FIRST DIVISION

G.R. No. 138051 June 10, 2004

JOSE Y. SONZA, petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of
Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals
affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s
dismissal of the case for lack of jurisdiction.

The Facts

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

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

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

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and ₱317,000
for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days
of the month.

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

Dear Mr. Lopez,

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

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

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

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

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

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

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank, Quezon
Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-
CBN deposited SONZA’s talent fees and other payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties
to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer
jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a
 result of a hearing. Thus, the respondent’s plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.

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

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge Respondent’s
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro Vidanes
and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.

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

xxx

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

It must be noted that complainant was engaged by respondent by reason of his peculiar skills
and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free
to perform the services he undertook to render in accordance with his own style. The benefits
conferred to complainant under the May 1994 Agreement are certainly very much higher than those
generally given to employees. For one, complainant Sonza’s monthly talent fees amount to a staggering
₱317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was
not bound to render eight (8) hours of work per day as he worked only for such number of hours as may
be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to
an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific
agreement by the parties and not by reason of employer-employee relationship. As correctly
put by the respondent, "All these benefits are merely talent fees and other contractual benefits and
should not be deemed as ‘salaries, wages and/or other remuneration’ accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term
or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit."
 The fact that complainant was made subject to respondent’s Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As held by
the Supreme Court, "The line should be drawn between rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means to achieve it." (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.

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

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between
SONZA and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the
NLRC:

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

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and
not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the ‘AGENT’. As a matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties
to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is
the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said
Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such that there
exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.

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

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself
to pay complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED
THOUSAND PESOS (₱500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’

Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of
merely resigning from ABS-CBN, complainant-appellant served upon the latter a ‘notice of rescission’ of
Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to
unpaid employee benefits, ‘he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said
Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint.
 Complainant-appellant’s claims being anchored on the alleged breach of contract on the part of
respondent-appellee, the same can be resolved by reference to civil law and not to labor law.
Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the
case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action
for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-
CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into
the correctness of the evaluation of the evidence which served as basis of the NLRC’s conclusion.12 The Court of
Appeals added that it could not re-examine the parties’ evidence and substitute the factual findings of the NLRC
with its own.13

The Issue

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

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND REFUSING TO
FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A
FINDING.14

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC
ruling which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

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

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN.
On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.

Employee or Independent Contractor?

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

SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case
law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s
power to control the employee on the means and methods by which the work is accomplished.18 The last
element, the so-called "control test", is the most important element.19

A. Selection and Engagement of Employee

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

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish
them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills,
talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and
celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages

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

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS,
Medicare, x x x and 13th month pay"20 which the law automatically incorporates into every employer-employee
contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed
enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain
talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive,
of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC
is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal

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

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza
shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees
during the life of the Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent
fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees
during the remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of
SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that he is
not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an
employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president
of MJMDC, rescinded the Agreement. SONZA’s letter clearly bears this out.26 However, the manner by which
SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or
resigned from work does not determine his status as employee or independent contractor.

D. Power of Control

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

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

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s
contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for the
 Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x28 (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The
greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well – the less control the hirer exercises, the more likely the worker is considered an
independent contractor.30

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

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-
CBN’s control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to
attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.31 ABS-CBN
could not dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in
his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or
discuss in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify
the program format and airtime schedule "for more effective programming."34 ABS-CBN’s sole concern was the
quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means
and methods of performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show,
ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with
the means and methods of SONZA’s performance of his work, or even with the quality or product of his work,
ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s
show but ABS-CBN must still pay his talent fees in full.35

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

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville
performers were independent contractors although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control over the manner of performance of the
skills of the artists, it could only control the result of the work by deleting objectionable features.37

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform
his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance.38 Even though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s
sole concern was for SONZA to display his talent during the airing of the programs.39

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

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules
and standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner
of work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies to
broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are
those applicable to talents and not to employees of ABS-CBN.

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

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

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

The Vaughan case also held that one could still be an independent contractor although the hirer reserved
certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one
hired from performing his services according to his own initiative.45

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

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

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This
practice is not designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time
and effort "in building up its talents as well as the programs they appear in and thus expects that said talents
remain exclusive with the station for a commensurate period of time."47 Normally, a much higher fee is paid to
talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to
ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA
insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who
is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes
the principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or
employed the employees.48 These circumstances are not present in this case.

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

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

Policy Instruction No. 40

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

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

Affidavits of ABS-CBN’s Witnesses

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

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

Section 3. Submission of Position Papers/Memorandum

xxx

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

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of
their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need
for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such
determination, ask clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or witness.50

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

Talents as Independent Contractors

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

The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-
employee relationship. To hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.

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

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZA’s Claims

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

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

SO ORDERED.

Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

 FIRST DIVISION

[ G.R. No. 221241. September 14, 2016 ]

MARIO N. FELICILDA, PETITIONER, VS. MANCHESTEVE H. UY, RESPONDENT.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated July 10, 2015 and the Resolution[3]
dated October 21, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 129784, which set aside the Decision[4]
dated November 16, 2012 and the Resolution[5] dated February 28, 2013 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 08-002277-12 / NLRC NCR Case No. 12-18409-11 and, instead, dismissed
Mario N. Felicilda's (petitioner) complaint for illegal dismissal with money claims for lack of merit.

The Facts

Petitioner alleged that on October 29, 2010, respondent Manchesteve H. Uy (respondent) hired him as a truck
driver for the latter's trucking service under the business name "Gold Pillars Trucking"[6] (GPT). In connection,
therewith, petitioner was issued a company identification card (ID), assigned in one of GPT's branches in Manila,
and paid on a percentage basis.[7] On December 9, 2011, petitioner took a nap at the work station while waiting
for his truck to be loaded with cargoes, all of which were delivered to respondent's clients on schedule. The next
day, or on December 10, 2011, respondent's helper told petitioner that his employment was already terminated
due to his act of sleeping while on the job.[8] Claiming that he was dismissed without just cause and due
process, and that his act of taking a nap did not prejudice respondent's business, petitioner filed a complaint[9]
for illegal dismissal with money claims against respondent, before the NLRC, docketed as NLRC NCR Case No.
12-18409-11.[10]

In his defense,[11] respondent denied the existence of an employer--employee relationship between him and
petitioner, considering that petitioner was: (a) paid merely on a per trip "percentage" basis and was not required
to regularly report for work; (b) free to offer his services to other companies; and (c) not under respondent's
control with respect to the means and methods by which he performed his job as a truck driver. Respondent
added that petitioner's company ID did not indicate that the latter was his employee, but only served the purpose
of informing the GPT's clients that petitioner was one of respondent's authorized drivers. Finally, respondent
averred that it no longer engaged petitioner's services due to the latter's "serious transgressions and
misconduct."[12]
The Labor Arbiter's Ruling

In a Decision[13] dated June 29, 2012, the Labor Arbiter (LA) ruled in petitioner's favor and, accordingly, ordered
respondent to pay the aggregate sum of P80,145.52 representing his backwages and separation pay.[14]

Finding that petitioner's service as truck driver was indispensable to respondent's business operations, the LA
concluded that petitioner was respondent's regular employee and, thus, may only be dismissed for just or
authorized cause and with due process. Absent any showing of a clear and valid cause to terminate petitioner's
employment, respondent was, therefore, guilty of illegal dismissal.[15]

Aggrieved, respondent appealed[16] to the NLRC, docketed as NLRC LAC No. 08-002277-12.

The NLRC Ruling

In a Decision[17] dated November 16, 2012, the NLRC affirmed the LA ruling. It ruled that an employer-employee
relationship existed between the parties, considering that: (a) respondent engaged petitioner's services without
the aid of a third party or a manpower agency; (b) the payment of wages on a percentage basis did not negate
such existence; (c) respondent's power to dismiss petitioner was inherent in his selection and engagement of
the latter as truck driver; and (d) respondent exercised control and supervision over petitioner's work as shown
in the former's determination of the latter's delivery areas and schedules.[18] Considering that respondent failed
to show a lawful cause for petitioner's dismissal, the NLRC sustained the order of payment of monetary awards
in petitioner's favor.[19]

Respondent moved for reconsideration,[20] but was denied in a Resolution[21] dated February 28, 2013.
Undaunted, respondent filed a petition for certiorari[22] before the CA.

