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FIRSTDIVISION

[G.R.No.138051.June10,2004]

JOSE Y. SONZA, petitioner, vs. ABSCBN BROADCASTING CORPORATION,

respondent.
DECISION
CARPIO,J.:

TheCase
[1]

[2]

BeforethisCourtisapetitionforreviewoncertiorari assailingthe26March1999Decision of
the Court of Appeals in CAG.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
(SONZA). The Court of Appeals affirmed the findings of the National Labor Relations Commission
(NLRC),whichaffirmedtheLaborArbitersdismissalofthecaseforlackofjurisdiction.
TheFacts
InMay1994,respondentABSCBNBroadcastingCorporation(ABSCBN)signedanAgreement
(Agreement)withtheMelandJayManagementandDevelopmentCorporation(MJMDC). ABSCBN
was represented by its corporate officers while MJMDC was represented by SONZA, as President
andGeneralManager,andCarmelaTiangco(TIANGCO),asEVPandTreasurer.Referredtointhe
Agreement as AGENT, MJMDC agreed to provide SONZAs services exclusively to ABSCBN as
talentforradioandtelevision.TheAgreementlistedtheservicesSONZAwouldrendertoABSCBN,
asfollows:
a.CohostforMel&Jayradioprogram,8:00to10:00a.m.,MondaystoFridays
[3]

b.CohostforMel&Jaytelevisionprogram,5:30to7:00p.m.,Sundays.

ABSCBNagreedtopayforSONZAsservicesamonthlytalentfeeofP310,000forthefirstyear
andP317,000forthesecondandthirdyearoftheAgreement.ABSCBNwouldpaythetalentfeeson
the10thand25thdaysofthemonth.
On1April1996,SONZAwrotealettertoABSCBNsPresident,EugenioLopezIII,whichreads:
DearMr.Lopez,
WewouldliketocallyourattentiontotheAgreementdatedMay1994enteredintobyyourgoodselfonbehalf
ofABSCBNwithourcompanyrelativetoourtalentJOSEY.SONZA.
Asyouarewellaware,Mr.Sonzairrevocablyresignedinviewofrecenteventsconcerninghisprogramsand
career.WeconsidertheseactsofthestationviolativeoftheAgreementandthestationasinbreachthereof.In
thisconnection,weherebyservenoticeofrescissionofsaidAgreementatourinstanceeffectiveasofdate.
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Mr.Sonzainformedusthatheiswaivingandrenouncingrecoveryoftheremainingamountstipulatedin
paragraph7oftheAgreementbutreservestherighttoseekrecoveryoftheotherbenefitsundersaidAgreement.
Thankyouforyourattention.
Verytrulyyours,
(Sgd.)
JOSEY.SONZA
[4]
PresidentandGen.Manager
On 30 April 1996, SONZA filed a complaint against ABSCBN before the Department of Labor
andEmployment,NationalCapitalRegioninQuezonCity.SONZAcomplainedthatABSCBNdidnot
pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowanceandamountsdueundertheEmployeesStockOptionPlan(ESOP).
On10July1996,ABSCBNfiledaMotiontoDismissonthegroundthatnoemployeremployee
relationshipexistedbetweentheparties.SONZAfiledanOppositiontothemotionon19July1996.
Meanwhile, ABSCBN continued to remit SONZAs monthly talent fees through his account at
PCIBank,QuezonAvenueBranch,QuezonCity.InJuly1996,ABSCBNopenedanewaccountwith
thesamebankwhereABSCBNdepositedSONZAstalentfeesandotherpaymentsduehimunder
theAgreement.
[5]

In his Order dated 2 December 1996, the Labor Arbiter denied the motion to dismiss and
directedthepartiestofiletheirrespectivepositionpapers.TheLaborArbiterruled:
Inthisinstantcase,complainantforhavinginvokedaclaimthathewasanemployeeofrespondentcompany
untilApril15,1996andthathewasnotpaidcertainclaims,itissufficientenoughastoconferjurisdictionover
theinstantcaseinthisOffice.Andastowhetherornotsuchclaimwouldentitlecomplainanttorecoverupon
thecausesofactionassertedisamattertoberesolvedonlyafterandasaresultofahearing.Thus,the
respondentspleaoflackofemployeremployeerelationshipmaybepleadedonlyasamatterofdefense.It
behoovesuponitthedutytoprovethattherereallyisnoemployeremployeerelationshipbetweenitandthe
complainant.
TheLaborArbiterthenconsideredthecasesubmittedforresolution.Thepartiessubmittedtheir
positionpaperson24February1997.
On11March1997,SONZAfiledaReplytoRespondentsPositionPaperwithMotiontoExpunge
RespondentsAnnex4andAnnex5fromtheRecords.Annexes4and5areaffidavitsofABSCBNs
witnessesSoccoroVidanesandRolandoV.Cruz.Thesewitnessesstatedintheiraffidavitsthatthe
prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independentcontractors.
The Labor Arbiter rendered his Decision dated 8July1997 dismissing the complaint for lack of
[6]

