under the boundary system pay a fixed amount (the "boundary") to the vehicle owner
and keep the excess as their earnings, this arrangement does not negate the employer-employee relationship. What matters is
the presence of control—specifically, the employer's authority over the drivers' conduct, routes, schedules, and use of the vehicles.
The Court emphasized that the economic reality and the degree of supervision exercised by the owner are key indicators of
employment.

In this case, the Court found that Dinglasan exercised sufficient control over the jeepney drivers, making them his employees despite
the boundary arrangement. This ruling reinforced the principle that the form of payment or profit-sharing does not determine
employment status, but rather the nature of the relationship and the control exercised by the employer.

The Supreme Court reviewed the evidence and found Dinglasan’s version of events credible, supported by multiple witnesses
including disinterested parties and law enforcement officers, in contrast to the limited and hearsay testimony presented by the union.
Although the Court agreed with the lower court that Dinglasan’s suspension of operations constituted a technical lockout under the
Industrial Peace Act, it emphasized that his actions were not willful or discriminatory. The Court acknowledged Dinglasan’s good faith
and noted that he had promptly invited the drivers to return to work. Their refusal to do so, and their coercion of others to join the
strike, indicated that the continued work stoppage was voluntary on their part.

Consequently, while the drivers were entitled to reinstatement, the Court ruled that they were not entitled to back wages for the
period during which they refused to return to work. This decision was consistent with precedent, particularly the case of Philippine
Marine Radio Officers' Association vs. Court of Industrial Relations, which held that back pay is not warranted in the absence of
willful unfair labor practices or refusal by the employer to reinstate workers.
Case Title: Magboo vs. Bernardo, 7 SCRA 952, 954 (1963)
Topic: Kind of relationship under a “boundary system” arrangement

Appeal from the Court of First Instance of Manila to the Court of Appeals, and certified by the latter to this Court on the ground that
only questions of law are involved.

The action of the spouses Urbano Magboo and Emilia C. Magboo against Delfin Bernardo is for enforcement of his subsidiary
liability as employer in accordance with Article 103, Revised Penal Code. The trial court ordered defendant to pay plaintiffs
P3,000.00 and costs upon the following stipulated facts:
1. That plaintiffs are the parents of Cesar Magboo, a child of 8 years old, who lived with them and was under their custody until his
death on October 24,1956 when he was killed in a motor vehicle accident, the fatal vehicle being a passenger jeepney with Plate No,
AC-1963 (56) owned by the defendant;
2. That at the time of the accident, said passenger jeepney was driven by Conrado Roque;
3. That the contract between Conrado Roque and defendant Delfin Bernardo was that Roque was to pay to defendant the sum of
P8.00, which he paid to said defendant, for privilege of driving the jeepney on October 24, 1956, it being their agreement that
whatever earnings Roque could make out of the use of the jeepney in transporting passengers from one point to another in the City
of Manila would belong entirely to Conrado Roque;
4. That as a consequence of the accident and as a result of the death of Cesar Magboo in said accident, Conrado Roque was
prosecuted for homicide thru reckless imprudence before the Court of First Instance of Manila, the information having been docketed
as Criminal Case No. 37736, and that upon arraignment Conrado Roque pleaded guilty to the information and was sentenced to six
(6) months of arresto mayor, with the accessory penalties of the law; to indemnify the heirs of the deceased in the sum of P3,000.00,
with subsidiary imprisonment in case of insolvency, and to pay the costs;
5. That pursuant to said judgment Conrado Roque served his sentence but he was not able to pay the indemnity because he was
insolvent."

Appellant assails said decision, assigning three errors which boil down to the question of whether or not an employer-employee
relationship exists between a jeepney-owner and a driver under a "boundary system" arrangement. Appellant contends that the
relationship is essentially that of lessor and lessee.

A similar contention has been rejected by this Court in several cases. In National Labor Union v. Dinglasan, 52 O.G., No. 4, 1933, it
was held that the features which characterize the "boundary system" — namely, the fact that the driver does not receive a fixed wage
but gets only the excess of the receipt of fares collected by him over the amount he pays to the jeep-owner and that the gasoline
consumed by the jeep is for the account of the driver — are not sufficient to withdraw the relationship between them from that of
employer and employee. The ruling was subsequently cited and applied in Doce v. Workmen's Compensation Commission, L-9417,
December 22, 1958, which involved the liability of a bus owner for injury compensation to a conductor working under the "boundary
system."