The CA Ruling

In a Decision[23] dated July 10, 2015, the CA set aside the NLRC ruling and, instead, dismissed petitioner's
complaint for illegal dismissal with money claims for lack of merit.[24] Contrary to the findings of the LA and the
NLRC, the CA held that the elements of payment of wages and control in determining an employer-employee
relationship were absent, considering that petitioner was not paid wages, but commissions only, which amounts
varied depending on the kind of cargo, length of trip, and fuel consumption. The CA observed that there was no
evidence to show that respondent exercised control over the means and methods by which petitioner was to
perform his duties. Further, petitioner failed to refute the claims that: (a) the payment of his commission was
dependent on his efficiency, discipline, and industry, which factors were beyond respondent's control; (b) he
was not required to regularly report for work and may make himself available to other companies; and (c) the
company ID was merely issued to him for the purpose of apprising respondent's clients that he was the
authorized driver.[25]
Petitioner moved for reconsideration,[26] but was denied in a Resolution[27] dated October 21, 2015; hence,
this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA correctly ascribed grave abuse of discretion
on the part of the NLRC in ruling that no employer-employee relationship existed between petitioner and
respondent and, thus, the latter could not have illegally dismissed the former.

The Court's Ruling

The petition is impressed with merit.

At the outset, it should be mentioned that the jurisdiction of the Supreme Court in cases brought before it from
the CA via Rule 45 of the Rules of Court is generally limited to reviewing errors of law and does not extend to a
re-evaluation of the sufficiency of evidence upon which the courts a quo had based its determination. This rule,
however, is not ironclad and a departure therefrom may be warranted where the findings of fact of the LA and
the NLRC, on the one hand, and the CA, on the other, are contradictory, as in this case. There is therefore a
need to review the records to determine whether the CA, in the exercise of its certiorari jurisdiction, erred in
finding grave abuse of discretion on the part of the NLRC in ruling that respondent was not illegally
dismissed.[28]

To justify the grant of the extraordinary remedy of certiorari, petitioner must satisfactorily show that the court
or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes a
capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or personal
hostility, the character of which being so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all in contemplation of law.[29]

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and
conclusions are not supported by substantial evidence, or that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.[30]

Guided by the foregoing considerations, the Court finds that the CA committed reversible error in granting
respondent's certiorari petition since the NLRC did not gravely abuse its discretion in ruling that petitioner was
respondent's regular employee and, hence, was illegally dismissed by the latter. In this case, respondent
disclaims any liability for illegal dismissal, considering that, in the first place, no employer-employee relationship
existed between him and petitioner.

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the
four-fold test, to wit: (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 employee's conduct, or the so-called "control test."[31]
Verily, the power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. This is the so-called "control test," and is
premised on whether the person for whom the services are performed reserves the right to control both the end
achieved and the manner and means used to achieve that end.[32] It must, however, be stressed that the
"control test" merely calls for the existence of the right to control, and not necessarily the exercise thereof. To
be clear, the test does not require that the employer actually supervises the performance of duties by the
employee.[33]

Contrary to respondent's submission, which was upheld by the CA, the Court agrees with the labor tribunals that
all the four (4) elements are present in this case:

First. It is undisputed that respondent hired petitioner to work as a truck driver for his private enterprise, GPT.

Second. Petitioner received compensation from respondent for the services he rendered. Contrary to the findings
of the CA, while the wages paid was determined on a "per trip" or commission basis, it has been constantly ruled
that such does not negate employment relationship.[34] Article 97 (f) of the Labor Code broadly defines the
term "wage" as "the remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered x x x."[35] That petitioner was paid on
a "per trip" or commission basis is insignificant as this is merely a method of computing compensation and not
a basis for determining the existence or absence of an employer--employee relationship.[36]

Third. Respondent's power to dismiss was inherent in the selection and engagement of petitioner as truck driver.

Fourth. The presence of the element of control, which is the most important element to determine the existence
or absence of employment relationship, can be safely deduced from the fact that: (a) respondent owned the
trucks that were assigned to petitioner; (b) the cargoes loaded in the said trucks were exclusively for
respondent's clients; and (c) the schedule and route to be followed by petitioner were exclusively determined
by respondent. The latter's claim that petitioner was permitted to render service to other companies was not
substantiated and there was no showing that he indeed worked as truck driver for other companies. Given all
these considerations, while petitioner was free to carry out his duties as truck driver, it cannot be pretended
that respondent, nonetheless, exercised control over the means and methods by which the former was to
accomplish his work. To reiterate, the power of control refers merely to the existence of the power. It is not
essential for the employer to actually supervise the performance of duties of the employee, as it is sufficient that
the former has a right to wield the power,[37] as in this case.

Having established that an employer-employee relationship exists between the parties, it is now incumbent for
the Court to determine whether or not respondent validly terminated petitioner's employment.
For a dismissal to be valid, the rule is that the employer must comply with both the substantive and procedural
due process requirements. Substantive due process requires that the dismissal must be pursuant to either a just
or an authorized cause under Articles 297, 298, and 299 (formerly Articles 282, 283 or 284)[38] of the Labor
Code, as amended.[39]

Procedural due process, on the other hand, mandates that the employer must observe the twin requirements of
notice and hearing before a dismissal can be effected.[40]

In this case, suffice it to say that aside from respondent's averment that petitioner committed "serious
transgressions and misconduct" resulting in the former's loss of trust and confidence, no other evidence was
shown to substantiate the same. Such averment should be properly deemed as a self- serving assertion that
deserves no weight in law.[41] Neither was petitioner accorded procedural due process as he was merely
informed by respondent's helper that he was already terminated from his job. Clearly, respondent illegally
dismissed petitioner, and as such, the latter is entitled to backwages and separation pay in lieu of reinstatement,
as correctly ruled by the labor tribunals.

WHEREFORE, the petition is GRANTED. The Decision dated July 10, 2015 and the Resolution dated October
21, 2015 of the Court of Appeals in CA-G.R. SP No. 129784 are hereby REVERSED and SET ASIDE. The
Decision dated November 16, 2012 and the Resolution dated February 28, 2013 of the National Labor Relations
Commission in NLRC LAC No. 08-002277-12 / NLRC NCR Case No. 12-18409-11 are REINSTATED.

SO ORDERED.

Sereno, C. J., Leonardo-De Castro, and Caguioa, JJ., concur.

Bersamin, J., on official leave.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-10675 April 29, 1960

COMPANIA MARITIMA, petitioner,

vs.
ERNESTA CABAGNOT VDA. DE HIO, for herself and as Guardian-ad-litem of her minor children,
DIONISIO, JR., ERNESTO, RAUL, and ESTER, all surnamed HIO, and PABLO VELEZ WATCHMEN'S
AGENCY, respondents.

Aurelio Quitoriano for petitioner.

Ernesta Cabagnot Vda. de Hio for herself and in behalf of her minor children.
Mendiola and Cruz for respondent Agency.

GUTIERREZ DAVID, J.:

Appeal by certiorari from a decision of the Workmen's Compensation Commission.

The petitioner, Compañia Maritima, is a domestic corporation organized under Philippine laws for the purpose
of engaging in interisland trade, while the respondent Pablo Velez Special Watchmen's Agency is a single
proprietorship owned and operated by Mr. Pablo Velez, engaged in the business of supplying watchmen and
protective services to shipping companies requesting such services. The watchmen supplied by the said agency
are recruited from the Manila Bay Watchmen's Association, a duly registered labor organization with whom Velez
had a collective bargaining contract under which fifteen percent (15%) of the total wages of the watchmen are
collected by the latter as commission. The members of the Manila Bay Watchmen's Association compose the
membership of the Pablo Velez Watchmen's Agency.

On or about the later part of August, 1954, a strike was staged by the Marine Officer's Guild and the petitioner
contracted with the Pablo Velez Special Watchmen's Agency for the latter to give security to the officers of the
said petitioner who did not join the strike. Among the members of the Pablo Velez Watchmen's Agency detailed
with the company was the late Dionisio Hio. On September 4, 1954, the said Dionisio Hio was on a night shift
duty as gangwayman of the M/V BASILAN, a vessel owned by petitioner. At about 8:30 o'clock in the evening
of that same day, the said Dionisio Hio and several others were picked on a jeep by the Chief Engineer of the
vessel in order to escort him to his home at Perla, Harrison, Pasay City. Upon their arrival at his residence, the
said engineer offered some drinks to the deceased and the other watchmen who accompanied him home. After
having several rounds of liquor, the watchmen left the engineer's house and they arrived at their respective
posts at about 2:00 a.m. the following day, September 5. At about 6 o'clock that morning, the body of Dionisio
Hio was found floating near the side of the M/V BASILAN along the gangway of which he was assigned for duty.

The deceased is survived by his wife Ernesta Cabagnot Hio and three minor children all of whom were dependent
on his wages at the time of his death.

