Cases for Laborel

7/30/2019 Cases for Laborel

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CASES for LABOREL

G.R. No. 124055 June 8, 2000

ROLANDO E. ESCARIO, NESTOR ANDRES, CESAR AMPER, LORETOBALDEMOR, EDUARDO BOLONIA, ROMEO E. BOLONIA, ANICETO

CADESIM, JOEL CATAPANG, NESTOR DELA CRUZ, EDUARDO

DUNGO ESCARIO REY, ELIZALDE ESTASIO, CAROLINO M. FABIAN,

RENATO JANER, EMER B. LIQUIGAN, ALEJANDRO MABAWAD,

FERNANDO M. MAGTIBAY, DOMINADOR B. MALLILLIN, NOEL B.

MANILA, VIRGILIO A. MANIO, ROMEO M. MENDOZA, TIMOTEO

NOTARION, FREDERICK RAMOS, JOSEPH REYES, JESSIE SEVILLA,

NOEL STO. DOMINGO, DODJIE TAJONERA, JOSELITO TIONLOC,

ARNEL UMALI, MAURLIE C. VIBAR, ROLANDO ZALDUA, RODOLFO

TUAZON, TEODORO LUGADA, MAURING MANUEL, MARCIANO

VERGARA, JR., ARMANDO IBASCO, CAYETANO IBASCO, LEONILO

MEDINA, JOSELITO ODO, MELCHOR BUELA, GOMER GOMEZ,

HENRY PONCE, RAMON ORTIZ, JR., ANTONIO MIJARES, JR., MARIO

DIZER, REYNANTE PEJO, ARNALDO RAFAEL, NELSON BERUELA,

AUGUSTO RAMOS, RODOLFO VALENTIN, ANTONIO CACAM,

VERNON VELASQUEZ, NORMAN VALLO, ALEJANDRO ORTIZ,

ROSANO VALLO, ANDREW ESPINOSA, EDGAR CABARDO, FIDELES

REYES, EDGARDO FRANCISCO, FERNANDO VILLARUEL, LEOPOLDO

OLEGARIO, OSCAR SORIANO, GARY RELOS, DANTE IRANZO,

RONALDO BACOLOR, RONALD ESGUERA, VICTOR ALVAREZ, JOSE

MARCELO, DANTE ESTRELLADO, MELQUIADES ANGELES,GREGORIO TALABONG, ALBERT BALAO, ALBERT CANLAS, CAMILO

VELASCO, PONTINO CHRISTOPHER, WELFREDO RAMOS,

REYNALDO RODRIGUEZ, RAZ GARIZALDE, MIGUEL TUAZON,

ROBERTO SANTOS, AND RICARDO MORTEL, petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION, CALIFORNIA

MANUFACTURING CO. INC. AND DONNA LOUISE ADVERTISING

AND MARKETING ASSOCIATES INCORPORATED, respondents.

D E C I S I O N

KAPUNAN,J.:

Before this Court is a petition for certiorariunder Rule 65, whichseeks to annul and set aside the decision, promulgated on 10 May

1995, of the National Labor Relations Commission (NLRC). The

assailed decision reversed the decision of the Labor Arbiter, and

ruled that the petitioners are employees of Donna Louise

Advertising and Marketing Associates, Inc. and ordered the

reinstatement of petitioners and the payment of backwages.

Private respondent California Marketing Co. Inc. (CMC) is a domestic

corporation principally engaged in the manufacturing of food

products and distribution of such products to wholesalers and

retailers. Private respondent Donna Louise Advertising and

Marketing Associates, Inc. (D.L. Admark) is a duly registered

promotional firm.

Petitioners worked as merchandisers for the products of CMC. Their

services were terminated on 16 March 1992.

The parties presented conflicting versions of the facts.

Petitioners allege that they were employed by CMC as

merchandisers. Among the tasks assigned to them were thewithdrawing of stocks from the warehouse, the fixing of prices,

price-tagging, displaying of merchandise, and the inventory of

stocks. These were done under the control, management and

supervision of CMC. The materials and equipment necessary in the

performance of their job, such as price markers, gun taggers, toys,

pentel pen, streamers and posters were provided by CMC. Their

salaries were being paid by CMC. According to petitioners, the

hiring, control and supervision of the workers and the payment of


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salaries, were all coursed by CMC through its agent D.L. Admark in

order for CMC to avoid its liability under the law.

On 7 February 1992, petitioners filed a case against CMC before the

Labor Arbiter for the regularization of their employment status.

During the pendency of the case before the Labor Arbiter, D.L.

Admark sent to petitioners notice of termination of their

employment effective 16 March 1992. Hence, their complaint was

amended so as to include illegal dismissal as cause of action.

Thereafter, twenty-seven more persons joined as complainants.

CMC filed a motion to implead as party-defendant D. L. Admark and

at the same time the latter filed a motion to intervene. Both

motions were granted.

CMC, on the other hand, denied the existence of an employer-

employee relationship between petitioner and itself. Rather, CMCcontended that it is D.L. Admark who is the employer of the

petitioners. While CMC is engaged in the manufacturing of food

products and distribution of such to wholesalers and retailers, it is

not allowed by law to engage in retail or direct sales to end

consumers. It, however, hired independent job contractors such as

D.L. Admark, to provide the necessary promotional activities for its

product lines.

For its part, D.L. Admark asserted that it is the employer of the

petitioners. Its primary purpose is to carry on the business ofadvertising, promotion and publicity, the sales and merchandising

of goods and services and conduct survey and opinion polls. As an

independent contractor it serves several clients among which

include Purefoods, Corona Supply, Firstbrand, Splash Cosmetics and

herein private respondent California Marketing.