The same principle applies with greater reason in negligence cases concerning the right of third parties to recover damages for
injuries sustained. In Montoya v. Ignacio, L-5868, December 29, 1953, the owner and operator of a passenger jeepney leased it to
another, but without the approval of the Public Service Commission. In a subsequent collision a passenger died. We ruled that since
the lease was made without such approval, which was required by law, the owner continued to be the operator of the vehicle in legal
contemplation and as such was responsible for the consequences incident to its operation. The same responsibility was held to
attach in a case where the injured party was not a passenger but a third person, who sued on the theory of culpa aquiliana (Timbol
vs. Osias, L-7547, April 30, 1955). There is no reason why a different rule should be applied in a subsidiary liability case under Article
103 of the Revised Penal Code. As in the existence of an employer-employee relationship between the owner of the vehicle and the
driver. Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary system" on the ground that
he is a mere lessor would be not only to abet flagrant violations of the Public Service law but also to place the riding public at the
mercy of reckless and irresponsible drivers - reckless because the measure of their earnings depends largely upon the number of
trips they make and, hence, the speed at which they drive; and irresponsible because most if not all of them are in no position to pay
the damages they might cause. (See Erezo vs. Jepte, L-9605, September 30, 1957).

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court,
without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët
Appellant further argues that he should not have been held subsidiarily liable because Conrado Roque (the driver of the jeepney)
pleaded guilty to the charge in the criminal case without appellant's knowledge and contrary to the agreement between them that
such plea would not be entered but, instead evidence would be presented to prove Roque's innocence. On this point we quote with
approval the pertinent portion of the decision appealed from:

"'With respect to the contention of the defendant that he was taken unaware by the spontaneous plea of guilt entered by the driver
Conrado Roque, and that he did not have a chance to prove the innocence of said Conrado Roque, the Court holds that at this
stage, it is already too late to try the criminal case all over again. Defendant's allegation that he relied on his belief that Conrado
Roque would defend himself and they had sufficient proof to show that Roque was not guilty of the crime charged cannot be
entertained. Defendant should have taken it to himself to aid in the defense of Conrado Roque. Having failed to take this step and
the accused having been declared guilty by final judgment of the crime of homicide thru reckless imprudence, there appears no more
way for the defendant to escape his subsidiary liability as provided for in Article 103 of the Revised Penal Code."'

WHEREFORE, the judgment appealed from, being in accordance with law, is hereby affirmed, with costs against defendant-
appellant.
Case Title: Lantaco, Sr. vs. Llamas, 108 SCRA 502, 514 [1981]
Topic: Kind of relationship under a “boundary system” arrangement
FACTS:

In a verified letter-complaint dated August 7, 1975, jeepney drivers from Pasay City—Martin Lantaco, Sr., Esteban del Barrio,
Rosalito Alamag, and Borromeo Vitaliano—lodged a grievance against City Judge Francisco R. Llamas of the Pasay City Court,
accusing him of "Backsliding and Grave Abuse of Discretion." The complaint stemmed from four estafa cases filed on January 8,
1975 against Ricardo Paredes, an officer of the jeepney operators' association PASCAMASCON, for failing to remit SSS
contributions. After the prosecution rested its case, the defense moved for dismissal due to insufficient evidence, which Judge
Llamas granted, acquitting Paredes on July 31, 1975. The complainants alleged irregularities in accessing the decision, including
repeated delays and the judge’s refusal to allow them to copy the original document. They were told the decision folder was at Judge
Llamas’ home for “correction,” raising concerns about post-promulgation alterations. Despite multiple follow-ups by the Court, Judge
Llamas only submitted his comment months later, asserting that the acquittal was properly rendered and that copies were provided
to the appropriate parties. He defended the integrity of the decision and submitted a copy as part of his response.

