No Eer Labor i Cases 2a

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L A B O R I C A S E S W I T H N O N - EX I S T E N T E M P L O Y E R - E M P L O Y E E R E L A T I O N S H I P

TABLE OF CONTENTS

Insular Life vs NLRC ............................................................................................................................................................... 2

Encyclopaedia Britannica vs NLRC .................................................................................................................................. 7

Abante vs Lamadrid Bearing & Parts ............................................................................................................................ 12

Filipinas Broadcasting Network vs NLRC .................................................................................................................... 21

Ushio Marketing vs NLRC ................................................................................................................................................... 31

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INSULAR LIFE VS NLRC

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered

into a contract 1 by which:

1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company;

2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ...

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Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive

jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.

Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the

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latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10

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

has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the

relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors,

instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their

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duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee.

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

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

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits.

WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

Footnotes

1 Rollo, pp. 14-15.

2 Rollo, p. 16.

3 Rollo, p. 17.

4 Docketed as RAB Case No. VI-0010-83.

5 Rollo, p. 17.

6 Id., pp. 18-22.

7 Rollo, pp., 23-27.

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8 which at that time conferred upon the Labor Arbiters such jurisdiction over, among others, ... all money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity benefits."

9 Respondents Comments; Rollo, pp. 47-52, 60-69.

10 99 Phil. 408. 411-412.

11 Feati University vs. Bautista, 18 SCRA., 119: Dy Keh Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 163: Rosario Bros. vs. Ople, 131 SCRA 72; National Mines and Allied Workers Union (NAMAWU) vs. Valero, 132 SCRA 578.

12 43 Am. Jur. 2d, pp. 73-91.

13 70 SCRA 139.

14 21 SCRA 924 (1967).

15 G.R. No. 73199. October 26, 1988.

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ENCYCLOPAEDIA BRITANNICA VS NLRC


Manila

SECOND DIVISION

G.R. No. 87098 November 4, 1996

ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER TEODORICO L. ROGELIO and BENJAMIN LIMJOCO, respondents.

TORRES, JR., J.:

Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to annul and set aside the resolution of the National Labor Relations Commission, Third Division, in NLRC Case No. RB IV-5158-76, dated December 28, 1988, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, the decision dated December 7, 1982 of then Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED, and the instant appeal is hereby DISMISSED for lack of merit.

SO ORDERED. 1

Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica and was in charge of selling petitioner's products through some sales representatives. As compensation, private respondent received commissions from the products sold by his agents. He was also allowed to use petitioner's name, goodwill and logo. It was, however, agreed upon that office expenses would be deducted from private respondent's commissions. Petitioner would also be informed about appointments, promotions, and transfers of employees in private respondent's district.

On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business. Then on October 30, 1975, he filed a complaint against petitioner Encyclopaedia Britannica with the Department of Labor and Employment, claiming for non-payment of separation pay and other benefits, and also illegal deduction from his sales commissions.

Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for brevity) was not its employee but an independent dealer authorized to promote and sell its products and in return, received commissions therefrom. Limjoco did not have any salary and his income from the petitioner company was dependent on the volume of sales accomplished. He also had his own separate office, financed the business expenses, and maintained his own workforce. The salaries of his secretary, utility man, and sales representatives were chargeable to his commissions. Thus, petitioner argued that it had no control and supervision over the complainant as to the manner and means he conducted his business operations. The latter did not even report to the office of the petitioner and did not observe fixed office hours. Consequently, there was no employer-employee relationship.

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Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was assigned in the sales department, and was earning an average of P4,000.00 monthly as his sales commission. He was under the supervision of the petitioner's officials who issued to him and his other personnel, memoranda, guidelines on company policies, instructions and other orders. He was, however, dismissed by the petitioner when the Laurel-Langley Agreement expired. As a result thereof, Limjoco asserts that in accordance with the established company practice and the provisions of the collective bargaining agreement, he was entitled to termination pay equivalent to one month salary, the unpaid benefits (Christmas bonus, midyear bonus, clothing allowance, vacation leave, and sick leave), and the amounts illegally deducted from his commissions which were then used for the payments of office supplies, office space, and overhead expenses.

On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an employee of the petitioner company. Petitioner had control over Limjoco since the latter was required to make periodic reports of his sales activities to the company. All transactions were subject to the final approval of the petitioner, an evidence that petitioner company had active control on the sales activities. There was therefore, an employer-employee relationship and necessarily, Limjoco was entitled to his claims. The decision also ordered petitioner company to pay the following:

1. To pay complainant his separation pay in the total amount of P16,000.00;

2. To pay complainant his unpaid Christmas bonus for three years or the amount of 12,000.00;

3. To pay complainant his unpaid mid-year bonus equivalent to one-half month pay or the total amount of P6,000.00;

4. To pay complainant his accrued vacation leave equivalent to 15 days per year of service, or the total amount of P6,000.00;

5. To pay complainant his unpaid clothing allowance in the total amount of P600.00; and

6. To pay complainant his accrued sick leave equivalent to 15 days per year of service or the total amount of P6,000.00. 2

On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed decision. The Commission opined that there was no evidence supporting the allegation that Limjoco was an independent contractor or dealer. The petitioner still exercised control over Limjoco through its memoranda and guidelines and even prohibitions on the sale of products other than those authorized by it. In short, the petitioner company dictated how and where to sell its products. Aside from that fact, Limjoco passed the costs to the petitioner chargeable against his future commissions. Such practice proved that he was not an independent dealer or contractor for it is required by law that an independent contractor should have substantial capital or investment.

Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us in this petition forcertiorari and injunction with prayer for preliminary injunction. On April 3, 1989, this Court issued a temporary restraining order enjoining the enforcement of the decision dated December 7, 1982.

The following are the arguments raised by the petitioner:

I

The respondent NLRC gravely abused its discretion in holding that "appellant's contention that appellee was an independent contractor is not supported by evidence on record".

II

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Respondent NLRC committed grave abuse of discretion in not passing upon the validity of the pronouncement of the respondent Labor Arbiter granting private respondent's claim for payment of Christmas bonus, Mid-year bonus, clothing allowance and the money equivalent of accrued and unused vacation and sick leave.

The NLRC ruled that there existed an employer-employee relationship and petitioner failed to disprove this finding. We do not agree.

In determining the existence of an employer-employee relationship the following elements must be present: 1) selection and engagement of the employee; 2) payment of wages; 3) power of dismissal; and 4) the power to control the employee's conduct. Of the above, control of employee's conduct is commonly regarded as the most crucial and

determinative indicator of the presence or absence of an employer-employee relationship. 3 Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to used in reaching that end. 4

The fact that petitioner issued memoranda to private respondents and to other division sales managers did not prove that petitioner had actual control over them. The different memoranda were merely guidelines on company policies which the sales managers follow and impose on their respective agents. It should be noted that in petitioner's business of selling encyclopedias and books, the marketing of these products was done through dealership agreements. The sales operations were primarily conducted by independent authorized agents who did not receive regular compensations but only commissions based on the sales of the products. These independent agents hired their own sales representatives, financed their own office expenses, and maintained their own staff. Thus, there was a need for the petitioner to issue memoranda to private respondent so that the latter would be apprised of the company policies and procedures. Nevertheless, private respondent Limjoco and the other agents were free to conduct and promote their sales operations. The periodic reports to the petitioner by the agents were but necessary to update the company of the latter's performance and business income.

Private respondent was not an employee of the petitioner company. While it was true that the petitioner had fixed the prices of the products for reason of uniformity and private respondent could not alter them, the latter, nevertheless, had free rein in the means and methods for conducting the marketing operations. He selected his own personnel and the only reason why he had to notify the petitioner about such appointments was for purpose of deducting the employees' salaries from his commissions. This he admitted in his testimonies, thus:

Q. Yes, in other words you were on what is known as P&L basis or profit and loss basis?

A. That is right.

Q. If for an instance, just example your sales representative in any period did not produce any sales, you would not get any money from Britannica, would you?

A. No, sir.

Q. In fact, Britannica by doing the accounting for you as division manager was merely making it easy for you to concentrate all your effort in selling and you don't worry about accounting, isn't that so?

A. Yes, sir.

Q. In fact whenever you hire a secretary or trainer you merely hire that person and notify Britannica so that Encyclopaedia Britannica will give the salaries and deduct it from your earnings, isn't that so?

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A. In certain cases I just hired people previously employed by Encyclopaedia Britannica.

xxx xxx xxx

Q. In this Exhibit "2" you were informing Encyclopaedia Britannica that you have hired a certain person and you were telling Britannica how her salary was going to be taken cared of, is it not?

A. Yes, sir.

Q. You said here, "please be informed that we have appointed Miss Luz Villan as division trainer effective May 1, 1971 at P550.00 per month her salary will be chargeable to the Katipunan and Bayanihan Districts", signed by yourself. What is the Katipunan and Bayanihan District?

A. Those were districts under my division.

Q. In effect you were telling Britannica that you have hired this person and "you should charge her salary to me," is that right?

A. Yes, sir. 5

Private respondent was merely an agent or an independent dealer of the petitioner. He was free to conduct his work and he was free to engage in other means of livelihood. At the time he was connected with the petitioner company, private respondent was also a director and later the president of the Farmers' Rural Bank. Had he been an employee of the company, he could not be employed elsewhere and he would be required to devote full time for petitioner. If private respondent was indeed an employee, it was rather unusual for him to wait for more than a year from his separation from work before he decided to file his claims. Significantly, when Limjoco tendered his resignation to petitioner on June 14, 1974, he stated, thus:

Re: Resignation

I am resigning as manager of the EB Capitol Division effective 16 June 1974.

This decision was brought about by conflict with other interests which lately have increasingly required my personal attention. I feel that in fairness to the company and to the people under my supervision I should relinquish the position to someone who can devote full-time to the Division.