Upon a claim for compensation made by the widow, in her behalf, and in behalf of her children, the Workmen's
Compensation Commission, finding that Dionisio Hio died of an accident that occurred in the course of his
employment, and declaring the Compañia Maritima as employer thereof, ordered that company to pay these
survivors the sum of P4,000.00 as death compensation, P200.00 as reimbursement for burial expenses and
P41.00 as fees required under section 55 of the Workmen's Compensation Act, as amended.

In this appeal, we are asked to rule on (1) whether or not the deceased was an employee of the Compañia
Maritima, entitled to compensation under the Workmen's Compensation Act; and (2) whether or not the
deceased was intoxicated while performing his duty as watchman at the time of his death.

The petitioner claims that it never had any employer-employee relationship with the deceased. The claim is
without merit. While it is true that no written employment contract between the petitioner and the deceased
was presented in evidence, it is not disputed that the petitioner company owns the vessel where the deceased
was assigned as gangwayman, and it was found by the Commission that the salary of the deceased was paid
directly from the funds of petitioner. From these circumstances, it would the appear that at the time of the
accident the deceased was under petitioner's employ.

There is nothing to the contention that the deceased was but a casual employee whose services were engaged
only for the duration of the strike and, not entitled to compensation. The section of the law cited by the petitioner
in support of this contention reads:

SEC. 39 (b). "Laborer" is used as a synonym of "employee" and means every person who has entered the
employment of, or works under a service or apprenticeship contract for an employer. It does not include a
person whose employment is purely casual and is not for the purpose of the occupation or business of the
employer. . . .

It is clear from the above that for an employee to be excluded from the term "laborer" or "employee" under the
Act, his employment must be "purely casual and is not for the purpose of the occupation or business of the
employer". In a case (Cajes vs. Philippine Manufacturing Co., 40 Off. Gaz., p. 1251), where this Court had
occasion to interpret the above-quoted section, it was held that the casual service that the law speaks of must
be construed, interpreted and concluded by the circumstance of whether or not the aforesaid service is related
with the occupation of business of the employer. We have reason to believe that the work of the deceased in
the case at bar was in connection with the business of petitioner. It has been shown that it was not only during
the strike that the Compañia Maritima needed the services of watchmen. In fact, the petitioner admitted having
its own permanently employed watchmen doing the same duties as that of the deceased. The duties referred to
must be that of giving security not only to the cargo of the vessel but also to the lives of its officers and crew,
and they are, undoubtedly, in connection with the business of the petitioner. Without security, any shipping
company could not possibly go on with its maritime business.

In disclaiming liability, the petitioner further insists that the deceased was intoxicated while performing his duty
as gangwayman in the early morning of September 5, 1954. The Workmen's Compensation Commission,
however, upon examination of the evidence on this point, noted serious contradictions in the testimony of the
witnesses. While one witness for the Pablo Velez Watchmen's Agency testified that after the alleged drinking
spree at the house of the Chief Engineer of the M/V BASILAN the deceased together with his companions
proceeded to their respective posts at Pier 8, another witness averred that they went to other night spots in
Pasay City. On the other hand, the testimony of the claimant widow that the deceased never got drunk while on
duty, and the autopsy report and testimony of Dr. Cabreira of the Manila Police Department to the effect that
there were no indications of alcohol in the body of the deceased would show that the deceased was not drunk
at the time of his death. There is authority to the effect that where the testimony or evidence shows a conflict
in the testimony as to whether or not the deceased was intoxicated at the time of the injury, it is not error to
fail to find that the deceased was intoxicated, for such ruling is necessarily included in a finding that the accident
arose out of the employment (Napoleon vs. McCullough, 89 N.J.L. 716; 99 Atl. 385, cited in Labor Laws by
Francisco, Vol. 2, p. 156). The defense of drunkenness in workmen's compensation cases must be supported by
clear and convincing proof to the effect that such intoxication or drunkenness rendered the employee incapable
of doing his work so that he could not be said to be engaged in his employment. The accident or injury must be
shown to have arisen out of his drunken condition and not out of the work. No such evidence was adduced in
the present case.

It is worthy to note that the witnesses who testified on the alleged drunkenness of the deceased were witnesses
for the Pablo Velez Watchmen's Agency, and not for petitioner. The latter could have presented as witness its
Chief Engineer to bolster its defense of drunkenness, but it failed to do so. It has been ruled that the burden of
establishing intoxication and that it caused the injury is on the employer (Ruprecht vs. Red Lumber Co., 2 Cal.
Ind. Acc. Comm. 860; 12 N.C.C.A. 79, cited in The Workmen's Compensation Law by Morabe and Inton, p 115).
Having failed in this case to prove that the deceased died in a state of drunkenness, the petitioner is not excused
from its obligation as employer to pay compensation to the widow and children of the deceased.

Wherefore, the decision appealed from is affirmed at petitioner's costs.

Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Endencia and Barrera, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 176240 October 17, 2008

ROLANDO SASAN, SR., LEONILO DAYDAY, MODESTO AGUIRRE, ALEJANDRO ARDIMER,

ELEUTERIO SACIL, WILFREDO JUEGOS, PETRONILO CARCEDO and CESAR PACIENCIA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION 4TH DIVISION, EQUITABLE-PCI BANK and
HELPMATE, INC., respondents.

DECISION

CHICO-NAZARIO, J.:

Assailed in this Petition for Review under Rule 45 of the Rules of Court are the Decision1 dated 24 April 2006 of
the Court of Appeals in CA-G.R. SP No. 79912, which affirmed the Decision dated 22 January 2003 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-000241-2002 finding that Helpmate, Inc. (HI) is a
legitimate independent job contractor and that the petitioners were not illegally dismissed from work; and the
Resolution2 dated 31 October 2006 of the same court denying the Motion for Reconsideration filed by the
petitioners.

Respondent Equitable-PCI Bank (E-PCIBank),3 a banking entity duly organized and existing under and by virtue
of Philippine laws, entered into a Contract for Services4 with HI, a domestic corporation primarily engaged in the
business of providing janitorial and messengerial services. Pursuant to their contract, HI shall hire and assign
workers to E-PCIBank to perform janitorial/messengerial and maintenance services. The contract was impliedly
renewed year after year. Petitioners Rolando Sasan, Sr.,5 Leonilo Dayday,6 Modesto Aguirre,7 Alejandro
Ardimer,8 Eleuterio Sacil,9 Wilfredo Juegos,10 Petronilo Carcedo,11 and Cesar Peciencia12 were among those
employed and assigned to E-PCIBank at its branch along Gorordo Avenue, Lahug, Cebu City, as well as to its
other branches in the Visayas.13

O 23 July 2001, petitioners filed with the Arbitration Branch of the NLRC in Cebu City separate
complaints14 against E-PCIBank and HI for illegal dismissal, with claims for separation pay, service incentive
leave pay, allowances, damages, attorney’s fees and costs. Their complaints were docketed as NLRC RAB-VII
Case No. 07-1381-2001 and raffled to Labor Arbiter Jose G. Gutierrez (Labor Arbiter Gutierrez) for their proper
disposition. Subsequently, on 22 August 2001, the petitioners15 amended their complaints to include a claim for
13th month-pay.
Several conciliation hearings were scheduled by Labor Arbiter Gutierrez but the parties still failed to arrive at a
mutually beneficial settlement; hence, Labor Arbiter Gutierrez ordered that they submit their respective position
papers.

In their position papers, petitioners claimed that they had become regular employees of E-PCIBank with respect
to the activities for which they were employed, having continuously rendered janitorial and messengerial services
to the bank for more than one year; that E-PCIBank had direct control and supervision over the means and
methods by which they were to perform their jobs; and that their dismissal by HI was null and void because the
latter had no power to do so since they had become regular employees of E-PCIBank.

For its part, E-PCIBank averred that it entered into a Contract for Services with HI, an independent job contractor
which hired and assigned petitioners to the bank to perform janitorial and messengerial services thereat. It was
HI that paid petitioners’ wages, monitored petitioners’ daily time records (DTR) and uniforms, and exercised
direct control and supervision over the petitioners and that therefore HI has every right to terminate their
services legally. E-PCIBank could not be held liable for whatever misdeed HI had committed against its
employees.

HI, on the other hand, asserted that it was an independent job contractor engaged in the business of providing
janitorial and related services to business establishments, and E-PCIBank was one of its clients. Petitioners were
its employees, part of its pool of janitors/messengers assigned to E-PCIBank. The Contract for Services between
HI and E-PCIBank expired on 15 July 2000. E-PCIBank no longer renewed said contract with HI and, instead,
bidded out its janitorial requirements to two other job contractors, Able Services and Puritan. HI designated
petitioners to new work assignments, but the latter refused to comply with the same. Petitioners were not
dismissed by HI, whether actually or constructively, thus, petitioners’ complaints before the NLRC were without
basis.