After a thorough review of the case records, the Court found that Judge Francisco R. Llamas committed grave abuse of authority by
unjustifiably refusing to provide the complainants—who were the witnesses in the estafa cases—a copy of the decision. Despite the
decision having been promulgated and made part of the public record, and despite the complainants’ willingness to obtain a certified
xerox copy, Judge Llamas denied their request and subjected them to repeated delays and evasions. This conduct was deemed
oppressive and arbitrary, violating the constitutional right to access public records, as emphasized in Baldoza vs. Judge Dimaano.
The Court underscored that while public officials may regulate access to records, they cannot prohibit it outright.

Furthermore, the Court found that Judge Llamas committed serious legal errors in dismissing the estafa cases. He wrongly
concluded that the absence of proof of demand invalidated the prosecution, ignoring the Social Security Act’s mandate that
employers must remit SSS contributions without need for demand. The law clearly imposes this obligation and provides penalties for
non-compliance, making demand irrelevant to the criminal liability. The Court clarified that its administrative review does not aim to
reverse the decision but to assess the judge’s conduct and competence. In this case, Judge Llamas’ actions reflected gross
ignorance of the law and a failure to uphold the standards of public service.

The Court found further errors in Judge Francisco R. Llamas’ decision, highlighting his misinterpretation of key provisions of the
Social Security Act. First, the judge wrongly dismissed the claim of forced daily deductions of ₱0.50 for SSS contributions, despite
the law clearly mandating employers to deduct and remit employee contributions based on monthly earnings. His disbelief had no
legal basis, as the obligation to deduct is explicitly stated in Section 18 of the Act.

Second, Judge Llamas incorrectly ruled that no employer-employee relationship existed between the accused jeepney operator and
the complainant drivers, thereby absolving the accused of any duty to remit SSS contributions. However, the Supreme Court had
long established in National Labor Union vs. Dinglasan (1956) that under the boundary system, jeepney drivers are considered
employees. The Court emphasized that drivers, having no investment in the business and being under the supervision and control of
the jeepney owner, cannot be considered lessees. This employer-employee relationship places legal obligations on the owner,
including compliance with labor and social security laws. Judge Llamas’ failure to recognize this precedent reflected a serious
misunderstanding of established jurisprudence and labor law principles.

In its final conclusion, the Supreme Court reaffirmed the long-standing legal doctrine that an employer-employee relationship exists
between jeepney owners/operators and drivers under the boundary system, citing precedents such as Magboo vs.
Bernardo and National Labor Union vs. Dinglasan. Judge Francisco R. Llamas was found to have gravely erred by ignoring this
settled jurisprudence and misapplying unrelated cases, such as Shriro and Manila Jockey Club, which had no relevance to the issue
at hand.

The Court emphasized that under the Social Security Act, SSS coverage is compulsory for employees, and employers are legally
obligated to deduct and remit contributions without requiring prior demand. Judge Llamas’ failure to apply these legal principles
demonstrated gross ignorance of the law or a deliberate refusal to uphold it—both of which are inexcusable for a member of the
judiciary.

Additionally, the Court criticized Judge Llamas for his repeated failure to comply with directives to submit his comment on the
complaint within the prescribed period, which showed disrespect to the Court and contributed to unnecessary delays in resolving the
administrative case. Ultimately, the Court concluded that Judge Llamas’ actions caused material and moral harm to the complainants
and foreclosed their right to refile the estafa cases due to double jeopardy, underscoring the serious consequences of his judicial
misconduct.

WHEREFORE, RESPONDENT FRANCISCO R. LLAMAS IS HEREBY DISMISSED AS CITY JUDGE OF PASAY CITY WITH
FORFEITURE OF ALL RETIREMENT PRIVILEGES AND WITH PREJUDICE TO REINSTATEMENT TO ANY POSITION IN THE
NATIONAL OR LOCAL GOVERNMENT, INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS, AGENCIES
OR INSTRUMENTALITIES.
Case Title: Calamba Medical Center, Inc. v. NLRC, G.R. No. 176484, November 25, 2008
Topic: Resident physician in training
FACTS:

Ronaldo Lanzanas and Merceditha Lanzanas are doctors employed by Calamba Medical Center, Inc. They are given a retainer’s fee
by the hospital as well as shares from fees obtained from patients.
One time, Ronaldo was overheard by Dr. Trinidad talking to another doctor about how low the admission rate to the hospital. That
conversation was reported to Dr. Desipeda who was then the Medical Director of the hospital.
Eventually Ronaldo was suspended. Ronaldo filed a case for Illegal Suspension in March 1998. In the same month, the rank and file
employees organized a strike against the hospital for unfair labor practices. Desipeda eventually fired Ronaldo for his alleged
participation in the strike, which is not allowed under the Labor Code for he is a managerial employee. Desipeda also fired
Merceditha on the ground that she is the wife of Ronaldo who naturally sympathizes with him.
The Labor Arbiter ruled that there was no Illegal Suspension for there was no employer-employee relationship because the hospital
has no control over Ronaldo as he is a doctor who even gets shares from the hospitals earnings.
The National Labor Relations Commission as well as the Court of Appeals reversed the LA.

ISSUE: Whether or not there is an employer-employee relationship?

HELD: Yes. Under the control test, an employment relationship exists between a physician and a hospital if the hospital controls both
the means and the details of the process by which the physician is to accomplish his task. There is control in this case because of
the fact that Desipeda schedules the hours of work for Ronaldo and his wife.

The doctors are also registered by the hospital under the SSS which is premised on an employer-employee relationship.
There is Illegal Dismissal committed against Rolando for there was no notice and hearing held. It was never shown that Rolando
joined the strike. But even if he did, he has the right to do so for he is not a part of the managerial or supervisory employees. As a
doctor, their decisions are still subject to revocation or revision by Desipeda.

There is Illegal Dismissal committed against Merceditha for the ground therefor was not mentioned in Article 282 of the Labor Code.

When is Control (One of the Four Tests of Employer-Employee Relationship) Absent?

Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of
work, and is compensated according to the result of his efforts and not the amount thereof, the element of control is absent.

The ruling centers on whether an employer-employee relationship exists between a hospital (the petitioner) and certain physicians
(the respondents). The hospital argued that no such relationship existed, citing the physicians’ twice-a-week reporting schedule and
their freedom to work elsewhere, as well as their entitlement to a share in certain hospital fees.

However, the Court rejected this argument, applying the "control test" which determines employment based on whether the employer
has the right to control the manner and means of the worker’s performance. The Court found that the hospital exercised significant
control over the physicians, including setting strict 24-hour work schedules, monitoring their activities through hospital staff, and
requiring approval for medical procedures.

The physicians were also subject to the hospital’s Code of Ethics and disciplinary rules. Furthermore, the hospital issued them ID
cards, payslips, and BIR forms indicating employee status, and enrolled them in SSS and PhilHealth—actions that presuppose an
employment relationship. The Court also noted that the physicians were not undergoing any accredited training, which under labor
regulations, confirms their status as employees. Ultimately, the Court concluded that the physicians were indeed employees of the
hospital, based on the totality of evidence and the control exercised by the petitioner.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with MODIFICATION in that the award
by the National Labor Relations Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other aspects,
the decision of the appellate court is affirmed.
Case Title: Hydro Resources Contractors Corp. v. Pagalilauan, G.R. No. L-62909, April 18, 1989
Topic: Employment arrangement on lawyers
Facts:

The petition for review on certiorari challenges the resolution of the National Labor Relations Commission (NLRC), which upheld the
labor arbiter's decision in favor of Rogelio A. Abanto. The NLRC ordered Hydro Resources Contractors Corporation to reinstate
Abanto to his former position without loss of seniority rights, pay him 12 months' backwages amounting to ₱18,000.00, and cover
attorney’s fees of ₱1,800.00. Abanto was hired by the corporation on October 24, 1978, as a Legal Assistant with a monthly salary of
₱1,500.00 and a gradually increasing living allowance. On September 4, 1980, he was informed of his termination effective October
4, 1980, due to alleged poor performance. Abanto responded by filing a complaint for illegal dismissal on October 6, 1980. The labor
arbiter ruled that Aban was illegally dismissed. This ruling was affirmed by the NLRC on appeal.

Issue:

Ruling:
The central issue raised by Hydro Resources Contractors Corporation was whether an employer-employee relationship existed
between the company and Rogelio A. Abanto, challenging the jurisdiction of the labor authorities.

The petitioner argued that Abanto, being a lawyer, was not an employee but merely a legal consultant, and thus labor laws did not
apply.