I wish to thank you for all the encouragement and assistance you have extended to me and to my group during my long association with Britannica.

Evidently, Limjoco was aware of "conflict with other interests which . . . have increasingly required my personal attention" (p. 118, Records). At the very least, it would indicate that petitioner has no effective control over the personal activities of Limjoco, who as admitted by the latter had other "conflict of interest" requiring his personal attention.

In ascertaining whether the relationship is that of employer-employee or one of independent contractor, each case must

be determined by its own facts and all features of the relationship are to be considered. 6 The records of the case at bar showed that there was no such employer-employee relationship.

As stated earlier, "the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the

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result of his efforts and not the amount thereof, we should not find that the relationship of employer and employee

exists. 7 In fine, there is nothing in the records to show or would "indicate that complainant was under the control of the petitioner" in respect of the means and methods 8 in the performance of complainant's work.

Consequently, private respondent is not entitled to the benefits prayed for.

In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC is hereby REVERSED AND SET ASIDE.

SO ORDERED.

Regalado, Romero, Puno and Mendoza, JJ., concur.

Footnotes

1 Rollo, p. 27

2 Rollo, pp. 36-37.

3 Vallum Security Services vs. NLRC, G.R. Nos. 97320-27, July 30, 1993.

4 Cosmopolitan Funeral Homes, Inc. vs. Maalat, G.R. No. 86693, July 2, 1990.

5 TSN, October 14, 1981, Rollo, pp. 64-67.

6 Opulencia Ice Plant and Storage vs. NLRC, G.R. 98368, December 15, 1993.

7 Investment Planning Corporation of the Philippines vs. Social Security System, No. L-19124, November 18, 1967, 21 SCRA 924.

8 Idem.

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ABANTE VS LAMADRID BEARING & PARTS


Manila

FIRST DIVISION

G.R. No. 159890 May 28, 2004

EMPERMACO B. ABANTE, JR., petitioner, vs. LAMADRID BEARING & PARTS CORP. and JOSE LAMADRID, President, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the Decision dated March 7, 2003 of the Court of Appeals in CA-G.R. SP No. 73102 which affirmed the Resolution dated April 2, 2002 of the National Labor Relations Commission.

Petitioner was employed by respondent company Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of Mindanao. His average monthly income was more or less P16,000.00, but later was increased to approximately P20,269.50. Aside from selling the merchandise of respondent corporation, he was also tasked to collect payments from his various customers. Respondent corporation had complete control over his work because its President, respondent Jose Lamadrid, frequently directed him to report to a particular area for his sales and collection activities, and occasionally required him to go to Manila to attend conferences regarding product competition, prices, and other market strategies.

Sometime in 1998, petitioner encountered five customers/clients with bad accounts, namely:

Customers/Clients Amount

1) A&B Engineering Services P 86,431.20

2) Emmanuel Engineering Services 126, 858.50

3) Panabo Empire Marketing 226,458.76

4) Southern Fortune Marketing 191,208.00

5) Alreg Marketing 56, 901.18

Less Returns: 691.02 56, 210.16

Total Bad Accounts P 687,166.62

Petitioner was confronted by respondent Lamadrid over the bad accounts and warned that if he does not issue his own checks to cover the said bad accounts, his commissions will not be released and he will lose his job. Despite serious misgivings, he issued his personal checks in favor of respondent corporation on condition that the same shall not be deposited for clearing and that they shall be offset against his periodic commissions.1

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Not contented with the issuance of the foregoing checks as security for the bad accounts, respondents "tricked" petitioner into signing two documents, which he later discovered to be a Promissory Note2 and a Deed of Real Estate Mortgage.3

Pursuant to the parties’ agreement that the checks would not be deposited, as their corresponding values would be offset from petitioner’s sales commissions, respondents returned the same to petitioner as evidenced by the undeposited checks and respondent Lamadrid’s computations of petitioner’s commissions.4

Due to financial difficulties, petitioner inquired about his membership with the Social Security System in order to apply for a salary loan. To his dismay, he learned that he was not covered by the SSS and therefore was not entitled to any benefit. When he brought the matter of his SSS coverage to his employer, the latter berated and hurled invectives at him and, contrary to their agreement, deposited the remaining checks which were dishonored by the drawee bank due to "Account Closed."

On March 22, 2001, counsel for respondent corporation sent a letter to petitioner demanding that he make good the dishonored checks or pay their cash equivalent. In response, petitioner sent a letter addressed to Atty. Meneses, counsel for respondent corporation, which reads:5

This has reference to your demand letter dated March 22, 2001 which I received on March 30, 2001, relative to the checks I issued to my employer LAMADRID BEARING PARTS CORPORATION.

May I respectfully request for a consideration as to the payment of the amount covered by the said checks, as follows:

1. I have an earned commission in the amount of P33,412.39 as shown in the hereto attached Summary of Sales as of February 28, 2001 (P22,748.60) and as of March 31, 2001 (P10,664.79), which I offer to be charged or deducted as partial payment thereof;

2. I hereby commit One Hundred Percent (100%) of all my commission to be directly charged or deducted as payment, from date onward, until such time that payment will be completed;

Sir, kindly convey my good faith to your client and my employer, as is shown by my willingness to continue working as Commission Salesman, having served the Company for the last sixteen (16) years.

I’m sincerely appealing to my employer, through you, Sir, to settle these accountabilities which all resulted from the checks issued by my customers which bounced and later charged to my account, in the manner afore-cited.

May this request merit your kindest consideration, Sirs.

Thank you very much.

On April 2, 2001, petitioner sent another letter to respondent Lamadrid, to wit:6

Dear Mr. Lamadrid,

This is to inform your good office that if you pursue the case against me, I may refer this problem to Mr. Paul Dominguez and Atty. Jesus Dureza to solicit proper legal advice. I may also file counter charges against your company of (sic) unfair labor practice and unfair compensation of 3% commission to my sales and commissions of more or less 90,000,000.00 (all collected and covered with cleared check payments) for 16 years working with your company up to the present year 2001.

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If I am not wrong your company did not exactly declare the correct amount of P90,000,000.00 more or less representing my sales and collections (all collected and covered with cleared check payments to the Bureau of Internal Revenue [BIR] for tax declaration purposes). In short your company profited large amount of money to (sic) the above-mentioned sales and collections of P90,000,000.00 more or less for 16 years working with your company.

I remember that upon my employment with your company last 1985 up to the present year 2001 as commission basis salesman, I have not signed any contract with your company stating that all uncollected accounts including bounced checks from Lamadrid Bearing & Parts Corp. will be charged to me. I wonder why your company forcibly instructed me to secure checking account to pay and issue check payment of P15,000.00 per month to cover your company’s bad accounts in which this amount is too heavy on my part paying a total bad accounts of more than P650,000.00 for my 16 years employment with your company as commission basis salesman.

Recalling your visit here at my Davao City residence, located at Zone 1 2nd Avenue, San Vicente Buhangin Davao City, way back 1998, you even forced me to sign mortgage contract of my house and lot located at Zone 1 2nd Avenue, San Vicente, Buhangin, Davao City, according to Mr. Jose Lamadrid this mortgage contract of my house and lot will serve as guarantee to the uncollected and bounced checks from Lamadrid Bearing and Parts Corp., customers. I have asked 1 copy of the mortgage contract I have signed but Mr. Jose C. Lamadrid never furnished me a copy.

Very truly yours,

(Sgd) Empermaco B. Abante, Jr.

While doing his usual rounds as commission salesman, petitioner was handed by his customers a letter from the respondent company warning them not to deal with petitioner since it no longer recognized him as a commission salesman.

In the interim, petitioner received a subpoena from the Office of the City Prosecutor of Manila for violations of Batas Pambansa Blg. 22 filed by respondent Lamadrid.

Petitioner thus filed a complaint for illegal dismissal with money claims against respondent company and its president, Jose Lamadrid, before the NLRC Regional Arbitration Branch No. XI, Davao City.

By way of defense, respondents countered that petitioner was not its employee but a freelance salesman on commission basis, procuring and purchasing auto parts and supplies from the latter on credit, consignment and installment basis and selling the same to his customers for profit and commission of 3% out of his total paid-up sales. Respondents cite the following as indicators of the absence of an employer-employee relationship between them:

(1) petitioner constantly admitted in all his acts, letters, communications with the respondents that his relationship with the latter was strictly commission basis salesman;

(2) he does not have a monthly salary nor has he received any benefits accruing to regular employment;

(3) he was not required to report for work on a daily basis but would occasionally drop by the Manila office when he went to Manila for some other purpose;

(4) he was not given the usual pay-slip to show his monthly gross compensation;

(5) neither has the respondent withheld his taxes nor was he enrolled as an employee of the respondent under the Social Security System and Philhealth;

WMSU LLB-2A Labor I

15

(6) he was in fact working as commission salesman of five other companies, which are engaged in the same line of business as that of respondent, as shown by certifications issued by the said companies;7

(7) if respondent owed petitioner his alleged commissions, he should not have executed the Promissory Note and the Deed of Real Estate Mortgage.8

Finding no necessity for further hearing the case after the parties submitted their respective position papers, the Labor Arbiter rendered a decision dated November 29, 2001, the decretal portion of which reads:9

WHEREFORE, premises considered judgment is hereby rendered DECLARING respondents LAMADRID BEARING & PARTS CORPORATION AND JOSE LAMADRID to pay jointly and severally complainant EMPERMACO B. ABANTE, JR., the sum of PESOS ONE MILLION THREE HUNDRED THIRTY SIX THOUSAND SEVEN HUNDRED TWENTY NINE AND 62/100 ONLY (P1,336,729.62) representing his awarded separation pay, back wages (partial) unpaid commissions, refund of deductions, damages and attorney’s fees.

SO ORDERED.