On 29 July 1994, the Labor Arbiter rendered a decision finding that

petitioners are the employees of CMC as they were engaged in

activities that are necessary and desirable in the usual business or

trade of CMC.1In justifying its ruling, the Labor Arbiter cited the

case ofTabas vs. CMCwhich, likewise, involved private respondent

CMC. In the Tabas case, this Court ruled that therein petitioner

merchandisers were employees of CMC, to wit:

There is no doubt that in the case at bar, Livi performs "manpower

services," meaning to say, it contracts out labor in favor of clients.

We hold that it is one not withstanding its vehement claims to the

contrary and notwithstanding its vehement claims to the contrary,

and notwithstanding the provision of the contract that it is "an

independent contractor." The nature of ones business is not

determined by self-serving appellations one attaches thereto but by

the tests provided by statute and prevailing case law. The bare fact

that Livi maintains a separate line of business does not extinguish

the equal fact that it has provided California with workers to pursuethe latters own business. In this connection, we do not agree that

the petitioner has been made to perform activities "which are not

directly related to the general business of manufacturing,"

Californias purported "principal operation activity. The petitioners

had been charged with merchandising [sic] promotion or sale of the

products of [California] in the different sales outlets in Metro

Manila including task and occational [sic] price tagging," an activity

that is doubtless, an integral part of the manufacturing business. It

is not, then, as if Livi had served as its (Californias) promo tions or

sales arm or agent, or otherwise rendered a piece of work it(California) could not itself have done; Livi as a placement agency,

had simply supplied it with manpower necessary to carry out its

(Californias) merchandising activities, using its (Californias)

premises and equipment.2

On appeal, the NLRC set aside the decision of the Labor Arbiter. It

ruled that no employer-employee relationship existed between the

petitioners and CMC. It, likewise, held that D.L. Admark is a
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legitimate independent contractor, hence, the employer of the

petitioners. Finding no valid grounds existed for the dismissal of the

petitioners by D.L. Admark, it ordered their reinstatement. The

dispositive portion of the decision reads:

WHEREFORE, premises considered, the appealed judgment is

modified. Intervenor DL ADMARK is ordered to reinstate the eighty

one (81) complainants mentioned in the appealed decision to their

former positions with backwages from March 16, 1992 until they

are actually reinstated. The award of attorneys fees equivalent to

ten (10%) of the award is deleted for lack of basis.3

Petitioners filed a motion for reconsideration but the same was

denied by the NLRC for lack of merit.4

Hence, this petition.

In the main, the issue brought to fore is whether petitioners are

employees of CMC or D.L. Admark. In resolving this, it is necessary

to determine whether D.L. Admark is a labor-only contractor or an

independent contractor.

Petitioners are of the position that D.L. Admark is a labor-only

contractor and cites this Courts ruling in the case ofTabas, which

they claim is applicable to the case at bar for the following reasons:

1. The petitioners are merchandisers and the petitioners in

the Tabas case are also merchandisers who have the same

nature of work.

2. The respondent in this case is California Manufacturing

Co. Inc. while respondent in the Tabas case is the same

California Manufacturing Co. Inc.

3. The agency in the Tabas case is Livi Manpower Services.

In this case, there are at least, three (3) agencies namely:

the same Livi Manpower Services; the Rank Manpower

Services and D.L. Admark whose participation is to give and

pay the salaries of the petitioners and that the money came

from the respondent CMC as in the Tabas case.lawphi1

4. The supervision, management and/or control rest upon

respondent California Manufacturing Co. Inc. as found by

the Honorable Labor Arbiter which is also, true in the Tabas

Case.5

We cannot sustain the petition.

Petitioners reliance on theTabas case is misplaced. In said case, we

ruled that therein contractor Livi Manpower Services was a mere

placement agency and had simply supplied herein petitioner with

the manpower necessary to carry out the companys merchandising

activity. We, however, further stated that :

It would have been different, we believe, had Livi been discretely a

promotions firm, and that California had hired it to perform the

latters merchandising activities. For then, Livi would have been

truly the employer of its employees and California, its client. x x x.6

In other words, CMC can validly farm out its merchandisingactivities to a legitimate independent contractor.

There is labor-only contracting when the contractor or sub-

contractor merely recruits, supplies or places workers to perform a

job, work or service for a principal. In labor-only contracting, the

following elements are present:
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(a) The person supplying workers to an employer does not

have substantial capital or investment in the form of tools,

equipment, machineries, work premises, among others; and

(b) The workers recruited and placed by such person are

performing activities which are directly related to the

principal business of the employer.7

In contrast, there is permissible job contracting when a principal

agrees to put out or farm out with a contractor or a subcontractor

the performance or completion of a specific job, work or service

within a definite or predetermined period, regardless of whether

such job or work or service is to be performed or completed within

or outside the premises of the principal. In this arrangement, the

following conditions must concur:

(a)....The contractor carries on a distinct and independent

business and undertakes the contract work on his account

under his own responsibility according to his own manner

and method, free from the control and direction of his

employer or principal in all matters connected with the

performance of his work except as to the results thereof;

and

(b)....The contractor has substantial capital or investment in

the form of tools, equipment, machineries (sic), workpremises, and other materials which are necessary in the

conduct of his business.8

In the recent case of Alexander Vinoya vs. NLRC et al.,9this Court

ruled that in order to be considered an independent contractor it is

not enough to show substantial capitalization or investment in the

form of tools, equipment, machinery and work premises. In

addition, the following factors need be considered: (a) whether the

contractor is carrying on an independent business; (b) the nature

and extent of the work; (c) the skill required; (d) the term and

duration of the relationship; (e) the right to assign the performance

of specified pieces of work; (f) the control and supervision of the

workers; (g) the power of the employer with respect to the hiring,

firing and payment of workers of the contractor; (h) the control of

the premises; (i) the duty to supply premises, tools, appliances,

materials, and labor; and (j) the mode, manner and terms of

payment.10

Based on the foregoing criterion, we find that D.L. Admark is a

legitimate independent contractor.

Among the circumstances that tend to establish the status of D.L.