However, the Court rejected this claim, affirming that professionals like lawyers can be employees if they meet certain criteria.
Applying the four-fold test—selection, wage payment, power of dismissal, and control—the Court found that Abanto was indeed an
employee. He was hired as a Legal Assistant, received a salary and allowances, was subject to dismissal, and performed duties
under the company’s control, including non-legal tasks.

As stated in the case of Tabas v. California Manufacturing Co., (G.R. No. 80680, January 26, 1989):
This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends upon four
standards: (1) the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the
presence or absence of a power of dismissal; and (4) the presence or absence of a power to control the putative employee's
conduct. Of the four, the right-of-control test has been held to be the decisive factor.

The petitioner’s attempt to deny this relationship was deemed a last-ditch effort to justify Abanto’s illegal dismissal. The Court upheld
the findings of the labor arbiter, ruling that Abanto was entitled to reinstatement with seniority rights, backwages for three years,
attorney’s fees of ₱5,000.00, and, if reinstatement was no longer feasible, separation pay based on his employment from October
24, 1978, to October 4, 1983.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The petitioner is ordered to reinstate the private respondent to his
former or a similar position without loss of seniority rights and to pay three (3) years backwages without qualification or deduction
and P5,000.00 in attorney's fees. Should reinstatement not be feasible, the petitioner shall pay the private respondent termination
benefits in addition to the above stated three years backpay and P5,000.00 attorney's fees.
Case Title: Vigilla v. Philippine College of Criminology, Inc., G.R. No. 200094, June 10, 2013
Topic: Employer-employee relationship in job contracting and labor-only contracting
Law Principle:
Anything favorable to the labor-only contractor redounds to the benefit of the employer under the principle of solidary liability

Facts:

The petitioners work for the Philippine College of Criminology Inc. (PCCr) as janitors, janitress and supervisor in its maintenance
department. The petitioners were made to understand by the respondent PCCr that they are under the Metropolitan Building
Services, Inc. (MBMSI) which is a corporation engaged in providing janitorial services. PCCr terminated the services of MBMSI on
2009 which resulted in the dismissal of the petitioners. An illegal dismissal complaint was then filed against PCCr by the petitioners
contending that it is their real employer and not MBMSI. Subsequently, the PCCr submitted to the Labor Arbiter waivers, releases
and quitclaims that were executed by the petitioners in favor to MBMSI.

The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon filing the petition for review on certiorari before the Court
of Appeals, the CA ruled that the quitclaims, releases and waivers executed by the petitioners in favor to MBMSI redounds to the
benefit of PCCr by virtue of solidary liability under Article 1217 of the NewCivil Code. The petitioners contend that under Article 106
of the Labor Code a labor-only contractor's liability is not solidary as it is the employer who should be directly responsible to the
supplied worker.

Issue

Whether or not the quitclaims, releases and waivers executed by the petitioners in favor to MBMSI redounds to the benefit of PCCr?

Held

Yes.

The Supreme Court held that the basis of the solidary liability of the principal with those engaged in labor-only contracting is the last
paragraph of Article 106 of the Labor Code that provides, "In such cases of labor-only contracting, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him."

It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the effects of labor-only contracting "where upon the finding by
competent authority of labor-only contracting shall render the principal jointly and severally liable with the contractor to the latter's
employees, in the same manner and extent that the principal is liable to employees directly hired by him/her, as provided in Article
106 of the Labor Code."

Hence, the PCCr's solidary liability was already expunged by virtue of the releases, waivers and quitclaims executed by the
petitioners in favor of MBMSI by virtue of Article 1217 of the Civil Code providing that "payment made by one of the solidary
debtors extinguishes the obligation."

In cases involving labor-only contracting, the law establishes that the labor-only contractor and the principal employer are solidarily
liable for the valid claims of the workers. This means that both parties can be held equally responsible for fulfilling the workers’ rights
and obligations under the law. The petitioners in the case argued that such solidary liability does not exist, claiming that only the
employer should be directly liable under Article 106 of the Labor Code. They also contended that Articles 109 of the Labor Code and
1217 of the Civil Code, which deal with solidary obligations, do not apply. Therefore, they believed that the releases and quitclaims
issued in favor of MBMSI should not absolve PCCr of liability.