jurisdiction. Thepertinentpartsofthedecisionreadasfollows:
xxx
WhilePhilippinejurisprudencehasnotyet,withcertainty,touchedonthetruenatureofthecontractofatalent,
itstandstoreasonthatatalentasabovedescribedcannotbeconsideredasanemployeebyreasonofthe
peculiarcircumstancessurroundingtheengagementofhisservices.
Itmustbenotedthatcomplainantwasengagedbyrespondentbyreasonofhispeculiarskillsandtalentas
aTVhostandaradiobroadcaster.Unlikeanordinaryemployee,hewasfreetoperformtheserviceshe
undertooktorenderinaccordancewithhisownstyle.ThebenefitsconferredtocomplainantundertheMay
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1994Agreementarecertainlyverymuchhigherthanthosegenerallygiventoemployees.Forone,complainant
SonzasmonthlytalentfeesamounttoastaggeringP317,000.Moreover,hisengagementasatalentwascovered
byaspecificcontract.Likewise,hewasnotboundtorendereight(8)hoursofworkperdayasheworkedonly
forsuchnumberofhoursasmaybenecessary.
ThefactthatpertheMay1994Agreementcomplainantwasaccordedsomebenefitsnormallygiventoan
employeeisinconsequential.Whateverbenefitscomplainantenjoyedarosefromspecificagreementbythe
partiesandnotbyreasonofemployeremployeerelationship.Ascorrectlyputbytherespondent,Allthese
benefitsaremerelytalentfeesandothercontractualbenefitsandshouldnotbedeemedassalaries,wagesand/or
otherremunerationaccordedtoanemployee,notwithstandingthenomenclatureappendedtothesebenefits.
Apropostothisistherulethatthetermornomenclaturegiventoastipulatedbenefitisnotcontrolling,butthe
intentofthepartiestotheAgreementconferringsuchbenefit.
ThefactthatcomplainantwasmadesubjecttorespondentsRulesandRegulations,likewise,doesnot
detractfromtheabsenceofemployeremployeerelationship.AsheldbytheSupremeCourt,Thelineshould
bedrawnbetweenrulesthatmerelyserveasguidelinestowardstheachievementofthemutuallydesiredresult
withoutdictatingthemeansormethodstobeemployedinattainingit,andthosethatcontrolorfixthe
methodologyandbindorrestrictthepartyhiredtotheuseofsuchmeans.Thefirst,whichaimonlytopromote
theresult,createnoemployeremployeerelationshipunlikethesecond,whichaddressboththeresultandthe
meanstoachieveit.(InsularLifeAssuranceCo.,Ltd.vs.NLRC,etal.,G.R.No.84484,November15,1989).
[7]

xxx(Emphasissupplied)

SONZAappealedtotheNLRC.On24February1998, the NLRC rendered a Decision affirming

theLaborArbitersdecision.SONZAfiledamotionforreconsideration,whichtheNLRCdeniedinits
Resolutiondated3July1998.
On6October1998,SONZAfiledaspecialcivilactionforcertioraribeforetheCourtofAppeals
assailingthedecisionandresolutionoftheNLRC.On26March1999,theCourtofAppealsrendered
[8]

aDecisiondismissingthecase.
Hence,thispetition.

TheRulingsoftheNLRCandCourtofAppeals
TheCourtofAppealsaffirmedtheNLRCsfindingthatnoemployeremployeerelationshipexisted
between SONZA and ABSCBN. Adopting the NLRCs decision, the appellate court quoted the
followingfindingsoftheNLRC:
xxxtheMay1994AgreementwillreadilyrevealthatMJMDCenteredintothecontractmerelyasanagentof
complainantSonza,theprincipal.Byallindicationandasthelawputsit,theactoftheagentistheactofthe
principalitself.Thisfactismadeparticularlytrueinthiscase,asadmittedlyMJMDCisamanagementcompany
devotedexclusivelytomanagingthecareersofMr.Sonzaandhisbroadcastpartner,Mrs.CarmelaC.Tiangco.
(OppositiontoMotiontoDismiss)
Clearly,therelationsofprincipalandagentonlyaccruesbetweencomplainantSonzaandMJMDC,andnot
betweenABSCBNandMJMDC.ThisisclearfromtheprovisionsoftheMay1994Agreementwhich
specificallyreferredtoMJMDCastheAGENT.Asamatteroffact,whencomplainanthereinunilaterally
rescindedsaidMay1994Agreement,itwasMJMDCwhichissuedthenoticeofrescissioninbehalfofMr.
Sonza,whohimselfsignedthesameinhiscapacityasPresident.
Moreover,previouscontractsbetweenMr.SonzaandABSCBNrevealthefactthathistorically,thepartiesto
thesaidagreementsareABSCBNandMr.Sonza.AnditisonlyintheMay1994Agreement,whichisthelatest
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AgreementexecutedbetweenABSCBNandMr.Sonza,thatMJMDCfiguredinthesaidAgreementasthe
agentofMr.Sonza.
WefinditerroneoustoassertthatMJMDCisamerelaboronlycontractorofABSCBNsuchthatthereexist[s]
employeremployeerelationshipbetweenthelatterandMr.Sonza.Onthecontrary,Wefinditindubitable,that
MJMDCisanagent,notofABSCBN,butofthetalent/contractorMr.Sonza,asexpresslyadmittedbythelatter
andMJMDCintheMay1994Agreement.
Itmaynotbeamisstostatethatjurisdictionovertheinstantcontroversyindeedbelongstotheregularcourts,the
samebeinginthenatureofanactionforallegedbreachofcontractualobligationonthepartofrespondent
appellee.AssquarelyapparentfromcomplainantappellantsPositionPaper,hisclaimsforcompensationfor
services,13thmonthpay,signingbonusandtravelallowanceagainstrespondentappelleearenotbasedonthe
LaborCodebutratherontheprovisionsoftheMay1994Agreement,whilehisclaimsforproceedsunderStock
PurchaseAgreementarebasedonthelatter.AportionofthePositionPaperofcomplainantappellantbears
perusal:
Under[theMay1994Agreement]withrespondentABSCBN,thelattercontractuallybounditselftopay
complainantasigningbonusconsistingofsharesofstockswithFIVEHUNDREDTHOUSANDPESOS
(P500,000.00).
Similarly,complainantisalsoentitledtobepaid13thmonthpaybasedonanamountnotlowerthantheamount
hewasreceivingpriortoeffectivityof(the)Agreement.
Underparagraph9of(theMay1994Agreement),complainantisentitledtoacommutabletravelbenefit
amountingtoatleastOneHundredFiftyThousandPesos(P150,000.00)peryear.
Thus,itispreciselybecauseofcomplainantappellantsownrecognitionofthefactthathiscontractualrelations
withABSCBNarefoundedontheNewCivilCode,ratherthantheLaborCode,thatinsteadofmerely
resigningfromABSCBN,complainantappellantserveduponthelatteranoticeofrescissionofAgreement
withthestation,perhisletterdatedApril1,1996,whichassertedthatinsteadofreferringtounpaidemployee
benefits,heiswaivingandrenouncingrecoveryoftheremainingamountstipulatedinparagraph7ofthe
AgreementbutreservestherighttosuchrecoveryoftheotherbenefitsundersaidAgreement.(Annex3ofthe
respondentABSCBNsMotiontoDismissdatedJuly10,1996).
Evidently,itispreciselybyreasonoftheallegedviolationoftheMay1994Agreementand/ortheStock
PurchaseAgreementbyrespondentappelleethatcomplainantappellantfiledhiscomplaint.Complainant
appellantsclaimsbeinganchoredontheallegedbreachofcontractonthepartofrespondentappellee,thesame
canberesolvedbyreferencetocivillawandnottolaborlaw.Consequently,theyarewithintherealmofcivil
lawand,thus,liewiththeregularcourts.AsheldinthecaseofDaiChiElectronicsManufacturingvs.
Villarama,238SCRA267,21November1994,anactionforbreachofcontractualobligationisintrinsically
[9]

acivildispute. (Emphasissupplied)
The Court of Appeals ruled that the existence of an employeremployee relationship between
SONZAandABSCBNisafactualquestionthatiswithinthejurisdictionoftheNLRCtoresolve.