Admark as a legitimate job contractor are:

1) The SEC registration certificate of D.L. Admark states that

it is a firm engaged in promotional, advertising, marketing

and merchandising activities.

2) The service contract between CMC and D.L. Admark

clearly provides that the agreement is for the supply of sales

promoting merchandising services rather than one of

manpower placement.11

3) D.L. Admark was actually engaged in several activities,such as advertising, publication, promotions, marketing and

merchandising. It had several merchandising contracts with

companies like Purefoods, Corona Supply, Nabisco Biscuits,

and Licron. It was likewise engaged in the publication

business as evidenced by it magazine the "Phenomenon."12

4) It had its own capital assets to carry out its promotion

business. It then had current assets amounting to P6 million
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and is therefore a highly capitalized venture.13

It had an

authorized capital stock of P500,000.00. It owned several

motor vehicles and other tools, materials and equipment to

service its clients. It paid rentals of P30,020 for the office

space it occupied.

Moreover, by applying the four-fold test used in determining

employer-employee relationship, the status of D.L. Admark as the

true employer of petitioners is further established. The elements of

this test are (1) the selection and engagement of employee; (2) the

payment of wages; (3) the power of dismissal; and (4) the power to

control the employees conduct.14

As regards the first element, petitioners themselves admitted that

they were selected and hired by D.L. Admark.15

As to the second element, the NLRC noted that D.L. Admark was

able to present in evidence the payroll of petitioners, sample SSS

contribution forms filed and submitted by D.L. Admark to the SSS,

and the application for employment by R. de los Reyes, all tending

to show that D.L. Admark was paying for the petitioners salaries. In

contrast, petitioners did not submit an iota of evidence that it was

CMC who paid for their salaries. The fact that the agreement

between CMC and D.L. Admark contains the billing rate and cost

breakdown of payment for core merchandisers and coordinators

does not in any way establish that it was CMC who was paying fortheir salaries. As correctly pointed out by both CMC

16and the Office

of the Solicitor General,17

such cost breakdown is a standard

content of service contracts designed to insure that under the

contract, employees of the job contractor will receive benefits

mandated by law.

Neither did the petitioners prove the existence of the third element.

Again petitioners admitted that it was D.L. Admark who terminated

their employment.18

To prove the fourth and most important element of control,

petitioners presented the memoranda of CMCs sales and

promotions manager. The Labor Arbiter found that these memos

"indubitably show that the complainants were under the

supervision and control of the CMC people."19

However, as correctly

pointed out by the NLRC, a careful scrutiny of the documents

adverted to, will reveal that nothing therein would remotely suggest

that CMC was supervising and controlling the work of the

petitioners:

x x x The memorandums (Exhibit "B") were addressed to the store

or grocery owners telling them about the forthcoming salespromotions of CMC products. While in one of the memorandums a

statement is made that "our merchandisers and demonstrators will

be assigned to pack the premium with your stocks in the shelves x x

x, yet it does not necessarily mean to refer to the complainants, as

they claim, since CMC has also regular merchandisers and

demonstrators. It would be different if in the memorandums were

sent or given to the complainants and their duties or roles in the

said sales campaign are therein defined. It is also noted that in one

of the memorandums it was addressed to: "All regular

merchandisers/demonstrators." x x x we are not convinced that thedocuments sufficiently prove employer-employee relationship

between complainants and respondents CMC.20

The Office of the Solicitor General, likewise, notes that the

documents fail to show anything that would remotely suggest

control and supervision exercised by CMC over petitioners on the

matter on how they should perform their work. The memoranda

were addressed either to the store owners or "regular"
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merchandisers and demonstrators of CMC. Thus, petitioners, who

filed a complaint for regularization against respondent CMC,

thereby, conceding that they are not regular employees of the

latter, cannot validly claim to be the ones referred to in said

memos.21

Having proven the existence of an employer-employee relationship

between D.L. Admark and petitioners, it is no longer relevant to

determine whether the activities performed by the latter are

necessary or desirable to the usual business or trade of CMC.

On the issue of illegal dismissal, we agree with the findings of the

NLRC that D.L. Admark "admits having dismissed the petitioners for

allegedly disowning and rejecting them as their employer."

Undoubtedly, the reason given is not just cause to terminate

petitioners.22D.L. Admarks belated claim that the petitioners werenot terminated but simply did not report to work

23is not supported

by the evidence on record. Moreover, there is no showing that due

process was afforded the petitioners.

IN VIEW OF THE FOREGOING, finding no grave abuse of discretion

on the part of the National Labor Relations Commission, the

assailed decision is AFFIRMED in toto.

SO ORDERED.

Puno, Pardo, and Ynares-Santiago, JJ., concur.

Davide, Jr., C.J., (Chairman), on official leave abroad.

G.R. No. 112877 February 26, 1996

SANDIGAN SAVINGS and LOAN BANK, INC., and SANDIGAN REALTY

DEVELOPMENT CORPORATION,petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION and ANITA M.

JAVIER, respondents.

D E C I S I O N

HERMOSISIMA, JR.,J.:

This Petition for Certiorari, with prayer for the issuance of a

temporary restraining order, seeks to review, modify and/or set

aside the Resolution1dated 24 September 1993 and the

Resolution2dated 19 November 1993 of public respondent National

Labor Relations Commission (NLRC) in NLRC CAS RAB-III-05-1560-90.

The former affirmed, with modification, the Decision3of the LaborArbiter of the NLRC Regional Arbitration Branch No. III while the

latter denied the motion to reconsider the former.

Private respondent Anita M. Javier (hereinafter referred to as Javier)

worked as a realty sales agent of the petitioner Sandigan Realty

Development Corporation (hereinafter called the Sandigan Realty)

from November 2, 1982 (or November 9, 1982)4to November 30,

1986. Their agreement was that Javier would receive a 5%

commission for every sale, or if no sale was made, she would

receive a monthly allowance of P500,00.