Labor Arbiter Gutierrez focused on the following issues: (a) whether petitioners were regular employees of HI;
(b) whether petitioners were illegally dismissed from their employment; and (c) whether petitioners were entitled
to their money claims.

On 7 January 2002, on the basis of the parties’ position papers and documentary evidence, Labor Arbiter
Gutierrez rendered a Decision finding that HI was not a legitimate job contractor on the ground that it did not
possess the required substantial capital or investment to actually perform the job, work, or service under its own
account and responsibility as required under the Labor Code.16 HI is therefore a labor-only contractor and the
real employer of petitioners is E-PCIBank which is held liable to petitioners. According to Labor Arbiter Gutierrez:

[T]he undisputed facts show that the [herein petitioners] were made to perform not only as janitors but also as
messengers, drivers and one of them even worked as an electrician. For us, these jobs are not only directly
related to the main business of the principal but are, likewise deemed necessary in the conduct of respondent
Equitable-PCI Bank’s principal business. Thus, based on the above, we so declare that the [petitioners] are
employees of respondent Equitable-PCI Bank. And having worked with respondent Equitable-PCI Bank for more
than one (1) year, they are deemed regular employees. They cannot, therefore, be removed from employment
without cause and without due process, which is wanting in this case. Hence, the severance of their employment
in the guise of termination of contract is illegal.17

In the dispositive portion of his 7 January 2002 Decision, Labor Arbiter Gutierrez awarded to petitioners the
following amounts:

I. – CESAR PACIENCIA

a) Backwages

July 15, 2001 to January 8, 2002

= ₱190.00 per day = ₱25,840.00

= 5 months and 6 days

= 136 days x ₱190.00

b) Separation Pay =₱12,350.00

June 10, 1996 to July 15, 2001
= 5 years
=₱190.00 x 26 days x 5 years / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total ₱43,130.00

II – Dominador Suico, Jr. (did not file Amended

Complaint)

a) Backwages = ₱25,840.00
July 15, 2001 to January 15, 2002
same as Paciencia

b) Separation Pay = ₱6,175.00

Feb. 2, 1999 to July 15, 2001
= ₱190.00 x 26 days x 2.5 years / 2

Total = ₱32,015.00
III – Roland Mosquera (did not file Amended
Complaint)

a) Backwages = ₱25,840.00
(same as Paciencia)

b) Separation Pay = ₱7,410.00

March 8, 1998 to July 15, 2001
= ₱190.00 x 26 days x 3 yrs. / 2

Total = ₱33,250.00

IV – Petronillo Carcedo

a) Backwages = ₱25,840.00
(same as Paciencia)

b) Separation Pay = ₱41,990.00

Sept. 16, 1984 to July 15, 2001
= ₱190.00 x 26 days x 17 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱72,770.00

V – Rolando Sasan, Sr.

a) Backwages = ₱25,840.00
(same as Paciencia)

b) Separation Pay = ₱29,640.00

October 1989 to July 15, 2001
= ₱190.00 x 26 days x 12 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱60,420.00

VI – Leonilo Dayday
a) Backwages = ₱25,840.00
(same as Paciencia)

b) Separation Pay = ₱44,460.00

Feb. 8, 1983 to July 15, 2001
= ₱190.00 x 26 days x 18 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱75,240.00

VII – Eleuterio Sacil

a) Backwages = ₱25,840.00
(same as Paciencia)

b) Separation Pay = ₱22,230.00

June 2, 1992 to July 15, 2001
= ₱190.00 x 26 days x 9 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱53,010.00

VIII – Mario Juntilla

a) Backwages = ₱25,840.00
(same as Pacencia)

b) Separation Pay = ₱34,580.00

October 7, 1987 to July 15, 2001
= ₱190.00 x 26 days x 14 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱65,360.00

IX – Wilfredo Juegos
a) Backwages = ₱25,840.00
(same as Pacencia)

b) Separation Pay = ₱27,170.00

July 23, 1990 to July 15, 2001
= ₱190.00 x 26 days x 11 yrs. / 2

c) 13th Month Pay = ₱4,840.00

= ₱190.00 x 26 days

Total = ₱57,950.00

X – Modesto Aguirre

a) Backwages = ₱25,840.00
(same as Paciencia)

b) Separation Pay

= Jan. 5, 1992 to July 15, 2001 = ₱23,465.00

= ₱190.00 x 26 days x 9.5 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱54,245.00

XI – Alejandro Ardimer

a) Backwages = ₱25,840.00

(same as Paciencia)

b) Separation Pay = ₱28,405.00

= Jan. 20, 1990 to July 15, 2001
= ₱190.00 x 26 days x 11.5 yrs. / 2

c) 13th Month Pay = ₱4,940.00

= ₱190.00 x 26 days

Total = ₱59,185.00

xxxx
WHEREFORE, the foregoing premises considered, judgment is hereby rendered directing the respondents
Equitable PCI Bank and Helpmate, Inc. to pay jointly and solidarily the complainants as follows:

1. Cesar Paciencia - P 43,130.00

2. Dominador Suico, Jr. - 32,015.00

3. Roland Mosquera - 33,250.00

4. Petronilo Carceda - 72,770.00

5. Roland Sasan, Sr. - 60,420.00

6. Leonilo Dayday - 75,240.00

7. Eleuterio Sacil - 53,010.00

8. Mario Juntilla - 65,360.00

9. Wilfredo Juegos - 57,950.00

10. Modesto Aguirre - 54,245.00

11. Alejandro Ardimer - 59,185.00

TOTAL - ₱606,575.0018

Aggrieved by the decision of Labor Arbiter Gutierrez, respondents E-PCIBank and HI appealed the same to the
NLRC, 4th Division, stationed in Cebu City. Their appeals were docketed as NLRC Case No. V-000241-2002. In
support of its allegation that it was a legitimate job contractor, HI submitted before the NLRC several documents
which it did not present before Labor Arbiter Gutierrez. These are:

1. Certificate of Filing of Certificate of Increase of Capital Stock, Certificate of Filing Amended Articles of
Incorporation, and General Information Sheet Stock Corporation of HI showing therein that it increased its
authorized capital stock from ₱1,500,000.00 to ₱20,000,000.00 on 12 March 1999 with the Securities and
Exchange Commission;

2. Audited Financial Statement of HI showing therein that it has Total Assets of ₱20,939,935.72 as of 31
December 2000;
3. Transfer Certificate of Title No. 110173 and Tax Declaration No. GR2K-09-063-00582 registered under the
name of HI showing that it has a parcel of land with Market Value of ₱1,168,860.00 located along Rizal Avenue
(now Bacalso Avenue), Cebu City, and

4. Tax Declaration No. GR2K-09-063-00583 registered under the name of HI showing that it has a commercial
building constructed on the preceding lot located along Bacalso Avenue, Cebu City with market value of
₱2,515,170.00.19

The NLRC promulgated its Decision on 22 January 2003 modifying the ruling of Labor Arbiter Gutierrez. The
NLRC took into consideration the documentary evidence presented by HI for the first time on appeal and, on
the basis thereof, declared HI as a highly capitalized venture with sufficient capitalization, which cannot be
considered engaged in "labor-only contracting."

On the charge of illegal dismissal, the NLRC ruled that:

The charge of illegal dismissal was prematurely filed. The record shows that barely eight (8) days from 15 July
2001 when the complainants were placed on a temporary "off-detail," they filed their complaints on 23 July 2001
and amended their complaints on 22 August 2001 against the respondents on the presumption that their services
were already terminated. Temporary "off-detail" is not equivalent to dismissal. x x x.20

The NLRC deleted Labor Arbiter Gutierrez’s award of backwages and separation pay, but affirmed his award for
13th month pay and attorney’s fees equivalent to ten percent (10%) of the 13th month pay, to the
petitioners.21 Thus, the NLRC decreed in its 22 January 2003 Decision, the payment of the following reduced
amounts to petitioners:

WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 7 January 2002 is
MODIFIED, to wit:

Ordering respondents Helpmate, Inc. and Equitable PCI Bank to jointly and severally22 pay the complainants of
their 13th month pay and attorney’s fees in the aggregate amount of Forty-Three Thousand Four Hundred
Seventy-Two and 00/100 (₱43,472.00), broken down as follows:

1. Aguirre, Modesto - P 5,434.00

2. Ardimer, Alejandro - 5,434.00

3. Carcedo, Petronilo - 5,434.00

4. Dayday, Leonilo - 5,434.00

 5. Juegos, Wilfredo - 5,434.00

6. Juntilla, Mario - 5,434.00

7. Paciencia, Cesar - 5,434.00

8. Sacil, Eleuterio - 5,434.00

TOTAL ₱43,472.0023

Petitioners’ Motion for Reconsideration was denied by the NLRC in its Resolution dated 1 July 2003.24

Distressed by the decision of the NLRC, petitioners sought recourse with the Court of Appeals by filing a Petition
for Certiorari25 under Rule 65 of the 1997 Rules of Civil Procedure docketed as CA-G.R. SP No. 79912.