[10]

[11]

specialcivilactionforcertiorariextendsonlytoissuesofwantorexcessofjurisdictionoftheNLRC.
Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which
[12]
servedasbasisoftheNLRCsconclusion. TheCourtofAppealsaddedthatitcouldnotreexamine
[13]

thepartiesevidenceandsubstitutethefactualfindingsoftheNLRCwithitsown.
TheIssue

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InassailingthedecisionoftheCourtofAppeals,SONZAcontendsthat:
THECOURTOFAPPEALSGRAVELYERREDINAFFIRMINGTHENLRCSDECISIONANDREFUSING
TOFINDTHATANEMPLOYEREMPLOYEERELATIONSHIPEXISTEDBETWEENSONZAANDABS
CBN,DESPITETHEWEIGHTOFCONTROLLINGLAW,JURISPRUDENCEANDEVIDENCETO
SUPPORTSUCHAFINDING.

[14]

TheCourtsRuling
Weaffirmtheassaileddecision.
NoconvincingreasonexiststowarrantareversalofthedecisionoftheCourtofAppealsaffirming
theNLRCrulingwhichupheldtheLaborArbitersdismissalofthecaseforlackofjurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudencedefineclearlytheelementsofanemployeremployeerelationship,thisisthefirsttime
thattheCourtwillresolvethenatureoftherelationshipbetweenatelevisionandradiostationandone
ofitstalents.Thereisnocaselawstatingthataradioandtelevisionprogramhostisanemployeeof
thebroadcaststation.
Theinstantcaseinvolvesbignamesinthebroadcastindustry,namelyJoseJaySonza,aknown
televisionandradiopersonality,andABSCBN,oneofthebiggesttelevisionandradionetworksinthe
country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employeeofABSCBN.Ontheotherhand,ABSCBNinsiststhattheLaborArbiterhasnojurisdiction
becauseSONZAwasanindependentcontractor.
EmployeeorIndependentContractor?
Theexistenceofanemployeremployeerelationshipisaquestionoffact.Appellatecourtsaccord
the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when
[15]

supported by substantial evidence.

Substantial evidence means such relevant evidence as a

[16]

reasonable mind might accept as adequate to support a conclusion. A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in
[17]

determiningwheretheweightofevidenceliesorwhatevidenceiscredible.

SONZAmaintainsthatallessentialelementsofanemployeremployeerelationshiparepresentin
thiscase.Caselawhasconsistentlyheldthattheelementsofanemployeremployeerelationshipare:
(a) the selection and engagement of the employee (b) the payment of wages (c) the power of
dismissaland(d)theemployerspowertocontroltheemployeeonthemeansandmethodsbywhich
[18]

the work is accomplished.

[19]
element.

The last element, the socalled control test, is the most important

A.SelectionandEngagementofEmployee
ABSCBN engaged SONZAs services to cohost its television and radio programs because of
SONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion used by
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respondentinspecificallyselectingandhiringcomplainantoverotherbroadcastersofpossiblysimilar
experienceandqualificationascomplainantbeliesrespondentsclaimofindependentcontractorship.
Independentcontractorsoftenpresentthemselvestopossessuniqueskills,expertiseortalentto
distinguishthemfromordinaryemployees.ThespecificselectionandhiringofSONZA,because of
his unique skills, talent and celebrity status not possessed by ordinary employees, is a
circumstanceindicative,butnotconclusive,ofanindependentcontractualrelationship.IfSONZAdid
notpossesssuchuniqueskills,talentandcelebritystatus,ABSCBNwouldnothaveenteredintothe
AgreementwithSONZAbutwouldhavehiredhimthroughitspersonneldepartmentjustlikeanyother
employee.
Inanyevent,themethodofselectingandengagingSONZAdoesnotconclusivelydeterminehis
status.Wemustconsiderallthecircumstancesoftherelationship,withthecontroltestbeingthemost
importantelement.
B.PaymentofWages
ABSCBNdirectlypaidSONZAhismonthlytalentfeeswithnopartofhisfeesgoingtoMJMDC.
SONZAassertsthatthismodeoffeepaymentshowsthathewasanemployeeofABSCBN.SONZA
alsopointsoutthatABSCBNgrantedhimbenefitsandprivilegeswhichhewouldnothaveenjoyedif
heweretrulythesubjectofavalidjobcontract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement.IfSONZAwereABSCBNsemployee,therewouldbenoneedforthepartiestostipulate
[20]

on benefits such as SSS, Medicare, x x x and 13th month pay

[21]

incorporates into every employeremployee contract.

which the law automatically

Whatever benefits SONZA enjoyed arose

fromcontractandnotbecauseofanemployeremployeerelationship.

[22]

SONZAstalentfees,amountingtoP317,000monthlyin the second and third year, are so huge

andoutoftheordinarythattheyindicatemoreanindependentcontractualrelationshipratherthanan
employeremployee relationship. ABSCBN agreed to pay SONZA such huge talent fees precisely
becauseofSONZAsuniqueskills,talentandcelebritystatusnotpossessedbyordinaryemployees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.
ThepaymentoftalentfeesdirectlytoSONZAandnottoMJMDCdoesnotnegatethestatusof
SONZAasanindependentcontractor.Thepartiesexpresslyagreedonsuchmodeofpayment.Under
the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any
talentfeeaccruingundertheAgreement.
C.PowerofDismissal
For violation of any provision of the Agreement, either party may terminate their relationship.
SONZAfailedtoshow that ABSCBN could terminate his services on groundsotherthanbreachof
[23]

contract,suchasretrenchmenttopreventlossesasprovidedunderlaborlaws.