Subsequently, that is, on 1 December 1986, Javier was hired as a

marketing collector of petitioner Sandigan Savings and Loan Bank

(hereinafter called the Sandigan Bank) by Angel Andan, the

President of both the Sandigan Bank and Sandigan Realty. Javier's

monthly salary and allowance were initially in the amount of

P788.00 and P585.00, respectively. These were adjusted thereafter

(the latest adjustment having been made on 1 July 1989), to
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P1,840.00 per month as salary and to P510.00 as monthly

allowance, per "Notice of Salary Adjustment."5

Meanwhile, respondent Javier continued to be a realty sales agent

of Sandigan Realty oh the side, and while she still received the 5%

commission on her sales, she no longer enjoyed the P500,00

monthly allowance.

On 20 April 1990, Javier was advised by Angel Andan not to report

for work anymore. This in effect was a notice of dismissal. The

manner by which her dismissal was effected has been correctly

described by the Solicitor General, thus:

On April 20, 1990, around 8:30 in the morning, while

performing her duties at the Bank, Javier saw and overhead

petitioner Andan summon the Bank's personnel officer,Mrs. Liberata G. Fajardo, and instruct her to prepare her

(Javier's) termination papers. Immediately thereafter,

Andan changed his mind and told Mrs. Fajardo to prepare

instead a resignation letter for Javier, saying, "Ayaw ko na

siyang makita sa susnod." Turning to private respondent, he

said, "Huwag na ninyong itanong kong anong dahilan,

basta't gusto ko, ito ang desisyon ko. Naawa lang ako sa iyo

noon kaya kita tinanggap. Ka Anita, huwag mong isipin na

may kinalaman ang mga pangyayari kay Ditas, wala, wala,

hindi iyon, basta't si Alice, iniskandalo na naman ako.

xxx xxx xxx

In the afternoon, after she received P50,000.00 from one

Mr. Ben Santos as full payment for a lot sold in Sta. Rita

Village, Guiguinto, Bulacan, Andan ordered Reynaldo

Bordado, her co-employee, to withdraw her commission of

P10,000.00 from the account of the Realty, saying, "Ibigay

mo sa ka Anita" yan para hindi na balikan dito.6

The advice of her termination notwithstanding, Javier reported for

work at the bank on the next working day or on 23 April 1990.

Though she signed the attendance sheet, she left when she could

not find her table.

On 18 May 1990, Javier filed a complaint against petitioners and

Angel Andan with the NLRC Regional Arbitration Branch No. III at

San Fernando, Pampanga, for illegal dismissal, seeking

reinstatement and payment of backwages and moral and exemplary

damages.

On 6 October 1992, the labor arbiter rendered judgment in private

respondent's favor, the dispositive portion of which reads:

WHEREFORE, considering the foregoing consideration, and

for having unjustly dismissed Anita Javier from her

employment, respondents are hereby directed to reinstate

her to her former position as marketing collector of

Sandigan Savings and Loan Bank and sales agent of

Sandigan Realty Development Corporation, pay her full

backwages from the time of her dismissal, plus 10%

attorney's fee and all her monetary award, until her actual

reinstatement, and P60,000.00 moral and exemplarydamages to compensate for her mental pain and anguish,

her social humiliation and besmirched reputation. Should

reinstatement be rendered impossible by virtue of the

abolition of her position as marketing collector, grant her, in

addition to backwages and other benefits, separation pay

equivalent to one (1) month for every year of service until

after this decision shall have become final and executory.7
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On appeal, the NLRC affirmed the decision of the Labor Arbiter in its

Resolution, dated 24 September 1993, but, deleting the award of

damages and attorney's fees, provided the following monetary

award of backwages and separation pay:

"Backwages: Fr: April 20, 1990-April 20, 1993 - 36 months

Realty: P500.00 (allowance) x 36 P18,000.00

Savings Bank: P2,400.00 x 36 P86,400.00

TOTAL P104,400.00

Separation Pay:

Realty: Nov. 2, 1982-April 20, 1993 - 10 years

P500.00 (allowance) x 10 P5,000.00

Savings Bank: Dec. 1, 1986-April 20, 1993 - 6 years

P2,400.00 x 6 P14,400.00

GRAND TOTAL P123,800.00"

The petitioners' Motion for Reconsideration of the said Resolution,

and that of the private respondent, were denied by the NLRC in its

Resolution, dated 19 November 1993, the dispositive portion of

which reads:

It appearing that the issues raised by both parties in theirMotions for Reconsideration were thoroughly discussed and

duly passed upon in the questioned Resolution promulgated

on September 24, 1993, the same are hereby denied for

lack of merit with finality.

No further motion for reconsideration shall be entertained.

The petitioners, thus, instituted this petition for certiorari,

contending that the NLRC gravely and seriously abused its discretion

in holding that:

1. Javier is a regular employee of both Sandigan Realty and

Sandigan Bank and entitled to backwages and separation

pay from both;

2. Javier was receiving P2,400.00 a month from the bank

and that she is entitled to separation pay for six years.8

The records disclose that petitioner Sandigan Bank no longer

disputes the finding that Javier was dismissed by it and that she did

not abandon her job thereat. In fact, it would have paid private

respondent the monetary award representing backwages and

separation pay adjudged against it in the assailed NLRC resolution, ifonly it found the same to be in the correct amount.

9

Consequently, the issues in this case are: (1) whether or not the

respondent NLRC abused its discretion in finding that private

respondent was a regular employee of the petitioner Sandigan

Realty, entitled to backwages and separation pay because of her

alleged illegal separation therefrom; and (2) whether the

computation of the monetary award owing to the private

respondent, as contained in the assailed NLRC resolution, was

attended with serious errors as to its bases both in fact and in law.