On appeal, the National Labor Relations Commission reversed the decision of the Labor Arbiter in a Resolution dated April 5, 2002, the dispositive portion of which reads:10

WHEREFORE, the Appeal is GRANTED. Accordingly, the appealed decision is Set Aside and Vacated. In lieu thereof, a new judgment is entered dismissing the instant case for lack of cause of action.

SO ORDERED.

Petitioner challenged the decision of the NLRC before the Court of Appeals, which rendered the assailed judgment on March 7, 2003, the dispositive portion of which reads:11

WHEREFORE, premises considered, petition is hereby DENIED. Let the supersedeas bond dated 09 January 2002, issued the Philippine Charter Insurance Corporation be cancelled and released.

SO ORDERED.

Upon denial of his motion for reconsideration, petitioner filed the instant appeal based on the following grounds:

I

THE HONORABLE COURT OF APPEALS IN GRAVE ABUSE OF DISCRETION "MODIFIED" THE IMPORT OF THE "RELEVANT ANTECEDENTS" AS ITS PREMISE IN ITS QUESTIONED DECISION CAUSING IT TO ARRIVE AT ERRONEOUS CONCLUSIONS OF FACT AND LAW.

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN APPRECIATING THE TRUE FACTS OF THIS CASE THEREBY IT MADE A WRONG CONCLUSION BY STATING THAT THE FOURTH ELEMENT FOR DETERMINING EMPLOYER-EMPLOYEE RELATIONSHIP, WHICH IS THE "CONTROL TEST," IS WANTING IN THIS CASE.

III

THE HONORABLE COURT OF APPEALS IS AT WAR WITH THE EVIDENCE PRESENTED IN THIS CASE AS WELL AS WITH THE APPLICABLE LAW AND ESTABLISHED RULINGS OF THIS HONORABLE COURT.

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Initially, petitioner challenged the statement by the appellate court that "petitioner, who was contracted a 3% of the total gross sales as his commission, was tasked to sell private respondent’s merchandise in the Mindanao area and to collect payments of his sales from the customers." He argues that this statement, which suggests contracting or subcontracting under Department Order No. 10-97 Amending the Rules Implementing Books III and VI of the Labor Code, is erroneous because the circumstances to warrant such conclusion do not exist. Not being an independent contractor, he must be a regular employee pursuant to Article 280 of the Labor Code because an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.

Petitioner likewise disputes the finding of the appellate court that no employer-employee relationship exists between him and respondent corporation since the power of control, which is the most decisive element to determine such relationship, is wanting. He argues that the following circumstances show that he was in truth an employee of the respondent corporation:

(1) As salesman of the private respondents, petitioner was also the one collecting payment of his sales from various customers. Thus, he was bringing with him Provisional Receipts, samples of which are attached to his Position Paper filed with the Labor Arbiter.

(2) Private respondents had complete control over the work of the petitioner. From time to time, respondent JOSE LAMADRID was directing him to report to a particular area in Mindanao for his sales and collection activities, and sometimes he was required to go to Manila for a conference regarding competitions, new prices (if any), special offer (if competitors gave special offer or discounts), and other selling/marketing strategy. In other words, respondent JOSE LAMADRID was closely monitoring the sales and collection activities of the petitioner.

Petitioner further contends that it was illogical for the appellate court to conclude that since he was not required to report for work on a daily basis, the power of control is absent. He reasons that being a field personnel, as defined under Article 82 of the Labor Code, who is covering the Mindanao area, it would be impractical for him to report to the respondents’ office in Manila in order to keep tab of his actual working hours.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence. The decisive factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot be accorded finality by this Court.12 Considering the conflicting findings of fact by the Labor Arbiter and the NLRC as well as the Court of Appeals, there is a need to reexamine the records to determine with certainty which of the propositions espoused by the contending parties is supported by substantial evidence.

We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an employee of respondent corporation. To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important.13 The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services areperformed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.

Applying the aforementioned test, an employer-employee relationship is notably absent in this case. It is undisputed that petitioner Abante was a commission salesman who received 3% commission of his gross sales. Yet no quota was imposed on him by the respondent; such that a dismal performance or even a dead result will not result in any sanction or provide a ground for dismissal. He was not required to report to the office at any time or submit any periodic written report on his sales performance and activities. Although he had the whole of Mindanao as his base of operation, he was not designated by respondent to conduct his sales activities at any particular or specific place. He pursued his selling activities without interference or supervision from respondent company and relied on his own resources to perform his

WMSU LLB-2A Labor I

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functions. Respondent company did not prescribe the manner of selling the merchandise; he was left alone to adopt any style or strategy to entice his customers. While it is true that he occasionally reported to the Manila office to attend conferences on marketing strategies, it was intended not to control the manner and means to be used in reaching the desired end, but to serve as a guide and to upgrade his skills for a more efficient marketing performance. As correctly observed by the appellate court, reports on sales, collection, competitors, market strategies, price listings and new offers relayed by petitioner during his conferences to Manila do not indicate that he was under the control of respondent.14 Moreover, petitioner was free to offer his services to other companies engaged in similar or related marketing activities as evidenced by the certifications issued by various customers.15

In Encyclopedia Britannica (Philippines), Inc. v. NLRC,16 we reiterated the rule that there could be no employer-employee relationship where the element of control is absent. Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the result of his efforts and not the amount thereof, no relationship of employer-employee exists.

We do not agree with petitioner’s contention that Article 28017 is a crucial factor in determining the existence of an employment relationship. It merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining their rights to certain benefits, such as to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.18

Neither can we subscribe to petitioner’s misplaced reliance on the case of Songco v. NLRC.19 While in that case the term "commission" under Article 96 of the Labor Code was construed as being included in the definition of the term "wage" available to employees, there is no categorical pronouncement that the payment of compensation on commission basis is conclusive proof of the existence of an employer-employee relationship. After all, commission, as a form of remuneration, may be availed of by both an employee or a non-employee.

Petitioner decried the alleged intimidation and trickery employed by respondents to obtain from him a Promissory Note and to issue forty-seven checks as security for the bad accounts incurred by five customers.

While petitioner may have been coerced into executing force to issue the said documents, it may equally be true that petitioner did so in recognition of a valid financial obligation. He who claims that force or intimidation was employed upon him lies the onus probandi. He who asserts must prove. It is therefore incumbent upon petitioner to overcome the disputable presumption that private transactions have been prosecuted fairly and regularly, and that there is sufficient consideration for every contract.20 A fortiori, it is difficult to imagine that petitioner, a salesman of long standing, would accede without raising a protest to the patently capricious and oppressive demand by respondent of requiring him to assume bad accounts which, as he contended, he had not incurred. This lends credence to the respondent’s assertion that petitioner procured the goods from the said company on credit, consignment or installment basis and then sold the same to various customers. In the scheme of things, petitioner, having directly contracted with the respondent company, becomes responsible for the amount of merchandise he took from the respondent, and in turn, the customer/s would be liable for their respective accounts to the seller, i.e., the petitioner, with whom they contracted the sale.

All told, we sustain the factual and legal findings of the appellate court and accordingly, find no cogent reason to overturn the same.

WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated March 7, 2003 in CA-G.R. SP No. 73102, which denied the petition of Empermaco B. Abante, is AFFIRMED in toto.

SO ORDERED.

Davide, Jr.*, Panganiban**, Carpio, and Azcuna, JJ., concur.

Footnotes

* On official leave.

WMSU LLB-2A Labor I

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** Working Chairman.

1 Check No. Date Amount

1. 3320013401 8-28-98 P15,000.00

2. 3320013402 9-28-98 - same-

3. 3320013403 10-28-98 - same-

4. 3320013404 11-28-98 - same-

5. 3320013405 12-28-98 - same-

6. 3320013501 1-28-99 - same-

7. 3320013502 2-28-99 - same-

8. 3320013503 3-28-99 - same-

9. 3320013504 4-28-99 - same-

10. 3320013505 5-28-99 - same-

11. 3320013506 6-28-99 - same-

12. 3320013507 7-28-99 - same-

13. 3320013508 8-28-99 - same-

14. 3320013509 9-28-99 - same-

15. 3320013510 10-28-99 - same-

16. 3320013511 11-28-99 - same-

17. 3320013512 12-28-99 - same-

18. 3320013513 1-28-00 - same-

19. 3320013514 2-28-00 - same-

20. 3320013515 3-28-00 - same-

21. 3320013516 4-28-00 - same-

22. 3320013517 5-28-00 - same-

23. 3320013518 6-28-00 - same-

24. 3320013519 7-28-00 - same-

25. 3320013520 8-28-00 - same-

26. 3320013521 9-28-00 - same-

27. 3320013522 10-28-00 - same-

28. 3320013523 11-28-00 - same-

29. 3320013524 12-28-00 - same-

30. 3320013525 1-28-01 - same-

31. 3320013526 2-28-01 - same-

WMSU LLB-2A Labor I

19

32. 3320013527 3-28-01 - same-

33. 3320013528 4-28-01 - same-

34. 3320013529 5-28-01 - same-

35. 3320013530 6-28-01 - same-

36. 3320013531 7-28-01 - same-

37. 3320013532 8-28-01 - same-

38. 3320013533 9-28-01 - same-

39. 3320013534 10-28-01 - same-

40. 3320013535 11-28-01 - same-

2 Annex "4" to Affidavit of Jose Lamadrid dated 4 June 2001 attached to Atty. Meneses’ letter dated 4 June 2001 addressed to Hon. Arturo L. Gamolo.

3 Annex "5" to Affidavit of Jose Lamadrid dated 4 June 2001 attached to Atty. Meneses’ letter dated 4 June 2001 addressed to Hon. Arturo L. Gamolo.

4 See Annexes "F" to "P".

5 CA Records, p. 153.

6 Annex "7" to Jose Lamadrid’s Affidavit dated 4 June 2001 attached to Atty. Meneses’ letter to Hon. Arturo L. Gamolo dated 4 June 2001.