DuringthelifeoftheAgreement,ABSCBNagreedtopaySONZAstalentfeesaslongasAGENT
[24]

andJaySonzashallfaithfullyandcompletelyperformeachconditionofthisAgreement. Evenifit
sufferedseverebusinesslosses,ABSCBNcouldnotretrenchSONZAbecauseABSCBNremained
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obligatedtopaySONZAstalentfeesduringthelifeoftheAgreement.Thiscircumstanceindicatesan
independentcontractualrelationshipbetweenSONZAandABSCBN.
SONZAadmitsthatevenafterABSCBNceasedbroadcastinghisprograms,ABSCBNstillpaid
himhistalentfees.Plainly,ABSCBNadheredtoitsundertakingintheAgreementtocontinuepaying
SONZAstalentfeesduringtheremaininglifeoftheAgreementevenifABSCBNcancelledSONZAs
programsthroughnofaultofSONZA.

[25]

SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admissionthatheisnotanemployeeofABSCBN.TheLaborArbiterstatedthatifitweretruethat
complainant was really an employee, he would merely resign, instead. SONZA did actually resign
fromABSCBNbuthealso,aspresidentofMJMDC,rescindedtheAgreement.SONZAsletterclearly
[26]

bearsthisout. However,themannerbywhichSONZAterminatedhisrelationshipwithABSCBNis
immaterial.WhetherSONZArescindedtheAgreementorresignedfromworkdoesnotdeterminehis
statusasemployeeorindependentcontractor.
D.PowerofControl
Sincethereisnolocalprecedentonwhetheraradioandtelevisionprogramhostisanemployee
oranindependentcontractor,werefertoforeigncaselawinanalyzingthepresentcase.TheUnited
States Court of Appeals, First Circuit, recently held in AlbertyVlez v. Corporacin De Puerto Rico
[27]

Para La Difusin Pblica (WIPR) that a television program host is an independent contractor. We
quotethefollowingfindingsoftheU.S.court:
SeveralfactorsfavorclassifyingAlbertyasanindependentcontractor.First,atelevisionactressisaskilled
positionrequiringtalentandtrainingnotavailableonthejob.xxxInthisregard,Albertypossessesa
mastersdegreeinpubliccommunicationsandjournalismistrainedindance,singing,andmodelingtaughtwith
thedramadepartmentattheUniversityofPuertoRicoandactedinseveraltheaterandtelevisionproductions
priortoheraffiliationwithDesdeMiPueblo.Second,Albertyprovidedthetoolsandinstrumentalities
necessaryforhertoperform.Specifically,sheprovided,orobtainedsponsorstoprovide,thecostumes,
jewelry,andotherimagerelatedsuppliesandservicesnecessaryforherappearance.Albertydisputesthatthis
factorfavorsindependentcontractorstatusbecauseWIPRprovidedtheequipmentnecessarytotapetheshow.
Albertysargumentismisplaced.TheequipmentnecessaryforAlbertytoconductherjobashostofDesdeMi
Pueblorelatedtoherappearanceontheshow.Othersprovidedequipmentforfilmingandproducingtheshow,
butthesewerenottheprimarytoolsthatAlbertyusedtoperformherparticularfunction.Ifweacceptedthis
argument,independentcontractorscouldneverworkoncollaborativeprojectsbecauseotherindividualsoften
providetheequipmentrequiredfordifferentaspectsofthecollaboration.xxx
Third,WIPRcouldnotassignAlbertyworkinadditiontofilmingDesdeMiPueblo.Albertyscontracts
withWIPRspecificallyprovidedthatWIPRhiredherprofessionalservicesasHostessfortheProgramDesde
MiPueblo.ThereisnoevidencethatWIPRassignedAlbertytasksinadditiontoworkrelatedtothesetapings.x
[28]

xx

(Emphasissupplied)

Applying the control test to the present case, we find that SONZA is not an employee but an
independentcontractor.Thecontroltestisthemostimportanttestourcourtsapplyindistinguishing
[29]

anemployeefromanindependentcontractor. Thistestisbasedontheextentofcontrolthehirer
exercisesoveraworker.Thegreaterthesupervisionandcontrolthehirerexercises,themorelikely
the worker is deemed an employee. The converse holds true as well the less control the hirer
[30]

exercises,themorelikelytheworkerisconsideredanindependentcontractor.

First,SONZAcontendsthatABSCBNexercisedcontroloverthemeansandmethodsofhiswork.
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SONZAsargumentismisplaced.ABSCBNengagedSONZAsservicesspecificallytocohostthe
Mel & Jay programs. ABSCBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
andsoundedonradiowereoutsideABSCBNscontrol.SONZAdidnothavetorendereighthoursof
workperday.TheAgreementrequiredSONZAtoattendonlyrehearsalsandtapingsoftheshows,as
[31]

well as pre and postproduction staff meetings. ABSCBN could not dictate the contents of
SONZAsscript.However,theAgreementprohibitedSONZAfromcriticizinginhisshowsABSCBNor
[32]

itsinterests. TheclearimplicationisthatSONZAhadafreehandonwhattosayordiscussinhis
showsprovidedhedidnotattackABSCBNoritsinterests.
We find that ABSCBN was not involved in the actual performance that produced the finished
[33]

product of SONZAs work. ABSCBN did not instruct SONZA how to perform his job. ABSCBN
merely reserved the right to modify the program format and airtime schedule for more effective
[34]

programming. ABSCBNs sole concern was the quality of the shows and their standing in the
ratings.Clearly, ABSCBN did not exercise control over the means and methods of performance of
SONZAswork.
SONZAclaimsthatABSCBNspowernottobroadcasthisshowsprovesABSCBNspowerover
themeansandmethodsoftheperformanceofhiswork.AlthoughABSCBNdidhavetheoptionnot
tobroadcastSONZAsshow,ABSCBNwasstillobligatedtopaySONZAstalentfees.Thus, even if
ABSCBN was completely dissatisfied with the means and methods of SONZAs performance of his
work,orevenwiththequalityorproductofhiswork,ABSCBNcouldnotdismissorevendiscipline
SONZA.AllthatABSCBNcoulddoisnottobroadcastSONZAsshowbutABSCBNmuststillpayhis
[35]

talentfeesinfull.