However, the Court rejected this argument. It ruled that the releases and quitclaims executed in favor of MBMSI also benefited PCCr
because MBMSI and PCCr are solidarily liable under the law. This is supported by Article 106 of the Labor Code, which states that in
labor-only contracting, the contractor is merely an agent of the employer, who is then considered the direct employer of the workers.
Department Orders issued by the Department of Labor and Employment (DOLE), such as DO 18-02 and DO 18-A, further reinforce
this interpretation by explicitly stating that the principal is solidarily liable with the contractor for any monetary claims of the workers.
Jurisprudence also supports this view. In cases like Philippine Bank of Communications v. NLRC, the Supreme Court clarified that
when labor-only contracting is found, the law treats the principal as the direct employer of the contractor’s workers to ensure their
rights are protected. This legal framework ensures that workers are not left without recourse in cases where contractors fail to meet
their obligations.

In light of these conclusions, the Court holds that the releases, waivers and quitclaims executed by petitioners in favor of MBMSI
redounded to the respondents' benefit. The liabilities of the respondents to petitioners are now deemed extinguished. The Court
cannot allow petitioners to reap the benefits given to them by MBMSI in exchange for the releases, waivers and quitclaims and,
again, claim the same benefits from PCCr.

While it is the duty of the courts to prevent the exploitation of employees, it also behooves the courts to protect the sanctity of
contracts that do not contravene the law. The law in protecting the rights of the laborer authorizes neither oppression nor self-
destruction of the employer. While the Constitution is committed to the policy of social justice and the protection of the working class,
it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own
rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less
privileges in life, the Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and applicable law and doctrine.

WHEREFORE, the petition is DENIED.

Case Title: Philippine Bank of Communications v. NLRC, 230 Phil. 430 (1986)
Topic: Employer-employee relationship in job contracting and labor-only contracting

FACTS:

The Philippine Bank of Communications (PBCom) entered into a service agreement with Corporate Executive Search Inc. (CESI) in
January 1976 to provide temporary services, including eleven messengers, at a daily rate of ₱18 per person. Ricardo Orpiada was
among those assigned to PBCom under this arrangement. Although CESI claimed to have hired Orpiada in June 1975, his
assignment at the bank was subject to PBCom’s acceptance. The agreement explicitly stated that assigned individuals would follow
PBCom’s workdays, hours, and methods but remain CESI’s employees, with CESI retaining all legal liabilities under labor and social
security laws. PBCom was responsible for monitoring time records and notifying CESI of any changes in assignments.

Despite these contractual terms, Orpiada filed a complaint for illegal dismissal and non-payment of 13th month pay after PBCom
requested CESI to withdraw his assignment in October 1976. Initially dismissed due to lack of employer-employee relationship, the
case was later certified for arbitration. Both PBCom and CESI maintained that CESI was Orpiada’s employer. However, the Labor
Arbiter ruled in favor of Orpiada in 1977, ordering PBCom to reinstate him with full back wages and 13th month pay. The NLRC
affirmed this decision in 1983, reducing back wages to two years. PBCom then filed a petition for certiorari with the Supreme Court in
1984, arguing that no employer-employee relationship existed.

The case hinged on legal criteria for determining such a relationship, including selection, wage payment, dismissal power, and
control over work conduct. While CESI hired Orpiada, PBCom accepted him and exercised control over his work. CESI paid his
wages, but PBCom funded them through service fees. PBCom also initiated the termination of Orpiada’s assignment, which led to
his dismissal by CESI. CESI clarified that Orpiada was hired specifically for PBCom and was let go when the service contract ended.
The complexity of the arrangement raised questions about the true nature of the employment relationship, ultimately requiring
judicial interpretation beyond the contract’s language.

Ruling:

The Supreme Court ruling in the case involving Ricardo Orpiada, the Philippine Bank of Communications (PBCom), and Corporate
Executive Search Inc. (CESI) centered on the determination of whether an employer-employee relationship existed between Orpiada
and PBCom. Under Article 106 of the Labor Code, a contractor’s employees are generally not considered employees of the principal.
However, if the contractor fails to pay wages, the principal becomes jointly liable. More significantly, in cases of “labor-only”
contracting—where the contractor lacks substantial capital and the workers perform tasks directly related to the principal’s business
—the law treats the contractor as merely an agent, thereby establishing an employer-employee relationship between the principal
and the contractor’s workers.