In determining the existence of an employer-employee relationship,

the following elements are generally considered: (1) the selection

and engagement of the employee; (2) the payment of wages; (3) the

power of dismissal; and (4) the employer's power to control the

employee with respect to the means and methods by which the

work is to be accomplished.10

This Court has generally relied on the

so called "right of control test" in making such a determination.
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Where the person for whom the services are performed reserves a

right to control not only the end to be achieved but also the means

by which such end is reached,11

the relationship is deemed to exist.

Stated differently, it is the power of control which is the most

determinative factor.12

It is deemed to be such an important factor

that the other requisites may even be disregarded.13Thus, in the

case ofCosmopolitan Funeral Homes, Inc. v. Maalat, it was held that

"to determine whether a person who performs work for another is

the latter's employee or is all independent contractor, the prevailing

test is 'the right of control test'." In the said case, the petitioner

therein failed to prove that the contract with private respondent

was that of a mere agency, an indication that subject person is free

to accomplish his work on his own terms and may engage in other

means of livelihood.14

Viewed in the light of the foregoing criteria, the features of therelationship between Javier and the Sandigan Realty, as may be

gleaned from the facts described herein below by the Office of the

Solicitor General, readily negate the existence of an employer-

employee relationship between them, the element of control being

noticeably absent.

Javier was hired in 1982 to sell houses or lots owned by the

Realty. She was paid 5% commission for every lot or house

sold. From 1982 up to 1986 when she was hired as a

marketing collector of petitioner bank, she received fromthe Realty P500.00 monthly allowance if she was unable to

make any sale. The P500.00 allowance ceased when she

became a regular employee of the petitioner bank.

Javier sold houses or lots according to the manner or means

she chose to. The petitioner realty firm, while interested in

the result of her work, had no control with respect to the

details of how the sale of a house or lot was achieved. She

was free to adopt her own selling methods or free to sell at

her own time. (cf.Insular Life Assurance Co., Ltd. v. NLRC,

179 SCRA 459 [1989]). Her obligation was merely to turn

over the proceeds of each sale to the Realty and, in turn,

the Realty paid her by the job, i.e., her commission, not by

the hour.

Moreover, selling houses and lots was merely her sideline

or extra work for a sister company.15

As it appears that Sandigan Realty had no control over the conduct

of Javier as a realty sales agent since its only concern or interest was

in the result of her work and not in how it was achieved, there

cannot now be any doubt that Javier was not an employee, much

less a regular employee of the Sandigan Realty. Hence, she cannot

be entitled to the right to security of tenure nor to backwages andseparation pay as a consequence of her separation therefrom.

Evidently, the legal relation of Javier to the Sandigan Realty can be

that of an independent contractor, where the control of the

contracting party is only with respect td the result of the work, as

distinguished from an employment relationship where the person

rendering service is under the control of the hirer with respect to

the details and manner of performance.16

In the case ofSara v. Agarrado, private respondent who sold palayand rice for the petitioners under an arrangement or agreement

that the former would be paid P2.00 commission per sack of milled

rice sold as well as a commission of 10% per kilo of palay

purchased,17

and that she would spend her own money for the

undertaking, and where she was shown to have worked for

petitioners at her own pleasure, that she was not subject to definite

hours or conditions of work, that she could even delegate the task

of buying and selling to others, if she so desired, or simultaneously
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engaged in other means of livelihood while selling and purchasing

rice or palay, was held to be an independent contractor.18

By the same token, the private respondent in another case, 19

who

earns on a per head/talent commission basis and who works as she

pleases, on her own schedule, terms and conditions was also held to

be an independent contractor.

Private respondent Anita Javier is clearly similarly placed as the

private respondents in the above-cited cases. Hence, she could not

have been a regular employee but an independent contractor in

relation to the petitioner Sandigan Realty.

As we hold that private respondent was not a regular employee of

the Sandigan Realty and that she could not, therefore, be entitled to

backwages and separation pay, we will necessarily have to limit ourtreatment of the alleged errors committed by the NLRC in the

computation of the monetary award to that adjudged against the

petitioner Sandigan Bank. But, first, we have to settle the question

as to whether reinstatement or payment of separation pay in its

stead is the proper relief to be accorded the private respondent, it

appearing that neither the labor arbiter nor the NLRC made a

definitive ruling on the matter. This has become especially more

significant since private respondent, in her Comment20

and

Memorandum,21

presses for an order of reinstatement to her

former position, claiming that there is no sufficient basis for a grantof separation pay in lieu thereof.

We agree with the private respondent in this respect.

Private respondent Anita Javier, by virtue of her employment status,

is, under the law entitled to security of tenure, which means that

she has the right to continue in employment until the same is

terminated under conditions required by law. Article 279 of the

Labor Code, as amended, clearly provides that:

Security of Tenure. - In cases of regular employment, the

employer shall not terminate the services of an employee

except for a just cause or when authorized by the Title. An

employee who is unjustly dismissed from work shall be

entitled to reinstatement without loss of seniority rights

and other privileges and to his full backwages, inclusive of

allowances, and to his other benefits or their monetary

equivalent computed from the time his compensation was

withheld from him up to the time of his actual

reinstatement.

There being a finding of illegal dismissal of private respondent Anita

Javier, her reinstatement should follow as a matter of course, unlessit be shown that the same is no longer possible, in which case,

payment of separation pay will be ordered, in lieu thereof.22

In this

case, we do not find any such showing or basis to preclude private

respondent's reinstatement.

In effect, the petitioner bank is liable to private respondent only for

backwages, inclusive of allowances, and other benefits or their

monetary equivalent computed from the time her compensation

was withheld from her up to the time of her actual reinstatement,

at the rate of her latest monthly salary and allowance which was inthe total amount of P2,350,00 as shown by Javier's latest "Notice of

Salary Adjustment". However, earnings derived elsewhere by Javier

from the date of dismissal up to the date of reinstatement, if there

be any, should be deducted from said backwages. 23

In this

connection, it must be pointed out that the NLRC applied the old

rule, otherwise known as the "Mercury Drug Rule", and so, as to the

rate of P2,400.00, no-evidence was presented as basis. The rule that

should apply in this case is that provided in Article 279 of the Labor
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Code, as amended by Section 34, Republic Act No. 6715, as

aforequoted, which took effect on March 21, 1989, considering that

the private respondent's dismissal occurred thereafter, or on April

20, 1990.