Clearly,ABSCBNsrightnottobroadcastSONZAsshow,burdenedasitwasbytheobligationto
continuepayinginfullSONZAstalentfees,didnotamounttocontroloverthemeansandmethodsof
the performance of SONZAs work. ABSCBN could not terminate or discipline SONZA even if the
means and methods of performance of his work how he delivered his lines and appeared on
televisiondidnotmeetABSCBNsapproval.ThisprovesthatABSCBNscontrolwaslimitedonlyto
the result of SONZAs work, whether to broadcast the final product or not.In either case, ABSCBN
muststillpaySONZAstalentfeesinfulluntiltheexpiryoftheAgreement.
[36]

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that
vaudevilleperformerswereindependentcontractorsalthoughthemanagementreservedtherightto
delete objectionable features in their shows. Since the management did not have control over the
mannerofperformanceoftheskillsoftheartists,itcouldonlycontroltheresultoftheworkbydeleting
objectionablefeatures.

[37]

SONZA further contends that ABSCBN exercised control over his work by supplying all
equipment and crew. No doubt, ABSCBN supplied the equipment, crew and airtime needed to
broadcasttheMel&Jayprograms.However,theequipment,crewandairtimearenotthetoolsand
instrumentalitiesSONZAneededtoperformhisjob.WhatSONZAprincipallyneededwerehistalent
[38]

orskillsandthecostumesnecessaryforhisappearance. EventhoughABSCBNprovidedSONZA
with the place of work and the necessary equipment, SONZA was still an independent contractor
sinceABSCBNdidnotsuperviseandcontrolhiswork.ABSCBNssoleconcernwasforSONZAto
[39]
displayhistalentduringtheairingoftheprograms.
[40]

Aradiobroadcastspecialistwhoworksunderminimalsupervisionisanindependentcontractor.
SONZAsworkastelevisionandradioprogramhostrequiredspecialskillsandtalent,whichSONZA
admittedlypossesses.TherecordsdonotshowthatABSCBNexercisedanysupervisionandcontrol
overhowSONZAutilizedhisskillsandtalentinhisshows.
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Second,SONZAurgesustorulethathewasABSCBNsemployeebecauseABSCBNsubjected
him to its rules and standards of performance. SONZA claims that this indicates ABSCBNs control
notonly[over]hismannerofworkbutalsothequalityofhiswork.
The Agreement stipulates that SONZA shall abide with the rules and standards of performance
[41]

coveringtalents ofABSCBN.TheAgreementdoesnotrequireSONZAtocomplywiththerules
andstandardsofperformanceprescribedforemployeesofABSCBN.Thecodeofconductimposed
onSONZAundertheAgreementreferstotheTelevisionandRadioCodeoftheKapisananngmga
BroadcastersaPilipinas(KBP),whichhasbeenadoptedbytheCOMPANY(ABSCBN)asitsCodeof
[42]

Ethics. The KBP code applies to broadcasters, not to employees of radio and television stations.
Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and
standards of performance referred to in the Agreement are those applicable to talents and not to
employeesofABSCBN.
Inanyevent,notallrulesimposedbythehiringpartyonthehiredpartyindicatethatthelatteris
[43]

an employee of the former. In this case, SONZA failed to show that these rules controlled his
performance.Wefindthatthesegeneralrulesaremerelyguidelinestowardstheachievementofthe
mutuallydesiredresult,whicharetopratingtelevisionandradioprogramsthatcomplywithstandards
oftheindustry.Wehaveruledthat:
Further,noteveryformofcontrolthatapartyreservestohimselfovertheconductoftheotherpartyinrelation
totheservicesbeingrenderedmaybeaccordedtheeffectofestablishinganemployeremployeerelationship.
ThefactsofthiscasefallsquarelywiththecaseofInsularLifeAssuranceCo.,Ltd.vs.NLRC.Insaidcase,we
heldthat:
Logically,thelineshouldbedrawnbetweenrulesthatmerelyserveasguidelinestowardstheachievementof
themutuallydesiredresultwithoutdictatingthemeansormethodstobeemployedinattainingit,andthosethat
controlorfixthemethodologyandbindorrestrictthepartyhiredtotheuseofsuchmeans.Thefirst,whichaim
onlytopromotetheresult,createnoemployeremployeerelationshipunlikethesecond,whichaddressboththe
[44]

resultandthemeansusedtoachieveit.

TheVaughancasealsoheldthatonecouldstillbeanindependentcontractoralthoughthehirer
reservedcertainsupervisiontoinsuretheattainmentofthedesiredresult.The hirer, however, must
notdeprivetheonehiredfromperforminghisservicesaccordingtohisowninitiative.

[45]

Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of
controlwhichABSCBNexercisedoverhim.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employeeofABSCBN.Evenanindependentcontractorcanvalidlyprovidehisservicesexclusivelyto
thehiringparty.Inthebroadcastindustry,exclusivityisnotnecessarilythesameascontrol.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
[46]

industry. Thispracticeisnotdesignedtocontrolthemeansandmethodsofworkofthetalent,but
simply to protect the investment of the broadcast station. The broadcast station normally spends
substantialamountsofmoney,timeandeffortinbuildingupitstalentsaswellastheprogramsthey
appear in and thus expects that said talents remain exclusive with the station for a commensurate
[47]

periodoftime. Normally,amuchhigherfeeispaidtotalentswhoagreetoworkexclusivelyfora
particularradioortelevisionstation.Inshort,thehugetalentfeespartiallycompensatesforexclusivity,
asinthepresentcase.
MJMDCasAgentofSONZA
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SONZAproteststheLaborArbitersfindingthatheisatalentofMJMDC,whichcontractedouthis
servicestoABSCBN.TheLaborArbiterruledthatasatalentofMJMDC,SONZAisnotanemployee
ofABSCBN.SONZAinsiststhatMJMDCisalaboronlycontractorandABSCBNishisemployer.
In a laboronly contract, there are three parties involved: (1) the laboronly contractor (2) the
employeewhoisostensiblyundertheemployofthelaboronlycontractorand(3)theprincipalwhois
deemed the real employer. Under this scheme, the laboronly contractor is the agent of the
principal.Thelawmakestheprincipalresponsibletotheemployeesofthelaboronlycontractorasif
[48]

theprincipalitselfdirectlyhiredoremployedtheemployees.
inthiscase.