7 Annexes "G to J".

8 Annexes "D & E".

9 Decision penned by Labor Arbiter Arturo L. Gamolo.

10 Decision penned by Commissioner Leon G. Gonzaga, Jr., concurred in by Acting Presiding Commissioner Oscar N. Abella, Fifth Division NLRC.

11 Decision penned by Associate Justice Buenaventura J. Guerrero, concurred in by Associate Justices Teodoro P. Regino and Mariano C. Del Castillo, Court of Appeals- Second Division.

12 AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47.

13 Ushio Marketing v. NLRC, G.R. No. 124551, 28 August 1998, 294 SCRA 673; Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 119930, 12 March 1998, 287 SCRA 476.

14 Rollo, p. 72.

15 Supra note 5.

16 G.R. No. 87098, 4 November 1996, 264 SCRA 1, 7.

WMSU LLB-2A Labor I

20

17 Art. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

18 Singer Sewing Machine Company v. Drilon, G.R. No. 91307, 24 January 1991, 193 SCRA 270.

19 G.R. Nos. 50999-51000, 23 March 1990, 183 SCRA 610.

20 Revised Rules on Evidence, Rule 131, Section 3, pars. P & Q.

WMSU LLB-2A Labor I

21

FILIPINAS BROADCASTING NETWORK VS NLRC


Manila

FIRST DIVISION

G.R. No. 118892 March 11, 1998

FILIPINAS BROADCASTING NETWORK, INC., vs. NATIONAL LABOR RELATIONS COMMISSION and SIMEON MAPA JR., respondents.

PANGANIBAN, J.:

As a rule, factual findings of the NLRC are binding on this Court. However, when the findings of the NLRC and the labor arbiter are contradictory, this Court may review questions of fact. Where the evidence clearly shows the absence of an employer-employee relationship, a claim for unpaid wages, thirteenth month pay, holiday and rest pay and other employment benefits must necessarily fail.

The Case

Before us is a petition for certiorari assailing the April 29, 1994 Decision of the National Labor Relations Commission, 1 in Case No. 05-08-00348-92, entitled "Simeon M. Mapa Jr., v. DZRC Radio Station." The dispositive portion of the challenged Decision reads:

WHEREFORE, premises considered, the appealed decision is set aside, and a new judgement is entered, declaring that complainant is an employee of respondent and is entitled to his claims for the payment of his services from March 11, 1990 to January 16, 1992. 2

Petitioner also impugns the November 9, 1994 Resolution 3 of the NLRC denying the motion for reconsideration.

The October 13, 1993 decision of the labor arbiter, 4 which the NLRC reversed and set aside, disposed as follows:

This Arbitration Branch, based on the facts and circumstances established by the parties in this case is inclined to believe that complainant Simeon M. Mapa, Jr., had not been an employee of the respondent DZRC Radio Station

before February 16, 1992. 5 He was but a volunteer reporter when accommodated to air his report on the respondent radio station as his application for employment with the respondent as field reporter had not been accepted yet or approved before February, 1992. There was no employer-employee relations that existed between the complainant and the respondent since March 11, 1990 until February 16, 1992. The complainant is not entitled to his claim for any salaries, premium pay for holiday and rest day, holiday pay and 13th month pay against the respondent DZRC Radio Station/Salvio Fortuno.

WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered dismissing the complaint in this case for lack of merit. 6

The Facts

Version of Private Respondent

WMSU LLB-2A Labor I

22

Petitioner and private respondent submitted different versions of the facts. The facts as viewed by private respondent are as follows: 7

The complainant (herein private respondent) began to work for the respondent as a radio reporter starting March 11, 1990. On May 14, 1990, upon being informed by then respondent's Station Manager, Mr. Plaridel Brocales, that complainant's employment with respondent is being blocked by Ms. Brenda Bayona of DZGB, complainant's previous employer, the said complainant took a leave of absence. In the first week of June, 1990, the respondent thru Mr. Antonio Llarena, then an employee of the respondent, asked the complainant to return to work even as he was assured that his salaries will be paid to him already. Thus, the complainant continued to work for the respondent since then. On September 5, 1991, again the complainant took a leave of absence because of his desperation over the failure of respondent to make good its promise of payment of salaries. He was reinstated on January 16, 1992 and resigned on February 27, 1992 when he decided to run for an elective office in the town of Daraga, Albay. Unfortunately, the respondent paid salary to the complainant only for the period from January 16, 1992 up to February 27, 1992. Respondent did not pay the complainant for all the services rendered by the latter from March 11, 1990 up to January 16, 1992.

As may be gleaned from its memorandum, 8 petitioner's version of the facts is as follows:

1. On or before April 1990, Mapa was dismissed from his employment with PBN-DZGB Legaspi. At this time, Mapa filed a case for illegal dismissal against PBN-DZGB Legaspi docketed as RAV V Case No. 05-04-00120-90 entitled "Simeon Mapa, Jr. v. People's Broadcasting Network-DZGB Legaspi, Jorge Bayona and Arturo Osia";

2. On or about May 1990, Mapa sought employment from DZRC as a radio reporter. However, DZRC required of private respondent the submission of a clearance from his former employer. Otherwise, his application would not be acted upon;

3. On May 14, 1990, Mapa was informed by DZRC's then station manager, Mr. Plaridel "Larry" Brocales, that his application for employment was "being blocked by Ms. Brenda Bayona of DZGB, Mapa's former employer." This fact is supported by Mapa's position paper before the Honorable Labor Arbiter . . . ;

4. Taking pity on Mapa and pending the issuance of the clearance from PBN-DZGB Legaspi, Mr. Larry Brocales granted the request of Mapa to be accommodated only as a volunteer reporter of DZRC on a part-time basis. As a volunteer reporter, Mapa was not to be paid wages as an employee of DZRC but he was permitted to find sponsors whose business establishments will be advertised every time he goes on the air. Most importantly, Mapa's only work consisted of occasional newsbits or on-the-spot reporting of incidents or newsworthy occurrences, which was very seldom.

5. Mapa's friends, who were also in the same situation as he was, declared in an affidavit dated June 10, 1993 that:

WE, ALLAN ALMARIO and ELMER ANONUEVO, of legal age, single, with postal address at Washington Drive, Legaspi City, under oath, depose and state:

1. We personally know Simeon "Jun" Mapa, a former volunteer reporter at DZRC just like us;

2. As volunteer reporters we know that we will not receive any salary or allowance from DZRC because our work was purely voluntary;

3. As incentive for us, the management of DZRC allowed us to get our own sponsors whose business establishment we mention[ed] every after field report was made by us;

4. The management did not require or oblige us to render a report. We were on our own. We ma[d]e or render[ed] a report as we [saw] fit;

5. During our stint as volunteer reporters we had several sponsors each who paid us P300.00 per month (each).

xxx xxx xxx

6. Having no radio gadgets to begin with, DZRC loaned Mapa the necessary equipment such as handheld radios and reporting gadgets. Mapa was to do occasional reporting only, i.e., a few minutes each day at an irregular time period at Mapa's own convenience. Mapa advertised his sponsors and pocketed the payment of these sponsors for his

WMSU LLB-2A Labor I

23

advertising services. In addition, DZRC had no control over the manner by [sic] which he was to make his reports. Nor were the said reports subject to editing by DZRC;

7. In an Affidavit dated June 10, 1993 executed by one of Mapa's sponsors, the same reads as follows:

I, CARLITO V. BAYLON, of legal age, married, resident of Dona Maria Subdivision, Daraga, Albay, under oath, depose and state:

1. I am a lawyer by profession. At the same time, I am owner of "Kusina ni Manoy" a restaurant situated in Daraga, Albay;

2. I personally know Simeon "Jun" Mapa. Sometime in May, 1990 he went to me and asked if I could be one of his sponsors because he was accommodated by DZRC as volunteer reporter. He explained to me that, he will not be receiving any salary from DZRC[;] hence, he was soliciting my support;

3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have to pay him P300.00/month. In exchange thereto, he will have to mention the name of my restaurant every time he renders a report on the air;

4. My sponsorship lasted for about (5) months after which I discontinued it when I rarely heard Jun Mapa in DZRC program.

xxx xxx xxx

8. On November 7, 1990, in his testimony against his former employer, Mapa declared under oath, to wit:

ATTY. LOBRIGO:

On paragraph 14 of the same affidavit it states and I quote: 13. Having been left with an empty stomach, I was compelled to apply for employment with another radio station. On March 11, 1990, I applied for employment with DZRC. Unfortunately, my application would not yet be acted [upon] favorably because of the malicious and oppressive imputations to me by my former employer.

My question is what is now the status of your employment with DZRC?

WITNESS:

I am at present on a volunteer status because my former employer at DZGB did not give me clearance and I am required to submit that clearance to DZRC. (Emphasis supplied).

See p. 2 of Position Paper of DZRC before the Labor Arbiter and pp. 4-5 of the Transcript of Stenographer Notes dated November 7, 1990, attached and marked as Annex "F" and Annex "F-1 ", Petition for Certiorari;

9. It cannot be overstressed that Mapa's application for employment could not have been acted upon because of the lack of the pre-requisite clearance.

10. Lacking in sponsors, Mapa soon failed to provide petitioner with newsbits, finding it unprofitable to continue since he had no available sources of funding. Sometime in September 1991, Mapa quit his part-time endeavor with DZRC, as attested to by the Office of Supervisor/Traffic Manager Ignacio Casi in an Affidavit dated June 10, 1992, to wit:

1. I am the Office Supervisor/Traffic Manager of DZRC-AM;

2. Sometime in May, 1990 Simeon "Jun" Mapa went to my office inside our radio station. He asked me if he could be accommodated as Radio Reporter of DZRC, as he was dismissed from DZGB. I referred him to Larry Brocales, our Station Manager then;

3. Larry Brocales told Jun Mapa that he cannot be accommodated because he has no clearance from DZGB. Jun Mapa, almost teary eyed, pleaded to Larry Brocales that he be accommodated as volunteer reporter, that is, he will not receive any salary but that he intimated that he be allowed to look for sponsors whose business establishment, for a

WMSU LLB-2A Labor I

24

fee, will have to be mentioned after every report is made. Larry Brocales took pity on Jun Mapa and accommodated him;

4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field reports, at a particular time and in a particular program. They render report as they wish or see fit;

5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa. They (sponsors) pay directly to him;.