In its Decision dated 24 April 2006, the Court of Appeals affirmed the findings of the NLRC that HI was a
legitimate job contractor and that it did not illegally dismiss petitioners:

As to the question of whether or not, as a legitimate independent job contractor, respondent HI illegally
dismissed the petitioners. We rule in the negative.

It is undisputed that the contract between respondent HI and its client E-PCIBank expired on July 15, 2000. The
record shows that after said expiration, respondent HI offered the petitioners new work assignments to various
establishments which are HI’s clients. The petitioners, therefore, were not even placed on "floating status." They
simply refused, without justifiable reason, to assume their new work assignments which refusal was tantamount
to abandonment. There being no illegal dismissal, petitioners are not entitled to backwages or separation pay.26

The fallo of the 24 April 2006 Decision of the appellate court reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DENYING the petition filed
in this case and AFFIRMING the decision of the NLRC, Fourth Division, in NLRC Case No. V-000145-2003
promulgated on June 22, 2003.27

Petitioners now come before us via the instant Petition raising the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ACTED IN EXCESS OF THEIR JURISDICTION AND/OR
COMMITTED GRAVE ABUSE OF DISCRETION IN UPHOLDING THE NLRC 4TH DIVISION’S DECISION AND
GRAVELY ERRED IN:

I. ACCEPTING AND APPRECIATING THE PIECES OF EVIDENCE SUBMITTED BY RESPONDENTS DURING APPEAL,
ALL EXISTING DURING THE TIME THE NLRC RAB 7’S TRIAL, CONTRARY TO THIS HONORABLE COURT’S
PREVIOUS ESTABLISHED DECISIONS.
II. REVERSING, WITHOUT ANY LEGAL BASIS, THE FACTUAL FINDING OF NLRC RAB 7 THAT THE RESPONDENT
HI WAS LABOR ONLY CONTRACTOR.

III. RULING, WITHOUT ANY LEGAL BASIS, THAT THE ILLEGAL DISMISSAL COMPLAINTS WERE PREMATURELY
FILED.28

Before proceeding to the substantive issues, we first address the procedural issues raised by petitioners.

Petitioners object to the acceptance and consideration by the NLRC of the evidence presented by HI for the first
time on appeal. This is not a novel procedural issue, however, and our jurisprudence is already replete with
cases29 allowing the NLRC to admit evidence, not presented before the Labor Arbiter, and submitted to the NLRC
for the first time on appeal. Technical rules of evidence are not binding in labor cases. Labor officials should use
every reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process.30

The submission of additional evidence before the NLRC is not prohibited by its New Rules of Procedure. After
all, rules of evidence prevailing in courts of law or equity are not controlling in labor cases. The NLRC and labor
arbiters are directed to use every and all reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law and procedure all in the interest of substantial justice. In
keeping with this directive, it has been held that the NLRC may consider evidence, such as documents and
affidavits, submitted by the parties for the first time on appeal. The submission of additional evidence on appeal
does not prejudice the other party for the latter could submit counter-evidence.31

In Clarion Printing House, Inc. v. National Labor Relations Commission,32 we again emphasized that:

[T]he NLRC is not precluded from receiving evidence, even for the first time on appeal, because technical rules
of procedure are not binding in labor cases.

The settled rule is that the NLRC is not precluded from receiving evidence on appeal as technical rules of evidence
are not binding in labor cases. In fact, labor officials are mandated by the Labor Code to use every and all
reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities
of law or procedure, all in the interest of due process. Thus, in Lawin Security Services v. NLRC, and Bristol
Laboratories Employees’ Association-DFA v. NLRC, we held that even if the evidence was not submitted to the
labor arbiter, the fact that it was duly introduced on appeal to the NLRC is enough basis for the latter to be more
judicious in admitting the same, instead of falling back on the mere technicality that said evidence can no longer
be considered on appeal. Certainly, the first course of action would be more consistent with equity and the basic
notions of fairness.

For the same reasons, we cannot find merit in petitioners’ protestations against the documentary evidence
submitted by HI because they were mere photocopies. Evidently, petitioners are invoking the best evidence rule,
espoused in Section 3, Rule130 of the Rules of Court. It provides that:
Section 3. – Original document must be produced; exceptions. – When the subject of inquiry is the contents of
a document, no evidence shall be admissible other than the original document itself x x x.

The above provision explicitly mandates that when the subject of inquiry is the contents of a document, no
evidence shall be admissible other than the original document itself. Notably, certified true copies of these
documents, acceptable under the Rules of Court33 were furnished to the petitioners. Even assuming that
petitioners were given mere photocopies, again, we stress that proceedings before the NLRC are not covered
by the technical rules of evidence and procedure as observed in the regular courts. Technical rules of evidence
do not apply if the decision to grant the petition proceeds from an examination of its sufficiency as well as a
careful look into the arguments contained in position papers and other documents.34

Petitioners had more than adequate opportunity when they filed their motion for reconsideration before the
NLRC, their Petition to the Court of Appeals and even to this Court, to refute or present their counter-evidence
to the documentary evidence presented by HI. Having failed in this respect, petitioners cannot now be heard to
complain about these documentary evidences presented by HI upon which the NLRC and the Court of Appeals
based its finding that HI is a legitimate job contractor.

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, a
fair and reasonable opportunity to explain one's side. It is also an opportunity to seek a reconsideration of the
action or ruling complained of. It is not the denial of the right to be heard but denial of the opportunity to be
heard that constitutes violation of due process of law. Petitioners herein were afforded every opportunity to be
heard and to seek reconsideration of the adverse judgment against them. They had every opportunity to
strengthen their positions by presenting their own substantial evidence to controvert those submitted by E-
PCIBank and HI before the NLRC, and even before the Court of Appeals. It cannot win its case by merely raising
unsubstantiated doubt or relying on the weakness of the adverse parties’ evidence.

We now proceed to the resolution of the substantive issues submitted by petitioners for our consideration,
particularly, whether HI is a labor-only contactor and E-PCIBank should be deemed petitioners’ principal
employer; and whether petitioners were illegally dismissed from their employment.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or
farm out to a contractor or subcontractor the performance or completion of a specific job, work or service within
a definite or predetermined period, regardless of whether such job, work or service is to be performed or
completed within or outside the premises of the principal.35 A person is considered engaged in legitimate job
contracting or subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform
the job, work or service on its own account and under its own responsibility according to its own manner and
method, and free from the control and direction of the principal in all matters connected with the performance
of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.36

In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a principal.37 In labor-only
contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job,
work or service under its own account and responsibility; and

(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal.38

In distinguishing between permissible job contracting and prohibited labor-only contracting,39 we elucidated
in Vinoya v. National Labor Relations Commission,40 that it is not enough to show substantial capitalization or
investment in the form of tools, equipment, etc. Other facts that may be considered include the following:
whether or not the contractor is carrying on an independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the right to assign the performance of specified pieces
of work; the control and supervision of the work to another; the employer’s power with respect to the hiring,
firing and payment of the contractor’s workers; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode and manner or terms of payment.41 Simply put, the totality of
the facts and the surrounding circumstances of the case are to be considered.42 Each case must be determined
by its own facts and all the features of the relationship are to be considered.43

In the case at bar, we find substantial evidence to support the finding of the NLRC, affirmed by the Court of
Appeals, that HI is a legitimate job contractor.

We take note that HI has been issued by the Department of Labor and Employment (DOLE) Certificate of
Registration44 Numbered VII-859-1297-048. The said certificate states among other things:

"CERTIFICATE OF REGISTRATION

Numbered VII-859-1297-048

is issued to

HELPMATE, INCORPORATED

330 N. Bacalso Avenue, Cebu City

for having complied with the requirements as provided for under the Labor Code, as amended, and its
Implementing Rules and having paid the registration fee in the amount of ONE HUNDRED PESOS (P100.00) per
Official Receipt Number 9042769, dated October 16, 1997.