Thesecircumstancesarenotpresent

ThereareessentiallyonlytwopartiesinvolvedundertheAgreement,namely,SONZAandABS
CBN.MJMDCmerelyactedasSONZAsagent.TheAgreementexpresslystatesthatMJMDCacted
astheAGENTofSONZA.TherecordsdonotshowthatMJMDCactedasABSCBNsagent.MJMDC,
whichstandsforMelandJayManagementandDevelopmentCorporation,isacorporationorganized
and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by
SONZA, acted as agent of ABSCBN in entering into the Agreement with SONZA, who himself is
representedbyMJMDC.ThatwouldmakeMJMDCtheagentofbothABSCBNandSONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the
careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
[49]

agentofSONZAorTIANGCOtopromotetheircareersinthebroadcastandtelevisionindustry.
PolicyInstructionNo.40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the
typesofemployeesinthebroadcastindustryarethestationandprogramemployees.
PolicyInstructionNo.40isamereexecutiveissuancewhichdoesnothavetheforceandeffectof
law.ThereisnolegalpresumptionthatPolicyInstructionNo.40determinesSONZAsstatus.Amere
executiveissuancecannotexcludeindependentcontractorsfromtheclassofserviceproviderstothe
broadcastindustry.Theclassificationofworkersinthebroadcastindustryintoonlytwogroupsunder
PolicyInstructionNo.40isnotbindingonthisCourt,especiallywhentheclassificationhasnobasis
eitherinlaworinfact.
AffidavitsofABSCBNsWitnesses
SONZAalsofaultstheLaborArbiterforadmittingtheaffidavitsofSocorroVidanesandRolando
Cruz without giving his counsel the opportunity to crossexamine these witnesses. SONZA brands
thesewitnessesasincompetenttoattestontheprevailingpracticeintheradioandtelevisionindustry.
SONZAviewstheaffidavitsofthesewitnessesasmisleadingandirrelevant.
While SONZA failed to crossexamine ABSCBNs witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to
conductaformal(trialtype)hearingafterthesubmissionofthepositionpapersoftheparties,thus:
Section3.SubmissionofPositionPapers/Memorandum
xxx
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Theseverifiedpositionpapersshallcoveronlythoseclaimsandcausesofactionraisedinthecomplaint
excludingthosethatmayhavebeenamicablysettled,andshallbeaccompaniedbyallsupportingdocuments
includingtheaffidavitsoftheirrespectivewitnesseswhichshalltaketheplaceofthelattersdirecttestimony.xx
x
Section4.DeterminationofNecessityofHearing.Immediatelyafterthesubmissionofthepartiesoftheir
positionpapers/memorandum,theLaborArbitershallmotupropiodeterminewhetherthereisneedforaformal
trialorhearing.Atthisstage,hemay,athisdiscretionandforthepurposeofmakingsuchdetermination,ask
clarificatoryquestionstofurtherelicitfactsorinformation,includingbutnotlimitedtothesubpoenaofrelevant
[50]

documentaryevidence,ifanyfromanypartyorwitness.

The Labor Arbiter can decide a case based solely on the position papers and the supporting
[51]

documents without a formal trial.

The holding of a formal hearing or trial is something that the

[52]

partiescannotdemandasamatterofright. IftheLaborArbiterisconfidentthathecanrelyonthe
documents before him, he cannot be faulted for not conducting a formal trial, unless under the
particularcircumstancesofthecase,thedocumentsaloneareinsufficient.Theproceedingsbeforea
LaborArbiterarenonlitigiousinnature.Subjecttotherequirementsofdueprocess,thetechnicalities
oflawandtherulesobtaininginthecourtsoflawdonotstrictlyapplyinproceedingsbeforeaLabor
Arbiter.
TalentsasIndependentContractors
ABSCBN claims that there exists a prevailing practice in the broadcast and entertainment
industriestotreattalentslikeSONZAasindependentcontractors.SONZAarguesthatifsuchpractice
exists,itisvoidforviolatingtherightoflabortosecurityoftenure.
[53]

TherightoflabortosecurityoftenureasguaranteedintheConstitution arisesonlyifthereis
an employeremployee relationship under labor laws. Not every performance of services for a fee
creates an employeremployee relationship. To hold that every person who renders services to
anotherforafeeisanemployeetogivemeaningtothesecurityoftenureclausewillleadtoabsurd
results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independentcontractor.Anindividuallikeanartistortalenthasarighttorenderhisserviceswithout
anyonecontrollingthemeansandmethodsbywhichheperformshisartorcraft.ThisCourtwillnot
interpret the right of labor to security of tenure to compel artists and talents to render their services
onlyasemployees.Ifradioandtelevisionprogramhostscanrendertheirservicesonlyasemployees,
thestationownersandmanagerscandictatetotheradioandtelevisionhostswhattheysayintheir
shows.Thisisnotconducivetofreedomofthepress.
DifferentTaxTreatmentofTalentsandBroadcasters
[54]

The National Internal Revenue Code (NIRC)

in relation to Republic Act No. 7716,

[55]

as

[56]

amended by Republic Act No. 8241, treats talents, television and radio broadcasters differently.
UndertheNIRC,theseprofessionalsaresubjecttothe10%valueaddedtax(VAT)onservicesthey
render.ExemptedfromtheVATarethoseunderanemployeremployeerelationship.
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[57]

Thisdifferent
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taxtreatmentaccordedtotalentsandbroadcastersboltersourconclusionthattheyareindependent
contractors,providedallthebasicelementsofacontractualrelationshiparepresentasinthiscase.
NatureofSONZAsClaims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay,
serviceincentiveleave,signingbonus,travelallowance,andamountsdueundertheEmployeeStock
OptionPlan.WeagreewiththefindingsoftheLaborArbiterandtheCourtofAppealsthatSONZAs
claimsareallbasedontheMay1994Agreementandstockoptionplan,andnotontheLabor
Code.Clearly,thepresentcasedoesnotcallforanapplicationoftheLaborCodeprovisionsbutan
interpretationandimplementationoftheMay1994Agreement.Ineffect,SONZAscauseofactionis
forbreachofcontractwhichisintrinsicallyacivildisputecognizablebytheregularcourts.