6. Being the Office Supervisor, I know for a fact that Jun Mapa seldom renders report on the air. He has no assigned program either. He was on and off the air, so to speak;

7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already because his sponsors were no longer paying him of his monthly contract with them. (Emphasis supplied).

(See Annex "G", Petition for Certiorari);

11. Subsequently, Mapa sent a letter dated October 7, 1991 to Ms. Diana C. Gozum, General Manager of petitioner FBN. In the said letter, Mapa wrote and admitted that:

I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my previous application submitted last March 1990 as a reporter of DZRC AM.

May I inform you that since the submission of such application I worked until September 6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as a regular reporter.

With this, I respectfully wish to follow up my application for recognition.

May I also inform you that the case I have with my previous job with the other company has commenced.

Attached herewith is my resume.

I am once again submitting myself for an interview with your office at a time convenient to you.

Thank you.

(See Annex "H", Petition for Certiorari);

12. Reacting to the letter mentioned in the immediately preceding paragraph, DZRC favorably acted upon the application of Mapa and accepted him as a radio reporter on January 16, 1992;

13. On February 27, 1992, Mapa resigned as a radio reporter in order to run for an elective office in the May 1992 elections and was paid all his salaries and benefits for the period of his employment commencing from January 16, 1992 until February 27, 1992;

14. Having no work to do and no employment in sight, Mapa filed a complaint against FBN-DZRC on August 1992, claiming the payment of salaries, premium pay, holiday pay as well as 13th month pay for the period 28 February 1990 until January 16, 1992;

On October 13, 1993, Labor Arbiter Emeterio Ranola dismissed the complaint for lack of merit, finding that no employer-employee relationship existed between Mapa and DZRC during the period March 11, 1990 to February 16, 1992. 9

Findings of the NLRC

In holding that there was an employer-employee relationship, the NLRC set aside the labor arbiter's findings:

WMSU LLB-2A Labor I

25

In his appeal, complainant insists that there was an employer-employee relationship between him and the respondent. In support of his contention, he cites the payroll for February 16 to 29, 1992, the ID card issued to him as employee and regular reporter by the respondent: [sic] the program schedules of DZRC showing the regular program of the station indicating his name: [sic] the affidavit of Antonio Llarena, program supervisor of DZRC, stating that he [was] a regular reporter under his supervision and the list of reporting gadgets issued to regular reporter.

The existence of employer employee relationship is determined by the following elements, namely: 1) selection and engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the power to control employees' conduct although the latter is the most important element. (Rosario Brothers, Inc. vs. Ople, 131 SCRA 72)

Considering the totality of the evidence adduced by the parties, we are of the opinion that the complainant is a regular reporter of the respondent. Firstly, the work of the complainant is being supervised by the program supervisor of the respondent; secondly, the complainant uses the reporting gadgets of the respondent. Thirdly, he has no reporting gadgets of his own; Fourthly, the program schedule is prepared by the respondent; and Lastly, he was paid salary for the period from February 16 to 29, 1992 and covered under the Social Security System. There is no showing in the record that his work from February 16, 1992 was different from his work before said period. 10

The NLRC subsequently denied petitioner's motion for reconsideration 11 on November 9, 1994. 12 Hence, this petition. 13

Issue

Petitioner alleges that Public Respondent NLRC committed grave abuse of discretion as follows: 14

I

. . . in declaring Mapa as an employee of petitioner before January 16, 1992. The test of an employer-employee relationship was erroneously applied to the facts of this case.

II

. . . in disregarding significant facts which clearly and convincingly show that the private respondent was not an employee of the petitioner before 16 January 1992.

In the main, the issue in this case is whether private respondent was an employee of petitioner for the period March 11, 1990 to January 15, 1992.

The Court's Ruling

The petition is meritorious.

Main Issue:

Private Respondent Was Not an Employee

During the Period in Controversy

As a rule, the NLRC's findings are accorded great respect, even finality, by this Court. This rule, however, is not without qualification. This

Court held Jimenez v. NLRC 15:

The review of labor cases elevated to us on certiorari is confined to questions of jurisdiction or grave abuse of

discretion. 16 As a rule, this Court does not review supposed errors in the decision of the NLRC which raise factual issues, because factual findings of agencies exercising quasi-judicial functions are accorded not only respect but even finality, aside from the consideration that the Court is essentially not a trier of facts. However, in the case at bar, a review of the records thereof with an assessment of the facts is necessary since the factual findings of the NLRC and the labor arbiter are at odds with each other. 17

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In the present case, a review of the factual findings of the public respondent is in order, for said findings differ from those of the labor

arbiter. 18 Worse, the facts alleged by the private respondent and relied upon by the public respondent do not prove an employer-employee relationship. 19 In this light, we will review — and overrule — the findings of the NLRC.

The following are generally considered in the determination of the existence of an employer-employee relationship: (1) the manner of selection and engagement, (2) the payment of wages, (3) the presence or absence of the power of dismissal, and (4) the presence or absence of the power of control; of these four, the last one is the most important. 20

Engagement and Payment of Wages

Let us consider the circumstances of the private respondent's engagement in DZRC before January 16, 1992. Petitioner did not act on his application for employment as a radio reporter because private respondent admittedly failed to present a clearance from his former employer. Nevertheless, private respondent "volunteered" his services, knowing that he would not be paid wages, and that he had to rely on financial sponsorships of business establishments that would be advertised in his reports. In other words, private respondent willingly acted as a volunteer reporter, fully cognizant that he was not an employee and that he would not receive any compensation directly from the petitioner, but only from his own advertising sponsors.

The nature of private respondent's engagement is evident from the affidavit of Allan Almario and Elmer Anonuevo who served under identical circumstances. The two affirmed the following:

1. We personally know Simeon "Jun" Mapa, a volunteer reporter at DZRC just like us;

2. As volunteer reporters we know [sic] that we will not receive any salary or allowance from DZRC because our work was purely voluntary;

3. As incentive for us, the management of DZRC allowed us to get our own sponsors whose business establishments we mention every after [sic] field report was made by us;

xxx xxx xxx

4. During our stint as volunteer reporters we had several sponsors each who paid us P300.00 per month. 21

The above statement is corroborated by Carlito Baylon, one of private respondent's advertising sponsors. In his affidavit dated June 10, 1993, he averred:

2. I personally know Simeon "Jun" Mapa.

Sometime in May, 1990 he went to me and asked if I could be one of his sponsors because he was accommodated by DZRC as volunteer reporter. He explained to me that, he will not be receiving any salary from DZRC[,] hence, he was soliciting my support;

3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have to pay him P300.00/month. In exchange thereto, he will have to mention the name of my restaurant everytime he renders a report on the air;

4. My sponsorship lasted for about five (5) months after which I discontinued it when I rarely heard Jun Mapa in DZRC program. 22

Indeed, private respondent himself admitted that he worked under the said circumstances. The bio-data sheet signed by Mapa himself, in which he acknowledged that he was not an employee, states in part:

Work experiences:

DWGW Reporter/Newscaster 1970-1980

DZGB Reporter 1983-1990

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27

DZRC Reporter 1990-1991

for free not recognized due to no appointment. 23 (Emphasis supplied.)

In his letter dated October 7, 1991, which he sent to the general manager of Filipinas Broadcasting Network (owner of DZRC), Mapa again acknowledged in the following words that he was not an employee:

I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my previous application submitted last March 1990 as a reporter of DZRC AM.

May I inform you that since the submission of such application I worked until September 6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as a regular reporter.

With this, I respectfully wish to follow up my application for recognition. [Emphasis supplied.]

There is no indication that these two admissions were made under duress. Indeed, private respondent himself did not dispute their voluntariness or veracity. It is clear that he rendered services knowing that he was not an employee. Aware that he would not be paid wages, he described himself as a "volunteer reporter" who was, as evident from his letter, hoping for "the chance to be recognized as a regular reporter." In fact, petitioner acted favorably on this letter and accepted his application as an employee effective on January 16, 1992.

Power of Dismissal

Likewise, the evidence on record shows that petitioner did not exercise the power to dismiss private respondent during the period in question. In September 1991, Private Respondent Mapa ceased acting as a volunteer reporter, not because he was fired, but because he stopped sending his reports. Ignacio Casi, Office Supervisor of DZRC, declared in his affidavit that Mapa told him that "he [was] quitting already because his sponsors were no longer paying him of [sic] his monthly contract with them." Mapa did not controvert this statement. In fact, his aforesaid letter of October 17, 1991 expressed his hope of being "given the chance to be recognized as a regular reporter." Private respondent's attitude in said letter is inconsistent with the notion that he had been dismissed.

Mapa Was Not Subject to Control of Petitioner

The most crucial test — the control test — demonstrates all too clearly the absence of an employer-employee relationship. No one at the DZRC had the power to regulate or control private respondents' activities or inputs. Unlike the regular reporters, he was not subject to any supervision by petitioner or its officials. Regular reporters "are required by the petitioner to adhere to a program schedule which delineates the time when they are to render their reports, as well as the topic to be reported upon. The substance of their reports are [sic] oftentimes screened by the station prior to [their] actual airing. In contrast, volunteer reporters are never given such a program schedule but are merely advised to inform the station of the reports they would make from time to time." 24

Indeed, DZRC, the petitioner's radio station, exercised no editorial rights over his reports. He had no fixed day or time for making his reports; in fact, he was not required to report anything at all. Whether he would air anything depended entirely on him and his convenience.