In witness whereof, and by authority vested in me by the Labor Code, as amended, and its Implementing Rules
specifically Department Order No. 10 series of 1997, I have hereunto set my hand and affixed the Official on
this 23rd day of December 1997."45

Having been issued by a public officer, this certification carries with it the presumption that it was issued in the
regular performance of official duty.46 In the absence of proof, petitioner’s bare assertion cannot prevail over
this presumption. Moreover, the DOLE being the agency primarily responsible for regulating the business of
independent job contractors, we can presume in the absence of evidence to the contrary that it thoroughly
evaluated the requirements submitted by HI as a precondition to the issuance of the Cerificate of Registration.

The evidence on record also shows that HI is carrying on a distinct and independent business from E-PCIBank.
The employees of HI are assigned to clients to perform janitorial and messengerial services, clearly
distinguishable from the banking services in which E-PCIBank is engaged.

Despite the afore-mentioned compliance by HI with the requisites for permissible job contracting, Labor Arbiter
Gutierrez still declared that HI was engaged in prohibited labor-only contracting because it did not possess
substantial capital or investment to actually perform the job, work or service under its own account or
responsibility. Both the NLRC and the Court of Appeals ruled to the contrary, and we agree.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipments, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.47 An
independent contractor must have either substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others. The law does not require both substantial capital and investment in
the form of tools, equipment, machineries, etc.48 It is enough that it has substantial capital. In the case of HI, it
has proven both.

We have expostulated that once it is established that an entity such as in this case, HI has substantial capital, it
was no longer necessary to adduce further evidence to prove that it does not fall within the purview of "labor-
only" contracting.49 There is even no need for HI to refute the contention of petitioners that some of the activities
they performed such as those of messengerial services are directly related to the principal business of E-
PCIBank.

In any event, we have earlier declared that while these services rendered by the petitioners as janitors,
messengers and drivers are considered directly related to the principal business of a bank, in this case E-PCIBank,
nevertheless, they are not necessary in the conduct of its (E-PCIBANK’s) principal business.50
HI has substantial capital in the amount of ₱20,939,935.72. It has its own building where it holds office and it
has been engaged in business for more than a decade now.51 As observed by the Court of Appeals, surely, such
a well-established business entity cannot be considered a labor-only contractor.

Etched in an unending stream of cases are four standards in determining the existence of an employer-employee
relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the mode of
payment of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of
control of the putative employee’s conduct. Most determinative among these factors is the so-called "control
test."52

The presence of the first requisite for the existence of an employer-employee relationship to wit, the selection
and engagement of the employee is shown by the fact that it was HI which selected and engaged the services
of petitioners as its employees. This is fortified by the provision in the contract of services between HI and E-
PCIBank which states:

Selection, Engagement, Discharge. [HI] shall have exclusive discretion in the selection, engagement,
investigation, discipline and discharge of its employees.53

On the second requisite regarding the payment of wages, it was HI who paid petitioners their wages and who
provided their daily time records and uniforms and other materials necessary for the work they performed.
Therefore, it is HI who is responsible for petitioner’s claims for wages and other employee’s benefits. Precisely,
the contract of services between HI and E-PCIBank reveals the following:

Indemnity for Salaries and Benefits, etc. [HI] shall be responsible for the salaries, allowances, overtime and
holiday pay, and other benefits of its personnel including withholding taxes.54

As to the third requisite on the power to control the employee’s conduct, and the fourth requisite regarding the
power of dismissal, again E-PCIBank did not have the power to control petitioners with respect to the means
and methods by which their work was to be accomplished. It likewise had no power of dismissal over the
petitioners. All that E-PCIBank could do was to report to HI any untoward act, negligence, misconduct or
malfeasance of any employee assigned to the premises. The contract of services between E-PCIBank and HI is
noteworthy. It states:

[HI] shall have the entire charge, control and supervision over all its employees who may be fielded to [E-
PCIBank]. For this purpose, [HI] shall assign a regular supervisor of its employees who may be fielded to the
Bank and which regular supervisor shall exclusively supervise and control the activities and functions defined in
Section 1 hereof. x x x.55

All these circumstances establish that HI undertook said contract on its account, under its own responsibility,
according to its own manner and method, and free from the control and direction of E-PCIBank. Where the
control of the principal is limited only to the result of the work, independent job contracting exists. The janitorial
service agreement between E-PCIBank and HI is definitely a case of permissible job contracting.

Considering the foregoing, plus taking judicial notice of the general practice in private, as well as in government
institutions and industries, of hiring an independent contractor to perform special services,56 ranging from
janitorial, security and even technical services, we can only conclude that HI is a legitimate job contractor. As
such legitimate job contractor, the law creates an employer-employee relationship between HI and
petitioners57 which renders HI liable for the latter’s claims.

In view of the preceding conclusions, petitioners will never become regular employees of E-PCIBank regardless
of how long they were working for the latter.58

We further rule that petitioners were not illegally dismissed by HI. Upon the termination of the Contract of
Service between HI and E-PCIBank, petitioners cannot insist to continue to work for the latter. Their pull-out
from E-PCIBank did not constitute illegal dismissal since, first, petitioners were not employees of E-PCIBank;
and second, they were pulled out from said assignment due to the non-renewal of the Contract of Service
between HI and E-PCIBank. At the time they filed their complaints with the Labor Arbiter, petitioners were not
even dismissed by HI; they were only "off-detail" pending their re-assignment by HI to another client. And when
they were actually given new assignments by HI with other clients,59 petitioners even refused the same. As the
NLRC pronounced, petitioners’ complaint for illegal dismissal is apparently premature.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The Decision dated 24 April 2006
and Resolution dated 31 October 2006 of the Court of Appeals are AFFIRMED. Costs against petitioners.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ADOLFO S. AZCUNA *

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice
 FIRST DIVISION

G.R. No. 126586 February 2, 2000

ALEXANDER VINOYA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD CORPORATION AND/OR RICKY SEE
(PRESIDENT), respondents.

KAPUNAN, J.:

This petition for certiorari under Rule 65 seeks to annul and set aside the decision,1 promulgated on 21 June
1996, of the National Labor Relations Commission ("NLRC") which reversed the decision2 of the, Labor Arbiter,
rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to reinstate Alexander Vinoya to his former
position and pay him backwages.

Private respondent Regent Food Corporation is a domestic corporation principally engaged in the manufacture
and sale of various food products. Private respondent Ricky See, on the other hand, is the president of RFC and
is being sued in that capacity.

Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his services were
terminated on 25 November 1991.

The parties presented conflicting versions of facts.

Petitioner Alexander Vinoya claims that he applied and was accepted by RFC as sales representative on 26 May
1990. On the same date, a company identification card3 was issued to him by RFC. Petitioner alleges that he
reported daily to the office of RFC, in Pasig City, to take the latter's van for the delivery of its products. According
to petitioner, during his employ, he was assigned to various supermarkets and grocery stores where he booked
sales orders and collected payments for RFC. For this task, he was required by RFC to put up a monthly bond
of P200.00 as security deposit to guarantee the performance of his obligation as sales representative. Petitioner
contends that he was under the direct control and supervision of Mr. Dante So and Mr. Sadi Lim, plant manager
and senior salesman of RFC, respectively. He avers that on 1 July 1991, he was transferred by RFC to Peninsula
Manpower Company, Inc. ("PMCI"), an agency which provides RFC with additional contractual workers pursuant
to a contract for the supply of manpower services (hereinafter referred to as the "Contract of Service").4 After
his transfer to PMCI, petitioner was allegedly reassigned to RFC as sales representative. Subsequently, on 25
November 1991, he was informed by Ms. Susan Chua, personnel manager of RFC, that his services were
terminated and he was asked to surrender his ID card. Petitioner was told that his dismissal was due to the
expiration of the Contract of Service between RFC and PMCI. Petitioner claims that he was dismissed from
employment despite the absence of any notice or investigation. Consequently, on 3 December 1991, petitioner
filed a case against RFC before the Labor Arbiter for illegal dismissal and non-payment of 13th month pay.5
Private respondent Regent Food Corporation, on the other hand, maintains that no employer-employee
relationship existed between petitioner and itself. It insists that petitioner is actually an employee of PMCI,
allegedly an independent contractor, which had a Contract of Service6 with RFC. To prove this fact, RFC presents
an Employment Contract7 signed by petitioner on 1 July 1991, wherein PMCI appears as his employer. RFC
denies that petitioner was ever employed by it prior to 1 July 1991. It avers that petitioner was issued an ID
card so that its clients and customers would recognize him as a duly authorized representative of RFC. With
regard to the P200.00 pesos monthly bond posted by petitioner, RFC asserts that it was required in order to
guarantee the turnover of his collection since he handled funds of RFC. While RFC admits that it had control and
supervision over petitioner, it argues that such was exercised in coordination with PMCI. Finally, RFC contends
that the termination of its relationship with petitioner was brought about by the expiration of the Contract of
Service between itself and PMCI and not because petitioner was dismissed from employment.