[58]

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26
March1999inCAG.R.SPNo.49190isAFFIRMED.Costsagainstpetitioner.
SOORDERED.
Davide,Jr.,C.J.,(Chairman),Panganiban,YnaresSantiago,andAzcuna,JJ.,concur.
[1]
[2]

[3]
[4]
[5]
[6]
[7]
[8]
[9]

UnderRule45oftheRulesofCourt.
Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias and Marina L. Buzon
concurring.
Rollo,p.150.
Ibid.,p.204.
DonatoG.Quinto,Jr.
Rollo,pp.114130.
Ibid.,pp.123125.
Ibid.,p.39.
Rollo,pp.3739.

[10]
[11]

Ibid.,p.39.

Ibid.

[12]
[13]
[14]
[15]

Ibid.
Ibid.
Ibid.,p.269.
FleischerCompany,Inc.v. National Labor Relations Commission, G.R. No. 121608, 26 March 2001, 355 SCRA 105
AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47 Cathedral
SchoolofTechnologyv.NLRC,G.R.No.101438,13October1992,214SCRA551.SeealsoIgnaciov.CocaCola
BottlersPhils.,Inc.,417Phil.747(2001)Gonzalesv.NationalLaborRelationsCommission,G.R.No.131653,26
March2001,355SCRA195SandiganSavingsandLoanBank,Inc.v.NLRC,324Phil.348(1996)MagnoliaDairy
ProductsCorporationv.NLRC,322Phil.508(1996).

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[16]
[17]
[18]

[19]
[20]

[21]

[22]

SonzavsABSCBN:138051:June10,2004:J.Carpio:FirstDivision:Decision

Madlosv.NLRC,324Phil.498(1996).
Domasigv.NationalLaborRelationsCommission,G.R.No.118101,16September1996,261SCRA779.
DeLosSantosv.NLRC,423Phil.1020(2001)TradersRoyalBankv.NLRC,378Phil.1081(1999)AboitizShipping
EmployeesAssociationv.NationalLaborRelationsCommission,G.R.No.78711,27June1990,186SCRA825
Rugav.NationalLaborRelationsCommission,G.R.Nos.7265461,22January1990,181SCRA266.
Ibid.
Paragraph10oftheAgreementprovides:TheCOMPANYshallprovidehimwiththefollowingbenefits:SSS,Medicare,
Healthcare, executive life and accident insurance, and a 13thmonth pay based on an amount not lower than the
amounthewasreceivingpriortotheeffectivityofthisAgreement.
PresidentialDecreeNo.851(RequiringAllEmployerstoPaytheirEmployeesa13thmonthPay)forthe13thmonthpay
Republic Act No. 1161 (Social Security Law) for the SSS benefits and Republic Act No. 7875 (National Health
InsuranceActof1995)forthePhilhealthinsurance.
Article1157oftheCivilCodeexplicitlyprovides:

Obligationsarisefrom:
(1)Law
(2)Contracts
(3)Quasicontracts
(4)Actsoromissionspunishedbylawand
(5)Quasidelicts.(Emphasissupplied)
[23]
[24]

[25]

[26]

SeeArticle283,LaborCode.
Paragraph7oftheAgreementstates:ProvidedthattheAGENTandJaySonzashallfaithfullyandcompletelyperform
eachconditionofthisAgreementforandinconsiderationoftheaforesaidservicesbytheAGENTanditstalent,the
COMPANYagreestopaytheAGENTforthefirstyearofthisAgreementtheamountofTHREEHUNDREDTEN
THOUSANDPESOSONLY(P310,000.00)permonth,payableonthe10thand25thofeachmonth.Forthesecond
and third year of this Agreement, the COMPANY shall pay the amount of THREE HUNDRED SEVENTEEN
THOUSANDPESOSONLY(P317,000.00)permonth,payablelikewiseonthe10thand25thoftheeachmonth.
Paragraph11oftheAgreementstates:IntheeventofcancellationofthisAgreementthroughnofaultoftheAGENTand
itstalent,COMPANYagreestopaythefullamountspecifiedinthisAgreementfortheremainingperiodcoveredby
thisAgreement,providedthatthetalentshallnotrenderanyservicefororinanyotherradioortelevisionproduction
ofanyperson,firm,corporationoranyentitycompetingwiththeCOMPANYuntiltheexpiryhereof.
TheopeningsentenceofthesecondparagraphofSONZAsletterreads:

Asyouarewellaware,Mr.Sonzairrevocablyresignedinviewofrecenteventsconcerninghisprogramsandcareer.xxx
[27]
[28]
[29]

361F.3d1,2March2004.
SeealsoSpiridesv.Reinhardt,486F.Supp.685(1980).
IntheUnitedStates,asidefromtherightofcontroltest,therearetheeconomicrealitytestandthemultifactortest.The
tests are drawn from statutes, regulations, rules, policies, rulings, case law and the like. The right of control test
appliesunderthefederalInternalRevenueCode(IRC).TheeconomicrealitytestappliestothefederalFairLabor
[29]

StandardsAct(FLSA). The California Division of Labor Standards Enforcement (DLSE) uses a hybrid of these
twotestsoftenreferredtoasthemultifactortestindeterminingwhoanemployeeis.
MostcourtsintheUnitedStateshaveutilizedthecontroltesttodeterminewhetheroneisanemployee.Underthistest,a
courtmustconsiderthehiringpartysrighttocontrolthemannerandmeansbywhichtheproductisaccomplished.
Amongotherfactorsrelevanttothisinquiryaretheskillsrequiredthesourceoftheinstrumentalitiesandtoolsthe
location of the work the duration of the relationship between the parties whether the hiring party has the right to
assign additional projects to the hired party the extent of the hired partys discretion over when and how long to
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workthemethodofpaymentthehiredpartysroleinhiringandpayingassistantswhethertheworkispartofthe
regularbusinessofthehiringpartywhetherthehiringpartyisinbusinesstheprovisionofemployeebenefitsand
the tax treatment of the hired party. (www.piercegorman.com, quoted from the article entitled Managementside
employment law advice for the entertainment industry with subtitle Classification of Workers: Independent
ContractorsversusEmployeebyDavidAlbertPierce,Esq.)
[30]

[31]

[32]

[33]

[34]

[35]

[36]
[37]
[38]