The absence of petitioner's control over private respondent is manifest from the sworn statement of the traffic manager of petitioner, Ignacio Casi, who deposed in part:

xxx xxx xxx

4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field reports, at a particular time and in a particular program. They render report as they wish or see fit;

5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa. They (sponsors) pay directly to him;

6. Being the Office Supervisor, I Know for a fact that Jun Mapa seldom renders report on the air. He has no assigned program either. He was on and off the air, so to speak;

WMSU LLB-2A Labor I

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7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already because his sponsors were no longer paying him of his monthly contract with them.

In Encyclopedia Britannica (Philippines) Inc., v. NLRC, 25 we reiterated that there could be no employer-employee relationship where "the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work[;] and in turn is compensated according to the result of his efforts and not the, amount thereof, we should not find that the relationship of employer-employee exists." In the present case, private respondent worked at his "own pleasure and [was] not subject to definite hours or conditions of work."

"Evidence" Found by NLRC Not Applicable

In its two-page 26 holding that there was an employer-employee relationship, the NLRC relied on the following:

(1) the payroll for February 16 to 29, 1992,

(2) the ID card issued to him as employee and regular reporter by the respondent,

(3) the program schedules of DZRC showing the regular program of the station indicating his name:

(4) the affidavit of Antonio Llarena, program supervisor of DZRC, stating that he [was] under his supervision, and

(5) the list of reporting gadgets issued to regular reporter.

Other than the items enumerated above, no other document was considered by the NLRC. In other words, its conclusion was based solely on these alleged pieces of evidence. It dearly committed grave abuse of discretion in its factual findings, because all the above documents relate to the period January 16, 1992 to February 28, 1992 and not to the period March 11, 1990 to January 15, 1992 which are the inclusive dates in controversy.

The payroll 27 from February 16, 1992 to February 27, 1992 does not demonstrate that private respondent was an employee prior to said period. Lest it be forgotten, the question in this case pertains to the status of private respondent from March 11, 1990 to January 15, 1992. The said payroll may prove that private respondent was an employee during said days in February 1992, but not for the period which is the subject of the present controversy.

Furthermore, neither the identification cards nor the SSS number printed at the back thereof indicate the date of issuance. Likewise, the SSS number does not show that he was a member during the period in controversy; much less, that he became so by reason of his employment with petitioner.

Similarly inapplicable is the program schedule 28 which allegedly showed the regular program of the station and indicated the name of private respondent as an employee. The document is a mere photocopy of a typewritten schedule. There is absolutely no indicium of its authenticity. Moreover, it is undated; hence, it does not indicate whether such schedule pertained to the period in dispute, that is, March 11, 1990 to January 15, 1992. Worse, the heading thereof was entitled "Radio DZRC Programming Proposal. [emphasis supplied]" A proposal is "put forth merely for consideration and acceptance." 29 It cannot, by itself, prove that such program was implemented and that private respondent acted as an employee of petitioner.

Neither does the list of returned gadgets support the conclusion of the NLRC. It must be stressed that such gadgets were essential to enable the private respondent to access the specific radio frequency and facilities of the radio station. Being exclusive properties of the radio station, such, gadgets could not have been purchased, as they were not commercially available. In any event, the list of returned gadgets was dated February 27, 1992 — again, a date not in controversy. Such document, by itself, does not prove that private respondent was an employee from March 20, 1990 to January 15, 1992.

WMSU LLB-2A Labor I

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The affidavit of Antonio Llarena 30, an employee of DZRC, stating that the private respondent was under his supervision, is vague, even misleading; it declared merely that Llarena was "in charge" of said respondent. Such language could not be construed to mean that he exercised supervision and control over private respondent.

Indubitably the NLRC based its findings of employer-employee relationship from the circumstances attendant when the private respondent was already a regular employee. Uncontroverted is the statement that the private respondent was a regular employee from January 16, 1992 to February 28, 1992, for which period he received all employee benefits. But such period, it must be stressed again, is not covered by private respondent's complaint.

In sum, the evidence, which Public Respondent NLRC, relies upon, does not justify the reversal of the labor arbiter's ruling which, in turn, we find amply supported by the records. Clearly, private respondent was not an employee during the period in question.

WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution are hereby SET ASIDE. The Order of the Labor Arbiter dated October 13, 1993 dismissing the case for lack of merit is hereby REINSTATED. No costs.

SO ORDERED.

David, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

Footnotes

1 The Division, composed of Comm. Joaquin A. Tanodra, ponente; Pres. Comm. Lourdes C. Javier and Comm. Ireneo B. Bernardo, concurring.

2 Rollo, p. 41.

3 Ibid, pp. 42-43.

4 Emeterio C. Ranola.

5 It should be noted, however, that private respondent was claiming unpaid benefits only for the period from March 11, 1990 to January 16, 1992.

6 Rollo, pp. 108-109.

7 Ibid., pp. 44-46; taken from the Position Statement, dated December 28, 1992, filed by Atty. Vicente G. Judar, counsel for private respondent, before the NLRC, Regional Arbitration Branch No. V, Legaspi City (Annex C, petition).

8 Rollo, pp. 319-324.

9 Should be March 11, 1990 to January 15, 1992.

10 Rollo, pp., 39-41; assailed Decision, pp. 3-5.

11 Ibid., pp. 110-123.

12 Rollo, pp. 42-43.

13 The case was deemed submitted for resolution on November 18, 1997 upon receipt by this Court of private respondent's manifestation adopting his comment and opposition as his memorandum.

14 Rollo, p. 13.

15 256 SCRA 84, April 2, 1996, per Regalado, J.

WMSU LLB-2A Labor I

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16 Loadstar Shipping Co., Inc. vs. Gallo 229 SCRA 654, February 4, 1994; Philippines Overseas Drilling and Oil Development Corporation vs. Ministry of Labor, et al., 146 SCRA 79, November 27, 1986.

17 Prieto vs. NLRC, 226 SCRA 232, September 10, 1993; Rapiz vs. NLRC, 207 SCRA 243, March 16, 1992; Llobrera vs. NLRC, 162 SCRA 788, June 28, 1988.

18 Tanala vs. National Labor Relations Commission, 252 SCRA 314, 319, January 24, 1996; Pantranco North Express, Inc. vs. NLRC, 239 SCRA 272, December 16, 1994; Prieto, et al. vs. NLRC, et al., 226 SCRA 232, September 10, 1993.

19 Bontia vs. NLRC, 255 SCRA 167, 173, March 18, 1996; Orcino vs. Civil Service Commission, 190 SCRA 811, October 18, 1990; Chong Guan Trading vs. NLRC, et al., 172 SCRA 831, April 26, 1989.

20 Singer Sewing Machine Company vs. Drilon, Chaguile, Jr., and Singer Machine Collectors Union-Bagui (SIMA CUB), 193 SCRA 270, January 24, 1991; Mafinco Trading Corporation vs. Ople, 70 SCRA 139, March 25, 1976; Development Bank of the Philippines vs. NLRC, 175 SCRA 537, July 21, 1989; Rosario Brothers, Inc. vs. Ople, 131 SCRA 72, July 31, 1984.

21 Rollo, p. 6.

22 Rollo, p. 7.

23 Rollo, p. 24.

24 Rollo, pp. 195-196; Reply to Comment, dated July 25, 1995, pp. 3-4.

25 264 SCRA 1, November 4, 1996, per Torres, J.

26 See pp. 4-5 of the 5-page assailed Decision.

27 Records, Vol. 2, p.19.

28 Records, Vol. 2, p. 21.

29 New World Dictionary, 2nd ed., p. 1140.

30 Records, p, 22.

WMSU LLB-2A Labor I

31

USHIO MARKETING VS NLRC


Manila

FIRST DIVISION

G.R. No. 124551 August 28, 1998

USHIO MARKETING, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and SEVERINO ANTONIO, respondents.

DAVIDE, JR., J.:

Petitioner urges us to annul the decision of 31 May 1995 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 008495-95 1 which

reversed the Labor Arbiter's 13 January 1995 decision in NLRC NCR Case No. 08-06147-94 and the NLRC's Order 2 of 29 February 1996 which denied petitioner's motion for reconsideration.

The factual and procedural antecedents are summarized by the public respondent NLRC in its Comment as follows:

Private respondent Severino Antonio was an electrician who worked within the premises of petitioner Ushio's car accessory shop in Banawe, Quezon City. On August 22, 1994, private respondent filed a complaint for illegal dismissal, non-payment of overtime pay, holiday pay, and other benefits against petitioner Ushio Marketing which was docketed as NLRC NCR Case No. 08-06147-94 and assigned to Labor Arbiter Facundo L. Leda.

On October 13, 1994, Labor Arbiter Leda directed the parties to file their respective papers within a non-extendible period of twenty-five (25) days. On November 4, 1994, petitioner filed a motion to dismiss, while private respondent failed to file his position paper.

In Petitioner's Motion to Dismiss, she alleged that it was a single proprietorship engaged in the business of selling automobile spare parts and accessories. Petitioner claimed that private respondent was not among her employees but a free lance operator who wait[ed] on the shop's customers should the latter require his services. Petitioner further alleges in her Motion to Dismiss the following:

5.0 In pursuit of its trading business, the company employs a handful of regular employees such as sales persons, clerks, account officers and the like. These employees are on the Company payroll and provided with all the privileges and benefits accorded by law to regular employees. These employees were selected and engaged by the management of the company and are paid their respective salaries regularly. They also have fixed working days and hours and are subject to disciplinary measures (such as reprimand, suspension or dismissal) should they violate company policies on tardiness, absences and general employment conduct. Simply put, the Company has full control over the manner by which the said employees perform their jobs.