PBCom and CESI argued that CESI was a legitimate job contractor with substantial capital and independent operations. However,
the Court disagreed, noting that CESI merely supplied personnel to PBCom without undertaking a specific job or project. The
messengers, including Orpiada, used PBCom’s premises and equipment and performed tasks integral to the bank’s daily operations.
CESI did not operate as a parcel delivery company but as a recruitment agency, placing workers in client companies. This
arrangement met the criteria for labor-only contracting under Section 9 of Rule VIII, Book III of the Labor Code’s Implementing Rules.
Furthermore, Orpiada had rendered services to PBCom for approximately sixteen months, surpassing the one-year threshold under
Article 281 of the Labor Code, which qualifies an employee as regular. Despite the contractual language aiming to avoid an
employer-employee relationship, the Court emphasized that legal realities and the nature of the work prevailed over contractual
intent. Thus, PBCom was deemed Orpiada’s employer, responsible for reinstating him and paying his back wages and 13th month
pay, affirming the decisions of the Labor Arbiter and the NLRC.

We hold that, in the circumstances 'instances of this case, (CESI) was engaged in "labor-only" or attracting vis-a-vis the petitioner
and in respect c Ricardo Orpiada, and that consequently, the petitioner bank is liable to Orpiada as if Orpiada had been directly,
employed not only by (CESI) but also by the bank. It may well be that the bank may in turn proceed against (CESI) to obtain
reimbursement of, or some contribution to, the amounts which the bank will have to pay to Orpiada; but this it is not necessary to
determine here.

Both the petitioner bank and (CESI) have insisted that (CESI) was not a "labor only" contractor. Section 9 of Rule VIII of Book III
entitled "Conditions of Employment," of the Omnibus Rules Implementing the Labor Code provides as follows:
Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shag be deemed to be engaged
in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials;
and
(2) The workers recruited and placed by such person are performing activities which are to the principal business or operations of
the c workers are habitually employed,
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him
(c) For cases not file under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the
employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection
and welfare of the workers. (Emphasis supplied)
In contrast, job contracting-contracting out a particular job to an independent contractor is defined by the Implementing Rules as
follows:

Sec. 8. Job contracting. — There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business. (Emphasis supplied)
The bank and (CESI) urge that (CESI) is not properly regarded as a "labor-only" contractor upon n the ground that (CESI) is
possessed of substantial capital or investment in the form of office equipment, tools and trained service personnel.
We are unable to agree with the bank and (CESI) on this score. The definition of "labor-only" contracting in Rule VIII, Book III of the
Implementing Rules must be read in conjunction with the definition of job contracting given in Section 8 of the same Rules. The
undertaking given by CESI in favor of the bank was not the performance of a specific — job for instance, the carriage and delivery of
documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service,
companies with their own personnel who pick up documents and packages from the offices of a client or customer, and who deliver
such materials utilizing their own delivery vans or motorcycles to the addresses. In the present case, the undertaking of (CESI) was
to provide its client-thebank-with a certain number of persons able to carry out the work of messengers. Such undertaking of CESI
was complied with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the
premises and office equipment of the bank and not those of (CESI) Messengerial work-the delivery of documents to designated
persons whether within or without the bank premises — is of course directly related to the day-to-day operations of the bank. Section
9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as a distinct and
separate line of business.

WHEREFORE, the petition for certiorari is DENIED and the decision promulgated on 29 December 1983 of the National Labor
Relations Commission is AFFIRMED. The Temporary Restraining Order issued by this Court on 11 April 1984 is hereby lifted. Costs
against petitioner.
Case Title: Manaya v. Alabang Country Club Incorporated, G.R. No. 168988, June 19, 2007
Topic: Construction in favor of labor

FACTS:

Petitioner alleged that in 1989 he was initially hired by the respondent as a maintenance helper and was later designated as a
company electrician. He continued to work until 1998 when respondent informed him that his services were no longer required by the
company. Petitioner filed a complaint with the Labor Arbiter contending that respondent illegally dismissed him without just cause
and without due process. The former further asserted that with his more or less nine years of service with respondent, he had
become a regular employee.