WHEREFORE, the petition is GRANTED. The assailed resolutions of

the National Labor Relations Commission, dated 24 September 1993

and 19 November 1993, are hereby modified to conform both to

our finding that private respondent was not a regular employee of

Sandigan Realty Development Corporation but of the Sandigan

Savings and Loan Bank, Inc. and to our determination respecting the

monetary award to which the private respondent is entitled. The

petitioner Sandigan Savings and Loan Bank, Inc. is hereby ordered to

reinstate private respondent Anita Javier and to pay her backwages

from April 20, 1990 up to the date of her actual reinstatement, less

earnings derived elsewhere, if any.

SO ORDERED.

Bellosillo, Vitug and Kapunan, JJ., concur.

Separate Opinions

PADILLA, J.: concurring and dissenting:

I concur in the ponencia of Mr. Justice Regino Hermosisima, Jr.

including its holding that because of the illegal dismissal, the

backwages to be awarded to the dismissed employee (Anita Javier)

should be reckoned from the date of illegal dismissal to date of

actual reinstatement (thereby departing from the "Mercury Drug

Rule"). Article 279 of the Labor Code as amended by Rep. Act No.

6715 provides for such a period as the basis in the computation of

backwages.

I do not however agree to the deduction from backwages of income

or salaries earned by the employee from elsewhere during the

period of his illegal dismissal. As I stated in my separate opinion

in Pines City Educational Center v. NLRCG.R. No. 96779, 10

November 1993, 227 SCRA 655:

xxx xxx xxx

The amendment to Art. 279 of the Labor Code introduced

by Rep. Act No. 6715 inserted the qualification " full" to the

word "backwages". The intent of the law seems to be clear.

The plain words of the statute provide that an employee

who is unjustly dismissed is entitled to FULL backwages

from the time of his dismissal to actual reinstatement. The

law provides no qualification nor does it state that income

earned by the employee during the period between hisunjust dismissal and reinstatement should be deducted

from such backwages. When the law does not provide, the

Court should not improvise.

It is further my view that the principle of unjust enrichment

(if no deduction is allowed from backwages) does not apply

in this case, for the following reasons:

1. The applicable provision of law should be

construed in favor of labor.

2. The Labor Code is special lawwhich should

prevail over the Civil Code provisions on unjust

enrichment.

3 The language employed by the statute and,

therefore, its intent are clear. Where the unjust

dismissal occurs after Rep. Act No. 6715 took effect,


12/58

backwages must be awarded from the time the

employee is unlawfully dismissed until the time he

is actually reinstated. There is no provision

authorizing deduction of any income earned by the

employee during that period. The statutory formula

was evidently crafted by the legislature not only for

convenience and expediency in executing the

monetary judgments in favor of the employees but

also to prevent the employer from reporting to

delaying tactics when the judgment is executed by

pleading income earned by the employee before

reinstatement as proper deductions from

backwages. It is true that the dismissed employee

may also resort to the same delaying tactics but

when we consider the by and large inherent

inequality of resources between employer andemployee, the legislative formula would seem to be

equitable. Besides and this we cannot over-stress -

given the language of the law, the Court appears to

have no alternative but to award such full

backwages without deduction or qualification. Any

other interpretation opens the Court to the charge

of indulging in judicial legislation.

I therefore vote to award private respondents Roland Picart and

Lucia Chan full backwages from time of their unjust dismissal totheir actual reinstatement, without deduction or qualification in

accordance with the mandate of the law. (Rep. Act No. 6715)."

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 acontract

1by 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 partof 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.


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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 isprohibited 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 specifiedcauses). ...

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 compensationsshall 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

complaint4

against the Company and its president. Without


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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 respondentcompany ..." 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 certiorariand 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 theLabor 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 notthe party who engages the services of another has the power to

control the 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 ofViana vs. Alejo Al-

Lagadan10

... In determining the existence of employer-

employee relationship, the following elements are

generally considered, namely: (1) the selection and


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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 arare 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-employeerelationship 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 ofemployees 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 System14

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


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commissions earned being payable to their legal representatives in

the event of death or registration; (b) required to put up

performance bonds; (c) subject to a set of rules and regulations

governing the performance of their duties under the agreement

with the company and termination of their services for certain

causes; (d) not required to report for work at any time, nor to

devote their time exclusively to working for the company nor to

submit a record of their activities, and who, finally, shouldered their

own selling and transportation expenses.

More recently, in Sara vs. NLRC,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, anindependent 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 thatany 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 isdismissed. No pronouncement as to costs.

SO ORDERED.

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

G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant,

vs.

PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL

RELATIONS, respondents-appellees.

x---------------------------------------------------------x

G.R. No. L-12598 January 28, 1961


17/58

SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.

PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL

RELATIONS, respondents-appellees.

Nicanor S. Sison for petitioner-appellant.

Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.

Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians

Guild.

CONCEPCION,J.:

Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc.

seek a review by certiorariof an order of the Court of Industrial

Relations in Case No. 306-MC thereof, certifying the Philippine

Musicians Guild (FFW), petitioner therein and respondent herein, asthe sole and exclusive bargaining agency of all musicians working

with said companies, as well as with the Premiere Productions, Inc.,

which has not appealed. The appeal of LVN Pictures, Inc., has been

docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the

appeal of Sampaguita Pictures, Inc. Involving as they do the same

order, the two cases have been jointly heard in this Court, and will

similarly be disposed of.