WMSU LLB-2A Labor I

32

6.0 In stark contrast to the Company's regular employees, there are independent, free lance operators who are permitted by the Company to position themselves proximate to the Company premises. These independent operators are allowed by the Company to wait on Company customer who would be requiring their services. In exchange for the privileges of favorable recommendation by the Company and immediate access to customers in need of their services, these independent operators allow the Company to collect their service fee from the customer and this fee is given back to the independent operator at the end of the week. In effect, they do not earn fixed wages from the Company as their variable fees are earned by them from the customers of the Company. The Company has no control over and does not restrict the methodology or the means and manner by which these operators perform their work. These operators are not supervised by any employee of the Company since the results of their work is controlled by the customers who hire them. Likewise, the Company has no control as an employer over these operators. They are not subject to regular hours and days of work and may come and go as they wish. They are not subject to any disciplinary measures from the Company, save merely for the inherent rules of general behavior and good conduct.

7.0 Complainant was one such independent, free lance operator. He was allowed by the Company to provide his services to the customers of the Company who were in need of such services. He received his fees indirectly from the Company out of the fees paid by the customers during a given week. In doing his job, he was under the direct supervision and control of the customer. He was under no compulsion whatsoever to report to the Company on a regular basis. He was not subject to any disciplinary measures for his work conduct. Furthermore, he was free to position himself near other car accessory shops to offer his services to customers of said shops, as he is [sic] in fact had done on various occasions prior to the filing of this complaint.

Attached to the motion of the petitioner is an affidavit executed by Ms. Caroline Tan To, Assistant Manager of Share Motor Sales, also engaged in the business of selling car spare parts and accessories along Banawe Street, attesting to the following : that in the pursuit of the said business, it allows independent and free lance operators, such as electricians, to wait on customers who would want them to perform their services; and that she knows one independent operator by the name of Severino Antonio, as the latter had performed jobs [for] its customers.

On January 13, 1995, Labor Arbiter Facundo L. Leda premising on the allegations contained in the Motion to Dismiss submitted by the petitioner Company, issued an order dismissing the complaint of private respondent Severino Antonio against petitioner Ushio Marketing Corp.

On February 28, 1995, private respondent assisted by the Public Attorney's Office, appealed the order of the Honorable Labor Arbiter to the Commission. In his memorandum, private respondent alleged that Ushio Marketing hired his services on 15 November 1981 until July 3, 1994 as an electrician with a daily salary of one hundred thirty two pesos (P132.00) per day. He further alleged that:

During the employ of herein complainant with the respondents, he performed his job religiously and faithfully, in fact he was the most trusted employee in the company. For instance, Mrs. Tan, the employer, would ask him to go to the bank and withdraw money and deliver the purchased spare parts/accessories to the customer. If there was no driver, or they needed [a] handyman in the office and even in their household, Mrs. Tan would call for the complainant. He could be called, the employer's "personal assistant." However, despite his devotion and loyalty to his work as well as to his employer, his services were terminated by the respondents without legal grounds. When he reported for work on 3 July 1994, his

WMSU LLB-2A Labor I

33

employer would not let him inside the office because he was already dismissed from his job. He came [sic] back to the office for a number of times but his efforts proved futile. Hence, he instituted a complaint with this Honorable Office.

Attached to the private respondent's Memorandum of Appeal were affidavits of his co-electricians who worked with Ushio Marketing namely: Roberto Lopez and Narcing Pascua, corroborating the allegation that Mr. Severino Antonio worked with the petitioner Company as an electrician for the past four years when they have been working with the same Company; they were receiving One Hundred Thirty Two (P132.00) per day from Mrs. Tan, that they cannot be absent from work without the permission of Mrs. Tan; and that it was Mrs. Tan who gave them work when a client comes in. To quote:

4. Na ang suweldo ko at ni Severino na P132.00 isang araw ay kay Gng. Tan nanggagaling at hindi direktang ibinibigay ng kliyente;

5. Na hindi kami maaring lumiban sa aming trabaho nang hindi nagpapa[a]lam kay Gng. Tan;

6. Na si Gng. Tan ang nagbibigay sa amin ng trabaho kung mayroong dumarating na kliyente.

On May 31, 1995, the National Labor Relations Commission issued its decision holding that complainant is respondent's employee and that he was illegally dismissed. The dispositive portion of the decision reads as follows:

WHEREFORE, the appealed Order dated January 13, 1995 is hereby set aside. The respondent is directed to reinstate complainant with full backwages computed from August 3, 1994 until he is actually reinstated. Complainant's monetary claims presented as third issue on appeal is however remanded for further arbitration there being no substantial basis to grant or deny the same. (p. 6 NLRC's Decision) 3

The NLRC reversed the Labor Arbiter. It adopted private respondent's allegations in his complaint that he had "worked for respondent since '1988' as [an] 'electrician' [and] paid 'weekly every Sunday' at the rate of '132' pesos per clay;" and concluded that petitioner's arrangement as regards the mode of payment of private respondent's wages was "nothing but an evasive attempt to hide the real employment status of [private respondent]," considering that it could not understand why private respondent could not directly collect his earnings from a customer, immediately after private respondent accomplished a job for which he was hired; and why private respondent's proceeds from jobs rendered on a daily basis could only be paid to him on a weekly basis.

Petitioner's motion for reconsideration having been denied by the NLRC in its resolution of 29 February 1996 for "lack of palpable and patent errors," petitioner filed the instant petition, ascribing to the NLRC the commission of grave abuse of discretion in: (1) declaring private respondent as a regular employee; and (2) ignoring the accepted industry practices of car spare parts shop owners which are not contrary to law, public order and public policy.

Petitioner maintains that as it was private respondent who alleged the existence of an employer-employee relationship, the burden to prove the same by credible and relevant evidence thus lay with private respondent, especially since petitioner staunchly and consistently denied the same. Petitioner insists that the nature of its operations, as collaborated by the sworn statement of the assistant manager of a rival establishment, sufficiently established the real status of private respondent as a free lance operator performing assorted services like electrical jobs, installation of accessories and spare parts, and some minor repairs for petitioner's customers. Petitioner then concludes that the basic issue of whether private respondent was an employee should be resolved in the negative, considering that: (1) petitioner had no part in the selection and engagement of private respondent, its role merely limited to recommending private

WMSU LLB-2A Labor I

34

respondent's services to the former's customers; (2) private respondent was not paid a fixed regular wage, but only a service fee collected by petitioner from its customers and paid to private respondent at the end of the week; (3) private respondent was not included in petitioner's payroll and neither was the former reported as petitioner's employee to the Social Security System or the Bureau of Internal Revenue, citing Continental Marble Corporation v. NLRC (161 SCRA 151, 157 [1988]); (4) petitioner had no occasion to exercise its power to dismiss since petitioner never hired private respondent; and (5) petitioner did not exercise control and supervision over the means and methods by which private respondent performed his job, as private respondent practiced independent judgment as to the time and place of work and was not required to report on a regular basis and even allowed to service the customers of other auto supply shops. Additionally, petitioner had no liability, on account of private respondent's poor workmanship, to customers who chose to avail of private respondent's services and regulated his performance.

Petitioner further argues that it was a recognized and accepted trade practice peculiar to the auto spare parts shop industry operating along the stretch of Banawe Street, Quezon City, that shop owners would collect the service fees from its customers and disburse the same to the independent contractor at the end of a week. In fine, the shop owner and the independent contractor were partners in trade, "both benefiting from the proceeds of their joint efforts." This mutual cooperation between petitioner and private respondent could then be likened to that of a shoe shiner and a shoe shop

owner in Besa v. Trajano, 4 or that of a caddy and the golf club in Manila Golf Club, Inc. v. Intermediate Appellate Court. 5

In his comment, private respondent reiterates his arguments that he was an employee of petitioner, having worked for petitioner as an electrician from 15 November 1991 until 3 July 1994 with the following salary, to wit: 1981 -P20.00/day; 1983 - P21.00/day; 1989 - P75.00/day; 1990 - P100.00/day; 1991 -1994 - P132/day. Likewise, during private respondent's employ, he carried out various tasks as a driver, handyman, and "personal assistant" of petitioner. Private respondent could not be regarded an independent contractor since there was no written proof to support such a conclusion; his services as a handyman and an electrician for 13 years, more or less, were necessary in the operation of petitioner's business; he received a fixed salary instead of a commission; and he was dismissed and subjected to control by petitioner. Moreover, private respondent claims that the factual settings of Bess and Manila Golf and Country Club preclude their application to the instant case.

In its Manifestation in Lieu of Comment, the Office of the Solicitor General (OSG) supports the stand of petitioner and recommends the reversal of the challenged decision. The OSG asserts that there was no employer-employee relationship between the parties because the control test, being the most important element of an employer-employee relationship, was absent. The OSG then points out that there was no showing that petitioner supplied private respondent with equipment and tools; apart from private respondent's bare allegation that he could not leave the premises without petitioner's permission, it was not established that private respondent was under the control and supervision of petitioner or of its personnel; private respondent's admission that Mrs. Caroline Tan To referred jobs directly to him supports the notion that private respondent was not an employee, otherwise, Mrs. Tan To would have coursed the job orders for private respondent through petitioner; and the arrangement that petitioner would receive the service fees of private respondent from customers was not adequate to establish an employer-employee relationship.

In view of the stand of the OSG, we required the NLRC to file its Comment, if it so desired.

In its Comment filed on 1 August 1997, the NLRC argues, through its Legal and Enforcement Division, that it did not err in finding that there existed an employee-employer relationship between petitioner and private respondent for "[u]ndisputed are the facts that private respondent worked as an electrician within the premises of the petitioner's shop and would serve its customers when the latter so requires [and] [h]e was the one who closed and opened the shop of the petitioner and sometimes even asked to withdraw money and deliver purchased spare parts to petitioner's clients; [and] [h]e could be practically described as the 'personal assistant' of the manager, Mrs. Lilybeth Tan." Moreover, the NLRC derides petitioner's reliance on Besa v. Trajano, as the shoe shiners there collected their fees directly from the customers, which could not be said of private respondent here. Finally, the NLRC takes petitioner to task for attempting to capitalize on its failure to submit its payroll or Social Security remittances to refute private respondent's claims.