Respondent, on the other hand denied employment of petitioner and contended that the latter was employed by First Staffing
Network Corp. (FSNC) with which the respondent had an existing memorandum of agreement (MOA). Thus, by virtue of a legitimate
job contracting, petitioner, as an employee of FSNC, came to work with the respondent.

The Labor Arbiter ruled in favor of Petitioner and held respondent and FFSNC solidarily liable with the petitioner. Respondent filed an
appeal but dismissed by NLRC for failure to perfect an appeal. In CA, the latter reversed NLRC's decision and order the latter to give
due course to respondent's appeal. Hence this petition.

ISSUE:

Whether respondent's appeal may be given due course and allows the relaxation of rules of procedure.

RULING:

No, the Court allowed liberal interpretation given the extraordinary circumstances that justify a deviation from an otherwise stringent
rule. Absent exceptional circumstances, we adhere to the rule that certain procedural precepts must remain inviolable, like those
setting the periods for perfecting an appeal or filing a petition for review, for it is doctrinally entrenched that the right to appeal is a
statutory right and one who seeks to avail oneself of that right must comply with the statute or rules.

We pronounced in those cases that technicality should not be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. In all these, the Court allowed liberal interpretation given the extraordinary circumstances that
justify a deviation from an otherwise stringent rule.[29] Clearly, emphasized in these cases is that the policy of liberal interpretation is
qualified by the requirement that there must be exceptional circumstances to allow the relaxation of the rules.

Absent exceptional circumstances, we adhere to the rule that certain procedural precepts must remain inviolable, like those setting
the periods for perfecting an appeal or filing a petition for review, for it is doctrinally entrenched that the right to appeal is a statutory
right and one who seeks to avail oneself of that right must comply with the statute or rules. The rules, particularly the requirements
for perfecting an appeal within the reglementary period specified in the law, must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business. Furthermore, the perfection of an
appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional and the failure to perfect the
appeal renders the judgment of the court final and executory. Just as a losing party has the right to file an appeal within the
prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his/her case.

In this particular case, we adhere to the strict interpretation of the rule for the following reasons:

Firstly, in this case, entry of judgment had already been made which rendered the decision of the LA as final and executory.

Secondly, it is a basic and irrefragable rule that in carrying out and in interpreting the provisions of the Labor Code and its
implementing regulations, the workingman’s welfare should be the primordial and paramount consideration. The interpretation herein
made gives meaning and substance to the liberal and compassionate spirit of the law enunciated in Article 4 of the Labor Code that
"all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and
regulations shall be resolved in favor of labor."

In the case of Bunagan v. Sentinel, the court declared that:

The perfection of an appeal within the statutory or reglementary period is not only mandatory, but jurisdictional, and failure to do so
renders the questioned decision final and executory and deprives the appellate court of jurisdiction to alter the final judgement, much
less to entertain the appeal. The underlying purpose of this principle is to prevent needless delay, a circumstance which would allow
the employer to wear out the efforts and meager resources of the worker to the point that the latter is constrained to settle for less
than what is due him.

The Court is aware that the NLRC is not bound by the technical rules of procedure and is allowed to be liberal in the interpretation of
rules in deciding labor cases. However, such liberality should not be applied in the instant case as it would render futile the very
purpose for which the principle of liberality is adopted. The liberal interpretation in favor of labor stems from the mandate that the
workingman's welfare should be the primordial and paramount consideration.

Thirdly, respondent has not shown sufficient justification to reverse the findings of the LA as affirmed by the NLRC.

On this point, the law is clear-cut. In labor–only contracting, the statute creates an employer–employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the labor–only contractor as if such employees had been directly
employed by the principal employer.

The Labor Code and its implementing rules empower the Labor Arbiter to be the trier of facts in labor cases. Much reliance is placed
on findings of facts of the Arbiter having had the opportunity to talk to and discuss with the parties and their witnesses the factual
matters of the case during the conciliation phase.45 We, thus, give full credence to the findings of facts of the labor arbiter.
Wherefore, premises considered, the Petition is GRANTED. The Decision of the Court of Appeals dated 9 May 2005 and its
Resolution dated 21 July 2005 is REVERSED. The Decision of the Labor Arbiter dated 20 November 2000 is reinstated. Let the
records of the above-entitled case be remanded to the Labor Arbiter for immediate execution of the Decision. No costs.