In its petition in the lower court, the Philippine Musicians Guild

(FFW), hereafter referred to as the Guild, averred that it is a dulyregistered legitimate labor organization; that LVN Pictures, Inc.,

Sampaguita Pictures, Inc., and Premiere Productions, Inc. are

corporations, duly organized under the Philippine laws, engaged in

the making of motion pictures and in the processing and

distribution thereof; that said companies employ musicians for the

purpose of making music recordings for title music, background

music, musical numbers, finale music and other incidental music,

without which a motion picture is incomplete; that ninety-five (95%)

percent of all the musicians playing for the musical recordings of

said companies are members of the Guild; and that the same has no

knowledge of the existence of any other legitimate labor

organization representing musicians in said companies. Premised

upon these allegations, the Guild prayed that it be certified as the

sole and exclusive bargaining agency for all musicians working in the

aforementioned companies. In their respective answers, the latter

denied that they have any musicians as employees, and alleged that

the musical numbers in the filing of the companies are furnished by

independent contractors. The lower court, however, rejected this

pretense and sustained the theory of the Guild, with the result

already adverted to. A reconsideration of the order complained of

having been denied by the Court en banc, LVN Pictures, inc., and

Sampaguita Pictures, Inc., filed these petitions for review

for certiorari.

Apart from impugning the conclusion of the lower court on the

status of the Guild members as alleged employees of the film

companies, the LVN Pictures, Inc., maintains that a petition for

certification cannot be entertained when the existence of employer-

employee relationship between the parties is contested. However,

this claim is neither borne out by any legal provision nor supported

by any authority. So long as, after due hearing, the parties are found

to bear said relationship, as in the case at bar, it is proper to pass

upon the merits of the petition for certification.

It is next urged that a certification is improper in the present case,

because, "(a) the petition does not allege and no evidence was

presented that the alleged musicians-employees of the respondents

constitute a proper bargaining unit, and (b) said alleged musicians-

employees represent a majority of the other numerous employees

of the film companies constituting a proper bargaining unit under

section 12 (a) of Republic Act No. 875."


18/58

The absence of an express allegation that the members of the Guild

constitute a proper bargaining unit is fatal proceeding, for the same

is not a "litigation" in the sense in which this term is commonly

understood, but a mere investigation of a non-adversary, fact

finding character, in which the investigating agency plays the part of

a disinterested investigator seeking merely to ascertain the desires

of employees as to the matter of their representation. In connection

therewith, the court enjoys a wide discretion in determining the

procedure necessary to insure the fair and free choice of bargaining

representatives by employees.1

Moreover, it is alleged in the

petition that the Guild it a duly registered legitimate labor

organization and that ninety-five (95%) percent of the musicians

playing for all the musical recordings of the film companies involved

in these cases are members of the Guild. Although, in its answer,

the LVN Pictures, Inc. denied both allegations, it appears that, at the

hearing in the lower court it was merely the status of the musiciansas its employees that the film companies really contested. Besides,

the substantial difference between the work performed by said

musicians and that of other persons who participate in the

production of a film, and the peculiar circumstances under which

the services of that former are engaged and rendered, suffice to

show that they constitute a proper bargaining unit. At this juncture,

it should be noted that the action of the lower court in deciding

upon an appropriate unit for collective bargaining purposes is

discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L.

ed. 145) and that its judgment in this respect is entitled to almostcomplete finality, unless its action is arbitrary or capricious

(Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891),

which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and

exclusive bargaining agency for the musicians working in the

aforesaid film companies. It does not intend to represent the other

employees therein. Hence, it was not necessary for the Guild to

allege that its members constitute a majority of all the employees of

said film companies, including those who are not musicians. The

real issue in these cases, is whether or not the musicians in question

are employees of the film companies. In this connection the lower

court had the following to say:

As a normal and usual course of procedure employed by the

companies when a picture is to be made, the producer

invariably chooses, from the musical directors, one who will

furnish the musical background for a film. A price is agreed

upon verbally between the producer and musical director

for the cost of furnishing such musical background. Thus,

the musical director may compose his own music specially

written for or adapted to the picture. He engages his own

men and pays the corresponding compensation of the

musicians under him.

When the music is ready for recording, the musicians are

summoned through 'call slips' in the name of the film

company (Exh 'D'), which show the name of the musician,

his musical instrument, and the date, time and place where

he will be picked up by the truck of the film company. The

film company provides the studio for the use of the

musicians for that particular recording. The musicians are

also provided transportation to and from the studio by the

company. Similarly, the company furnishes them meals atdinner time.

During the recording sessions, the motion picture director,

who is an employee of the company, supervises the

recording of the musicians and tells what to do in every

detail. He solely directs the performance of the musicians

before the camera as director, he supervises the

performance of all the action, including the musicians who


19/58

appear in the scenes so that in the actual performance to be

shown on the screen, the musical director's intervention has

stopped.

And even in the recording sessions and during the actual

shooting of a scene, the technicians, soundmen and other

employees of the company assist in the operation. Hence,

the work of the musicians is an integral part of the entire

motion picture since they not only furnish the music but are

also called upon to appear in the f inished picture.

The question to be determined next is what legal

relationship exits between the musicians and the company

in the light of the foregoing facts.

We are thus called upon to apply R.A. Act 875. which issubstantially the same as and patterned after the Wagner

Act substantially the same as a Act and the Taft-Hartley Law

of the United States. Hence, reference to decisions of

American Courts on these laws on the point-at-issue is

called for.

Statutes are to be construed in the light of purposes

achieved and the evils sought to be remedied. (U.S. vs.

American Tracking Association, 310 U.S. 534, 84 L. ed.

1345.) .

In the case ofNational Labor Relations Board vs. Hearts

Publication, 322 U.S. 111, the United States Supreme Court

said the Wagner Act was designed to avert the 'substantial

obstruction to the free flow of commerce which results

from strikes and other forms of industrial unrest by

eliminating the causes of the unrest. Strikes and industrial

unrest result from the refusal of employers' to bargain

collectively and the inability of workers to bargain

successfully for improvement in their working conditions.