There is merit in the petition.

WMSU LLB-2A Labor I

35

It is not disputed that on 13 October 1994, Labor Arbiter Leda directed the parties to file their respective position papers within a non-extendible period of 25 days. Private respondent, however, failed to comply with this order. As to him then, there was no evidence extant on record to substantiate his allegations. On the other hand, on 4 November 1994, private respondent filed its motion to dismiss, duly verified by its sole proprietor, Lilybeth Tan. Said motion contained a statement of the case, a statement of facts, a statement of the issues involved, coupled with petitioner's position thereon and the arguments in support thereof. Moreover, attached to the motion and forming an integral part thereof was the affidavit of petitioner's business competitor, Mrs. Carolina Tan To, who corroborated private respondent's allegations as regards the nature of the automobile spare parts business and that private respondent was indeed an "independent operator." For all legal intents and purposes, the motion to dismiss sufficiently served as petitioner's position paper.

Under Section 3, Rule V of the New Rules of Procedure of the NLRC, should the parties fail to reach an amicable settlement, either in whole or in part, during the conference mandated by Section 2 thereof, the Labor Arbiter shall, inter alia, direct the parties to simultaneously file their respective verified position papers covering only those claims and causes of action raised in the complaint, but excluding those which may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses to take the place of the affiants' direct testimony. Thereafter, the parties shall not be allowed to allege facts, or present evidence to prove facts not referred to and any cause or causes of action not raised in the complaint or position papers, affidavits and other documents.

For failure then of private respondent to file his position paper, the Labor Arbiter acted correctly in taking into account only petitioner's motion to dismiss and thereafter dismissing private respondent's complaint.

It follows that in the exercise of its appellate jurisdiction, the NLRC cannot go beyond the pleadings and evidence submitted by the parties before the Labor Arbiter. However, we have sustained the action of the NLRC in allowing the

parties to submit additional evidence even during the pendency of an appeal, 6 in light of Article 221 of the Labor Code which provides that rules of evidence prevailing in courts of law or equity do not control the proceedings before Labor Arbiters and NLRC and that the Labor Arbiters and the NLRC should use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard for the technicalities of law or procedure.

Here, on appeal to the NLRC, private respondent alleged that his failure to submit his position paper before the Labor Arbiter was due to private respondent's having fallen victim to petitioner's misrepresentations as to the possibility of

arriving at an amicable settlement. To this end, private respondent submitted the affidavits 7 of Roberto Lopez and Narcing Pascua which, pursuant to Article 221 of the Labor Code discussed above, were properly admitted by the NLRC. A perusal of these affidavits, however, plainly shows that the avowals therein had no connection whatsoever with private respondent's claim of denial of procedural due process before the Labor Arbiter. Moreover, said affidavits, having been admitted by the NLRC on appeal, any defect in procedural due process must be deemed cured. Finally as to these affidavits, in the same vein as the rest of private respondent's cause, the declarations of the affiants were but mere sweeping statements, unsubstantiated and unsupportive of private respondent's allegations.

If only to underscore the paucity, if not absence, of evidence of private respondent, certainly falling short of the standard of substantial evidence governing proceedings before quasi-judicial bodies, we note that private respondent himself did not execute any affidavit, despite submitting the affidavits of Lopez and Pascua on appeal to the NLRC. Notably, neither did private respondent verify his Memorandum on Appeal filed with the NLRC, as only his counsel signed the Memorandum. All told, private respondent's dereliction of his duty to furnish some measure of probative value to his allegations mandates the grant of this petition.

Turning to the challenged decision and resolution of the NLRC, we note that in stark contrast to private respondent's

perfunctory advocacy, petitioner submitted a verified opposition 8 to private respondent's Memorandum, which reiterated petitioner's arguments in its Motion to Dismiss. To this, private respondent filed a reply 9 to the opposition, to which private respondent filed a rejoinder. 10

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The foregoing pleadings notwithstanding, the NLRC, in passing upon the merits of the case, failed to refer to any of the arguments raised therein, opting, instead, to confine its discussion solely to the assertions in the complaint and the motion to dismiss. Initially, as adverted to earlier, it would seem that the NLRC, in ruling for private respondent, merely took at face value and indiscriminately adopted private respondent's allegations that he had "worked for respondent since '1981' as [an] 'electrician' [and] paid 'weekly every Sunday' at the rate of '132' pesos per day," despite private respondent not having substantiated his allegations in the least.

What is most telling, however, is the NLRC's observation that "there [were] so many unexplained kinks in [petitioner's] theory of denial on [the existence of an] employer-employee relationship that we have no recourse but to rule that [private respondent] is [petitioner's employee]." Clearly, this observation cannot but be characterized as having been attended by grave abuse of discretion. Under the fact pattern of the instant petition, more so, the dearth of evidence in private respondent's favor, the NLRC should not have so readily afforded private respondent a presumption of the existence of an employer-employee relationship. The bare allegations in the complaint, the absence of an affidavit from private respondent, and the barren affidavits of Lopez and Pascua, could not, by any stretch, have furnished the particulars to justify the NLRC's conclusion. That private respondent's espousal failed to meet the standard of substantial evidence becomes all the more too painfully evident when considered in light of petitioner's arguments in its verified motion to dismiss and the supporting affidavit of petitioner's business competitor, akin to an admission against interest.

We hasten to add, however, that even if the NLRC had taken into account the various pleadings filed before it, as the same malady characterized those filed by private respondent, the conclusion would still be inevitable that the existence of an employer-employee relationship between the parties here was not proven by substantial evidence.

The factors to be considered in determining the existence of an employer-employee relationship are: (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. The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end. 11

We agree with the Office of the Solicitor General that here, the power to control the employee's conduct, i.e., the conduct of private respondent, is absent, thus:

First, private respondent contends that he worked as an electrician and personal assistant at petitioner's store. As [an] electrician, private respondent may be presumed to have used equipment or tools in rendering electrical services. If it is true that private respondent was an employee of petitioner, he would have used equipment or tools supplied and owned by his employer. However, private respondent failed to allege and present proof that petitioner supplied him equipment and tools.

Second, the conduct of private respondent was not subject to the control and supervision of petitioner or any of its personnel. There was no allegation of this, nor was evidence presented to prove it other than the bare allegation of private respondent that he could not leave the work premises without permission from petitioner. Private respondent himself decided how he would render electrical services to customers. If it is true that private respondent was hired as [an] electrician, petitioner would have exercised supervision and control over the, means and manner he performed his electrical services for, otherwise, if private respondent's work was unsatisfactory, it would reflect on the business of petitioner.

Third, private respondent was free to offer his services to other stores along Banaue, Quezon City, as evidenced by the affidavit of Caroline Tan To, Assistant Manager of Share Motor Sales (Annex B, Reply to Private Respondent's Comment dated August 5, 1996) and private respondent's own admission. But although private respondent admits that he rendered electrical services to the customers of other stores, he claims that petitioner allowed him to do so. If private respondent was an employee of

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petitioner, it was unthinkable for petitioner to allow private respondent to render electrical services to three other stores selling automobile spare parts and accessories who were its competitors.

Fourth, private respondent admits that "[i]t was Mrs. Tan who refers electrical and other jobs to private respondent" (p. 6, Private Respondent's Comment dated August 5, 1996). If private respondent was an employee of petitioner, Tan could not have referred electrical work directly to him. She would have to course job orders to petitioner. The fact that she dealt directly with private respondent means that she did not consider private respondent an employee of petitioner.

It is clear that petitioner did not have the power to control private respondent "[w]ith respect to the means and methods by which his work was to be accomplished" (Continental Marble Corporation. et al. vs. National Labor Relations Commission, 161 SCRA 151, 158 [1988]).

Lastly, private respondent allowed petitioner to collect service fees from his customers. He received said fees on a weekly basis. This arrangement, albeit peculiar, does not prove the existence of an employer-employee relationship. In Besa vs. Trajano, 146 SCRA 501, 506 [1986], the shoe shiner rendering services in the premises of Besa, received from Besa the payments for his services on a weekly basis. Yet the shoe shiner was not considered an employee of Besa. This is the same arrangement between petitioner and private respondent. 12

WHEREFORE, judgment is hereby rendered GRANTING the petition, REVERSING the challenged decision and resolution of the National Labor Relations Commission in NLRC-NCR CA No. 008495-95 and REINSTATING the Order of 13 January 1995 of the Labor Arbiter in NLRC-NCR Case No. 08-06147-94.

No pronouncement as to costs.

SO ORDERED.

Bellosillo, Vitug, Panganiban and Quisumbing, JJ., concur.

Footnotes

1 Annex "A" of Petition; Rollo, 20-26, Per Commissioner Vicente S.E. Veloso, with the concurrence of Presiding Commissioner Bartolome S. Carale and Commissioner Alberto R. Quimpo.

2 Annex "B," Id., 28-31.

3 Rollo, 110-114.

4 146 SCRA 501 [1986].

5 237 SCRA 207 [1994].

6 Haverton Shipping Ltd. v. NLRC, 135 SCRA 685, 691 [1985]; Bristol Laboratories Employees' Association v. NLRC, 187 SCRA 118, 121 [1990]; Lopez v. NLRC, 245 SCRA 644, 648-649 [1995]; Nagkakaisang Manggagawa sa SONY v. NLRC, 272 SCRA 209, 218-219 [1997].

7 Rollo, 63-64.

8 Original Record, 76-83.

9 Id., 99-102.

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10 Id., 90-95.

11 Encyclopedia Britannica (Phils.), Inc. v. NLRC, 264 SCRA 1, 6-7 [1996]; Progress Homes v. NLRC, 269 SCRA 274, 279 [1997].

12 Rollo, 96-99.

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