[39]

www.piercegorman.com,quotedfromthearticleentitledManagementsideemploymentlawadvicefortheentertainment
industrywithsubtitleClassificationofWorkers:IndependentContractorsversusEmployeebyDavidAlbertPierce,
Esq.
Paragraph 4 of the Agreement provides: AGENT will make available Jay Sonza for rehearsals and tapings of the
Programs on the day and time set by the producer and director of the Programs and to attend pre and post
productionstaffmeetings.
Paragraph 15 of the Agreement provides: AGENT, talent shall not use the Programs as a venue to broadcast or
announceanycriticismonanyoperational,administrative,orlegalproblems,situationsorothermatterwhichmay
occur, exist or alleged to have occurred or existed within the COMPANY. Likewise, AGENT, talent shall, in
accordance with good broadcast management and ethics, take up with the proper officers of the COMPANY
suggestions or criticisms on any matter or condition affecting the COMPANY or its relation to the public or third
parties.
InZhengxingv.Nathanson,215F.Supp.2d114,citingReddv.Summers,232F.3d933(D.C.Cir.),plaintiffssuperior
wasnotinvolvedintheactualperformancethatproducedthefinalproduct.
Paragraph 3 of the Agreement provides: The COMPANY reserves the right to modify the program format and likewise
changeairtimescheduleformoreeffectiveprogramming.
Therightnottobroadcastanindependentcontractorsshowalsogivestheradioandtelevisionstationprotectionincase
itdeemsthecontentsoftheshowlibelous.
157F.2d26,8August1946.
Ibid.
InZhengxingv.Nathanson,215F.Supp.2d114,5August2002,plaintiffwasalsoprovidedwiththeplaceofworkand
equipmenttobeused.
IntheAlbertycase,theUSCourtofAppealsrejectedAlbertyscontentionthatWIPRprovidedtheequipmentnecessary
totapetheshow.ThecourtheldtherethattheequipmentnecessaryforAlbertytoconductherjobasprogramhost
related to her appearance on the show.Others provided equipment for filming and producing the show, but these
were not the primary tools that Alberty used to perform her particular function.SinceAlbertyprovided,orobtained
sponsors to provide, the costumes, jewelry, and other imagerelated supplies and services necessary for her
appearance, she provided the tools and instrumentalities necessary for her to perform.The US Court of Appeals
added that if it accepted Albertys argument, independent contractors could never work on collaborative projects
becauseotherindividualsoftenprovidetheequipmentrequiredfordifferentaspectsofthecollaboration.

The Alberty case further ruled that while control over the manner, location, and hours of work is often critical to the
independentcontractor/employeeanalysis,itmustbeconsideredinlightoftheworkperformedandtheindustryat
issue.Consideringthetasksthatanactorperforms,thecourtdoesnotbelievethatthesortofcontrolidentifiedby
Albertynecessarilyindicatesemployeestatus.
[40]

[41]

[42]

In Zhengxing, a Chinese language broadcaster and translator was deemed an independent contractor because she
worked under minimal supervision. The U.S. court also found that plaintiff was required to possess specialized
knowledgebeforecommencingherpositionasabroadcaster.
Paragraph13oftheAgreementprovides:AGENTagreesthattalentshallabidebytherules,regulationsandstandards
of performance of the COMPANY covering talents, and that talent is bound to comply with the Television and
RadioCodeoftheKapisananngmgaBroadcastersaPilipinas(KBP),whichhasbeenadoptedbytheCOMPANY
asitsCodeofEthics.AGENTshallperformandkeepallofthedutiesandobligationsassumedorenteredbythe
AGENThereunderusingitsbesttalentsandabilities.Anyviolationofornonconformitywiththisprovisionbytalent
shallbeavalidandsufficientgroundfortheimmediateterminationoftheAgreement.(Emphasissupplied)
Ibid.

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[43]
[44]
[45]
[46]
[47]
[48]

SonzavsABSCBN:138051:June10,2004:J.Carpio:FirstDivision:Decision

AFPMutualBenefitAssociation,Inc.v.NLRC,G.R.No.102199,28January1997,267SCRA47.
Ibid.
Supranote36.
Rollo,p.302.
Ibid.
ThesecondparagraphofArticle106oftheLaborCodereads:

There is laboronly contracting where 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 the workers recruited
and placed by such persons are performing activities which are directly related to the principal business of such
employer.In such cases, the person or intermediary shall be considered merely as an agent of the employer who
shallberesponsibletotheworkersinthesamemannerandextentasifthelatterweredirectlyemployedbyhim.
[49]
[50]
[51]

[52]
[53]
[54]

Rollo,p.90.
NewRulesofProcedureoftheNationalLaborRelationsCommission,asamendedbyResolution399,seriesof1999.
University of the Immaculate Concepcion v. U.I.C. Teaching and NonTeaching Personnel and Employees Union,414
Phil.522(2001).
ColumbusPhilippineBusCorp.v.NLRC,417Phil.81(2001).
Section3,ArticleXIIIoftheConstitution.
RepublicActNo.8424.BIRRevenueRegulationsNo.1999alsoprovidesthefollowing:

SECTION1.Scope.PursuanttotheprovisionsofSections244and108oftheNationalInternalRevenueCodeof1997,in
relationtoSection17ofRepublicActNo.7716,asamendedbySection11ofRepublicAct8241,theseRegulations
areherebypromulgatedtogoverntheimpositionofvalueaddedtaxonsaleofservicesbypersonsengagedinthe
practice of profession or calling and professional services rendered by general professional partnerships services
rendered by actors, actresses, talents, singers and emcees, radio and television broadcasters and
choreographersmusical,radio,movie,televisionandstagedirectorsandprofessionalathletes.
SECTION2.Coverage.BeginningJanuary1,2000,generalprofessionalpartnerships,professionalsandpersonsdescribed
aboveshallbegovernedbytheprovisionsofRevenueRegulationNo.795,asamended,otherwiseknownasthe
ConsolidatedValueAddedTaxRegulations.xxx
[55]
[56]

[57]

OtherwiseknownastheExpandedValueAddedTaxLaw.
Act amending Republic Act No. 7716, otherwise known as the Expanded ValueAdded Tax Law and other pertinent
provisionsoftheNationalInternalRevenueCode,asamended(December20,1996).
Section109oftheNIRCprovides:

Exempttransactions.Thefollowingshallbeexemptfromthevalueaddedtax:
xxx
(o)Servicesrenderedbyindividualspursuanttoanemployeremployeerelationshipxxx
[58]

SingaporeAirlinesLtd.v.Hon.Cruz,etc.,etal.,207Phil.585(1983).

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