Hence, the purposes of the Act are to encourage collective

bargaining and to remedy the workers' inability to

bargaining power, by protecting the exercise of full freedom

of association and designation of representatives of their

own choosing, for the purpose of negotiating the terms and

conditions of their employment.'

The mischief at which the Act is aimed and the remedies it

offers are not confined exclusively to 'employees' within the

traditional legal distinctions, separating them from

'independent contractor'. Myriad forms of service

relationship, with infinite and subtle variations in the term

of employment, blanket the nation's economy. Some are

within this Act, others beyond its coverage. Large numberswill fall clearly on one side or on the other, by whatever test

may be applied. Inequality of bargaining power in

controversies of their wages, hours and working conditions

may characterize the status of one group as of the other.

The former, when acting alone may be as helpless in dealing

with the employer as dependent on his daily wage and as

unable to resist arbitrary and unfair treatment as the latter.'

To eliminate the causes of labor dispute and industrial

strike, Congress thought it necessary to create a balance offorces in certain types of economic relationship. Congress

recognized those economic relationships cannot be fitted

neatly into the containers designated as 'employee' and

'employer'. Employers and employees not in proximate

relationship may be drawn into common controversies by

economic forces and that the very dispute sought to be

avoided might involve 'employees' who are at times

brought into an economic relationship with 'employers',


20/58

who are not their 'employers'. In this light, the language of

the Act's definition of 'employee' or 'employer' should be

determined broadly in doubtful situations, by underlying

economic facts rather than technically and exclusively

established legal classifications. (NLRB vs. Blount, 131 F [2d]

585.)

In other words, the scope of the term 'employee' must be

understood with reference to the purposes of the Act and

the facts involved in the economic relationship. Where all

the conditions of relation require protection, protection

ought to be given .

By declaring a worker an employee of the person for whom

he works and by recognizing and protecting his rights as

such, we eliminate the cause of industrial unrest andconsequently we promote industrial peace, because we

enable him to negotiate an agreement which will settle

disputes regarding conditions of employment, through the

process of collective bargaining.

The statutory definition of the word 'employee' is of wide

scope. As used in the Act, the term embraces 'any

employee' that is all employees in the conventional as well

in the legal sense expect those excluded by express

provision. (Connor Lumber Co., 11 NLRB 776.).

It is the purpose of the policy of Republic Act 875; (a) To

eliminate the causes of industrial unrest by protecting the

exercise of their right to self-organization for the purpose of

collective bargaining. (b) To promote sound stable industrial

peace and the advancement of the general welfare, and the

best interests of employers and employees by the

settlement of issues respecting terms and conditions of

employment through the process of collective bargaining

between employers and representatives of their employees.

The primary consideration is whether the declared policy

and purpose of the Act can be effectuated by securing for

the individual worker the rights and protection guaranteed

by the Act. The matter is not conclusively determined by a

contract which purports to establish the status of the

worker, not as an employee.

The work of the musical director and musicians is a

functional and integral part of the enterprise performed at

the same studio substantially under the direction and

control of the company.

In other words, to determine whether a person whoperforms work for another is the latter's employee or an

independent contractor, the National Labor Relations relies

on 'the right to control' test. Under this test an employer-

employee relationship exist 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 be used in reaching the end. (United Insurance

Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, theSupreme Court said:.

'We find that the independent contractors and

persons working under them are employees' within

the meaning of Section 2 (3) of its Act. However, we

are of the opinion that the independent contractors

have sufficient authority over the persons working

under their immediate supervision to warrant their


21/58

exclusion from the unit. We shall include in the unit

the employees working under the supervision of the

independent contractors, but exclude the

contractors.'

'Notwithstanding that the employees are called

independent contractors', the Board will hold them to be

employees under the Act where the extent of the

employer's control over them indicates that the relationship

is in reality one of employment. (John Hancock Insurance

Co., 2375-D, 1940, Teller, Labor Dispute Collective

Bargaining, Vol.).

The right of control of the film company over the musicians

is shown (1) by calling the musicians through 'call slips' in

'the name of the company; (2) by arranging schedules in itsstudio for recording sessions; (3) by furnishing

transportation and meals to musicians; and (4) by

supervising and directing in detail, through the motion

picture director, the performance of the musicians before

the camera, in order to suit the music they are playing to

the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent

decisions of the United States Courts on the matter to the

facts established in this case, we cannot but conclude thatto effectuate the policies of the Act and by virtue of the

'right of control' test, the members of the Philippine

Musicians Guild are employees of the three film companies

and, therefore, entitled to right of collective bargaining

under Republic Act No. 875.

In view of the fact that the three (3) film companies did not

question the union's majority, the Philippine Musicians

Guild is hereby declared as the sole collective bargaining

representative for all the musicians employed by the film

companies."

We are fully in agreement with the foregoing conclusion and the

reasons given in support thereof. Both are substantially in line with

the spirit of our decision in MaligayaShipWatchmen Agency vs.

Associated Watchmen and Security Union, L-12214-17 (May 28,

1958). In fact, the contention of the employers in

theMaligaya cases, to the effect that they had dealt with

independent contractors, was stronger than that of the film

companies in these cases. The third parties with whom the

management and the workers contracted in theMaligaya cases

were agencies registeredwith the Bureau of Commerce and duly

licensed by the City of Manila to engage in the business of supplying

watchmen to steamship companies, with permits to engage in saidbusiness issued by the City Mayorand the Collector of Customs. In

the cases at bar, the musical directors with whom the film

companies claim to have dealt with had nothing comparable to the

business standing of said watchmen agencies. In this respect, the

status of said musical directors is analogous to that of the alleged

independent contractor in Caro vs. Rilloraza, L-9569 (September 30,

1957), with the particularity that the Carocase involved

the enforcement of the liabilityof an em

Documents

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