On 3 December 1991, when petitioner filed a complaint for illegal dismissal before the Labor Arbiter, PMCI was
initially impleaded as one of the respondents. However, petitioner thereafter withdrew his charge against PMCI
and pursued his claim solely against RFC. Subsequently, RFC filed a third party complaint against PMCI. After
considering both versions of the parties, the Labor Arbiter rendered a decision,8 dated 15 June 1994, in favor of
petitioner. The Labor Arbiter concluded that RFC was the true employer of petitioner for the following reasons:
(1) Petitioner was originally with RFC and was merely transferred to PMCI to be deployed as an agency worker
and then subsequently reassigned to RFC as sales representative; (2) RFC had direct control and supervision
over petitioner; (3) RFC actually paid for the wages of petitioner although coursed through PMCI; and, (4)
Petitioner was terminated per instruction of RFC. Thus, the Labor Arbiter decreed, as follows:

ACCORDINGLY, premises considered respondent RFC is hereby declared guilty of illegal dismissal and ordered
to immediately reinstate complainant to his former position without loss of seniority rights and other benefits
and pay him backwages in the amount of P103,974.00.

The claim for 13th month pay is hereby DENIED for lack of merit.

This case, insofar as respondent PMCI [is concerned] is DISMISSED, for lack of merit.

SO ORDERED.9

RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision,10 dated 21 June 1996, the
NLRC reversed the findings of the Labor Arbiter. The NLRC opined that PMCI is an independent contractor
because it has substantial capital and, as such, is the true employer of petitioner. The NLRC, thus, held PMCI
liable for the dismissal of petitioner. The dispositive portion of the NLRC decision states:

WHEREFORE, premises considered, the appealed decision is modified as follows:

1. Peninsula Manpower Company Inc. is declared as employer of the complainant;

2. Peninsula is ordered to pay complainant his separation pay of P3,354.00 and his proportionate 13th month
pay for 1991 in the amount of P2,795.00 or the total amount of P6,149.00.

SO ORDERED.11

Separate motions for reconsideration of the NLRC decision were filed by petitioner and PMCI. In a
resolution,12 dated 20 August 1996, the NLRC denied both motions. However, it was only petitioner who elevated
the case before this Court.

In his petition for certiorari, petitioner submits that respondent NLRC committed grave abuse of discretion in
reversing the decision of the Labor Arbiter, and asks for the reinstatement of the latter's decision.

Principally, this petition presents the following issues:

1. Whether petitioner was an employee of RFC or PMCI.

2. Whether petitioner was lawfully dismissed.

The resolution of the first issue initially boils down to a determination of the true status of PMCI, whether it is a
labor-only contractor or an independent contractor.

In the case at bar, RFC alleges that PMCI is an independent contractor on the sole ground that the latter is a
highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles of Incorporation and
the Treasurer's Affidavit13 submitted by PMCI to the Securities and Exchange Commission showing that it has an
authorized capital stock of One Million Pesos (P1,000,000.00), of which Three Hundred Thousand Pesos
(P300,000.00) is subscribed and Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC, PMCI
is a duly organized corporation engaged in the business of creating and hiring a pool of temporary personnel
and, thereafter, assigning them to its clients from time to time for such duration as said clients may require. RFC
further contends that PMCI has a separate office, permit and license and its own organization.

Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal.14 In labor-only contracting,
the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job,
work or service under its own account and responsibility;

(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal.15

On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal
agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific
job, work or service within a definite or predetermined period, regardless of whether such job, work or service
is to be performed or completed within or outside the premises of the principal.16 A person is considered engaged
in legitimate job contracting or subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform
the job, work or service on its own account and under its own responsibility according to its own manner and
method, and free from the control and direction of the principal in all matters connected with the performance
of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.17

Previously, in the case of Neri vs. NLRC,18 we held that in order to be considered as a job contractor it is enough
that a contractor has substantial capital. In other words, once substantial capital established it is no longer
necessary for the contractor to show evidence that it has investment in the form of tools, equipment,
machineries, work premises, among others. The rational for this is that Article 106 of the Labor Code does not
require that the contractor possess both substantial capital and investment in the form of tools, equipment,
machineries, work premises, among others.19 The decision of the Court in Neri, thus, states:

Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work
premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and
the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is
therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.20

However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the Court
considered not only the fact that it had substantial capitalization. The Court noted that BCC carried on an
independent business and undertook the performance of its contract according to its own manner and method,
free from the control and supervision of its principal in all matters except as to the results thereof.21 The Court
likewise mentioned that the employees of BCC were engaged to perform specific special services for its
principal.22 Thus, the Court ruled that BCC was an independent contractor.

The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox
Corporation vs. NLRC.23 In the said case, petitioner Fuji Xerox implored the Court to apply the Neri doctrine to
its alleged job-contractor, Skillpower, Inc., and declare the same as an independent contractor. Fuji Xerox alleged
that Skillpower, Inc. was a highly capitalized venture registered with the Securities and Exchange Commission,
the Department of Labor and Employment, and the Social Security System with assets exceeding P5,000,000.00
possessing at least 29 typewriters, office equipment and service vehicles, and its own pool of employees with
25 clerks assigned to its clients on a temporary basis.24 Despite the evidence presented by Fuji Xerox the Court
refused to apply the Neri case and explained:

Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care Corporation (BCC) was an
independent contractor on the basis of finding that it had substantial capital, although there was no evidence
that it had investments in the form of tools, equipment, machineries and work premises. But the Court in that
case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special
services (radio/telex operator and janitor) to the employer; that in another case, the Court had already found
that BCC was an independent contractor; that BCC retained control over the employees and the employer was
actually just concerned with the end-result; that BCC had the power to reassign the employees and their
deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services
it rendered. These features of that case make it distinguishable from the present one.25

Not having shown the above circumstances present in Neri, the Court declared Skillpower, Inc. to be engaged
in labor-only contracting and was considered as a mere agent of the employer.

From the two aforementioned decisions, it may be inferred that it is not enough to show substantial capitalization
or investment in the form of tools, equipment, machineries and work premises, among others, to be considered
as an independent contractor. In fact, jurisprudential holdings are to the effect that in determining the existence
of an independent contractor relationship, several factors might be considered such as, but not necessarily
confined to, whether the contractor is carrying on an independent business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the right to assign the performance of specified
pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring,
firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises,
tools, appliances, materials and labor; and the mode, manner and terms of payment.26

Given the above standards and the factual milieu of the case, the Court has to agree with the conclusion of the
Labor Arbiter that PMCI is engaged in labor-only contracting.

First of all, PMCI does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, among others, to qualify as an independent contractor. While it has an authorized
capital stock of P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind, cannot be considered as
substantial capitalization. In the case of Neri, which was promulgated in 1993, BCC had a capital stock of
P1,000,000.00 which was fully subscribed and paid-for. Moreover, when the Neri case was decided in 1993, the
rate of exchange between the dollar and the peso was only P27.30 to $127 while presently it is at P40.390 to
$1.28 The Court takes judicial notice of the fact that in 1993, the economic situation in the country was not as
adverse as the present, as shown by the devaluation of our peso. With the current economic atmosphere in the
country, the paid-in capitalization of PMCI amounting to P75,000,00 cannot be considered as substantial capital
and, as such, PMCI cannot qualify as an independent contractor.
Second, PMCI did not carry on an independent business nor did it undertake the performance of its contract
according to its own manner and method, free from the control and supervision of its principal, RFC. The
evidence at hand shows that the workers assigned by PMCI to RFC were under the control and supervision of
the latter. The Contract of Service itself provides that RFC can require the workers assigned by PMCI to render
services even beyond the regular eight hour working day when deemed necessary.29 Furthermore, RFC
undertook to assist PMCI in making sure that the daily time records of its alleged employees faithfully reflect the
actual working hours.30 With regard to petitioner, RFC admitted that it exercised control and supervision over
him.31 These are telltale indications that PMCI was not left alone to supervise and control its alleged employees.
Consequently, it can be, concluded that PMCI was not an independent contractor since it did not carry a distinct
business free from the control and supervision of RFC.

Third, PMCI was not engaged to perform a specific and special job or service, which is one of the strong indicators
that an entity is an independent contractor as explained by the Court in the cases of Neri and Fuji. As stated in
the Contract of Service, the sole undertaking of PMCI was to provide RFC with a temporary workforce able to
carry out whatever service may be required by it.32 Such venture was complied with by PMCI when the required
personnel were actually assigned to RFC. Apart from that, no other particular job, work or service was required
from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency for RFC. Since
the undertaking of PMCI did not involve the performance of a specific job, but rather the supply of manpower
only, PMCI clearly conducted itself as labor-only contractor.

Lastly, in labor-only contracting, the employees recruited, supplied or placed by the contractor perform activities
which are directly related to the main business of its principal. In this case, the work of petitioner as sales
representative is directly related to the business of RFC. Being in the business of food manufacturing and sales,
it is necessary for RFC to hire a sales representative like petitioner to take charge of booking its sales orders and
collecting payments for such. Thus, the work of petitioner as sales representative in RFC can only be categorized
as clearly related to, and in the pursuit of the latter's business. Logically, when petitioner was assigned by PMCI
to RFC, PMCI acted merely as a labor-only contractor.

Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such, cannot be considered
as the employer of petitioner.

However, even granting that PMCI is an independent contractor, as RFC adamantly suggests, still, a finding of
the same will not save the day for RFC. A perusal of the Contract of Service entered into between RFC and PMCI
reveals that petitioner is actually not included in the enumeration of the workers to be assigned to RFC. The
following are the workers enumerated in the contract:

1. Merchandiser

2. Promo Girl
3. Factory Worker

4. Driver33

Obviously, the above enumeration does not include the position of petitioner as sales representative. This only
shows that petitioner was never intended to be a part of those to be contracted out. However, RFC insists that
despite the absence of his position in the enumeration, petitioner is deemed included because this has been
agreed upon between itself and PMCI. Such contention deserves scant consideration. Had it really been the
intention of both parties to include the position of petitioner they should have clearly indicated the same in the
contract. However, the contract is totally silent on this point which can only mean that petitioner was never
really intended to be covered by it.

Even if we use the "four-fold test" to ascertain whether RFC is the true employer of petitioner that same result
would be achieved. In determining the existence of employer-employee relationship the following elements of
the "four-fold test" are generally considered, namely: (1) the selection and engagement of the employee or the
power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the
employee.34 Of these four, the "control test" is the most important.35 A careful study of the evidence at hand
shows that RFC possesses the earmarks of being the employer of petitioner.

With regard to the first element, the power to hire, RFC denies any involvement in the recruitment and selection
of petitioner and asserts that petitioner did not present any proof that he was actually hired and employed by
RFC.

It should be pointed out that no particular form of proof is required to prove the existence of an employer-
employee relationship.36 Any competent and relevant evidence may show the relationship.37 If only documentary
evidence would be required to demonstrate that relationship, no scheming employer would ever be brought
before bar of justice.38 In the case at bar, petitioner presented the identification card issue to him on 26 May
1990 by RFC as proof that it was the latter who engaged his services. To our mind, the ID card is enough proof
that petitioner was previously hired by RFC prior to his transfer as agency worker to PMCI. It must be noted that
the Employment Contract between petitioner and PMCI was dated 1 July 1991. On the other hand, the ID card
issued by RFC to petitioner was dated 26 May 1990, or more than one year before the Employment Contract
was signed by petitioner in favor of PMCI. It makes one wonder why, if petitioner was indeed recruited by PMCI
as its own employee on 1 July 1991, how come he had already been issued an ID card by RFC a year earlier?
While the Employment Contract indicates the word "renewal," presumably an attempt to show that petitioner
had previously signed a similar contract with PMCI, no evidence of a prior contract entered into petitioner and
PMCI was ever presented by RFC. In fact, despite the demand made by the counsel of petitioner for production
of the contract which purportedly shows that prior to 1 July 1991 petitioner was already connected with PMCI,
RFC never made a move to furnish the counsel of petitioner a copy of the alleged original Employment Contract.
The only logical conclusion which may be derived from such inaction is that there was no such contract end that
the only Employment Contract entered into between PMCI and petitioner was the 1 July 1991 contract and no
other. Since, as shown by the ID card, petitioner was already with RFC on 26 May 1990, prior to the time any
Employment Contract was agreed upon between PMCI and petitioner, it follows that it was RFC who actually
hired and engaged petitioner to be its employee.

With respect to the payment of wages, RFC disputes the argument of petitioner that it paid his wages on the
ground that petitioner did not submit any evidence to prove that his salary was paid by it, or that he was issued
payslip by the company. On the contrary, RFC asserts that the invoices39 presented by it, show that it was PMCI
who paid petitioner his wages through its regular monthly billings charged to RFC.

The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the Labor
Code, do not issue payslips directly to their employees.40 Under the current practice, a third person, usually the
purported contractor (service or manpower placement agency), assumes the act of paying the wage.41 For this
reason, the lowly worker is unable to show proof that it was directly paid by the true employer. Nevertheless,
for the workers, it is enough that they actually receive their pay, oblivious of the need for payslips, unaware of
its legal implications.42 Applying this principle to the case at bar, even though the wages were coursed through
PMCI, we note that the funds actually came from the pockets of RFC. Thus, in the end, RFC is still the one who
paid the wages of petitioner albeit indirectly.

As to the third element, the power to dismiss, RFC avers that it was PMCI who terminated the employment of
petitioner. The facts on record, however, disprove the allegation of RFC. First of all, the Contract of Service gave
RFC the right to terminate the workers assigned to it by PMCI without the latter's approval. Quoted hereunder
is the portion of the contract stating the power of RFC to dismiss, to wit:

7. The First party ("RFC") reserves the right to terminate the services of any worker found to be unsatisfactory
without the prior approval of the second party ("PMCI").43

In furtherance of the above provision, RFC requested PMCI to terminate petitioner from his employment with
the company. In response to the request of RFC, PMCI terminated petitioner from service. As found by the Labor
Arbiter, to which we agree, the dismissal of petitioner was indeed made under the instruction of RFC to PMCI.

The fourth and most important requirement in ascertaining the presence of employer-employee relationship is
the power of control. The power of control refers to the authority of the employer to control the employee not
only with regard to the result of work to be done but also to the means and methods by which the work is to be
accomplished.44 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, and not necessarily to the actual exercise of the right.45 In the case at
bar, we need not belabor ourselves in discussing whether the power of control exists. RFC already admitted that
it exercised control and supervision over petitioner.46 RFC, however, raises the defense that the power of control
was jointly exercised with PMCI. The Labor Arbiter, on the other hand, found that petitioner was under the direct
control and supervision of the personnel of RFC and not PMCI. We are inclined to believe the findings of the
Labor Arbiter which is supported not only by the admission of RFC but also by the evidence on record. Besides,
to our mind, the admission of RFC that it exercised control and supervision over petitioner, the same being a
declaration against interest, is sufficient enough to prove that the power of control truly exists.

We, therefore, hold that an employer-employee relationship exists between petitioner and RFC.

Having determined the real employer of petitioner, we now proceed to ascertain the legality of his dismissal
from employment.

Since petitioner, due to his length of service, already attained the status of a regular employee,47 he is entitled
to the security of tenure provided under the labor laws. Hence, he may only be validly terminated from service
upon compliance with the legal requisites for dismissal. Under the Labor Code, the requirements for the lawful
dismissal of an employee are two-fold, the substantive and the procedural aspects. Not only must the dismissal
be for a valid or authorized cause,48 the rudimentary requirements of due process — notice and hearing49 —
must, likewise, be observed before an employee may be dismissed. Without the concurrence of the two, the
termination would, in the eyes of the law, be illegal.50

As the employer, RFC has the burden of proving that the dismissal of petitioner was for a cause allowed under
the law and that petitioner was afforded procedural due process. Sad to say, RFC failed to discharge this burden.
Indeed, RFC never pointed to any valid or authorized cause under the Labor Code which allowed it to terminate
the services of petitioner. Its lone allegation that the dismissal was due to the expiration or completion of contract
is not even one of the grounds for termination allowed by law. Neither did RFC show that petitioner was given
ample opportunity to contest the legality of his dismissal. In fact, no notice of such impending termination was
ever given him. Petitioner was, thus, surprised that he was already terminated from employment without any
inkling as to how and why it came about. Petitioner was definitely denied due process. Having failed to establish
compliance with the requirements on termination of employment under the Labor Code, the dismissal of
petitioner is tainted with illegality.

An employee who has been illegally dismissed is entitled to reinstatement to his former position without loss of
seniority rights and to payment of full backwages corresponding to the period from his illegal dismissal up to
actual reinstatement.51 Petitioner is entitled to no less.

WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21 June 1996, as well as its resolution,
promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The decision of the Labor Arbiter, rendered on
15 June 1994, is hereby REINSTATED and AFFIRMED.1âwphi1.nêt

SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.