Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-34531 March 29, 1974

PHILIPPINE COMMUNICATIONS, ELECTRONICS & ELECTRICITY WORKERS' FEDERATION

(PCWF), petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS, UNION CARBIDE PHILIPPINES, INC., and UNION CARBIDE
LABOR UNION (NLU), respondents

E. H. Decena and Associates for petitioner

Siguion Reyna, Montecillo, Belo and Ongsiako for respondent Union Carbide Phil., Inc.

Eulogio R. Lerum for respondent Labor Union.

FERNANDO, J.:p
There is nothing unique about this petition for the review of an order of respondent Court of Industrial Relations, except perhaps the way it was disposed of by it.
There was a plea for a certification election by petitioner Labor Union submitted just barely six months before the termination of a collective bargaining
agreement. It ought, ordinarily, to have elicited a favorable response. Respondent Court acted otherwise, notwithstanding the series of recent decisions, 1 all
traceable to the leading case of LVN Pictures, Inc. v. Philippine Musicians Guild, 2 the opinion of which was penned by the then Justice, later Chief Justice,
Concepcion. It is beyond cavil that as therein pointed out, a certification proceeding, far from being a litigation in the sense in which the term is commonly
understood, is an investigation of a non-adversary fact-finding character. For such an inquiry to be truly meaningful, it is essential that an actual poll be taken of
the members of a collective bargaining unit. Only thus may there be a concrete and accurate determination as to which union should be the exclusive
representative for bargaining purposes. Surprisingly, as pointed out above, respondent Court was of a different mind. It must have been mislead by the fact that
under an existing collective bargaining agreement, the employees by virtue of a maintenance-of-membership clause had to remain members of respondent
Union. It ought to have realized that to impress such stipulation as a bar to their changing their affiliation would be to infringe on the constitutional right of freedom
of association. Moreover, it cannot escape attention that almost three years have again presumably elapsed since the last collective bargaining contract, which
must have been concluded in the latter part of 1971. All such considerations call for a reversal.

There is no dispute as to the facts. On June 16, 1971, there was filed with the respondent Court a petition
for a certification election, wherein it was alleged: "1. That petitioner PCWF is a legitimate labor
organization with offices at 3rd Floor, Veloso Building, 357 David Street, Manila; 2. That the Union Carbide
Philippines, Inc., is a duly organized corporation, existing under and by virtue of the laws of the Philippines,
with offices at E. de los Santos Avenue, Mandaluyong, Rizal; 3. That said Union Carbide Philippines, Inc.,
employs more or less 700 employees, which is the appropriate bargaining unit, and that under date of May
25, 1971, petitioner PCWF in representation of the aforementioned employees transmitted to the herein
employer a set of proposals for collective bargaining in respect to wages, hours and other conditions of
employment, claiming therein, among others, that said PCWF "has been duly designated by the great
majority of (the) employees as their sole and exclusive collective bargaining representative"; 4. That from
petitioner PCWF's proposals for recognition and collective bargaining, the herein employer made a reply
stating in part as follows: "We regret to advise you that our client cannot accede to your request. The
regular rank-and-file employees of the company whom you seek to represent are presently covered by a
collective bargaining agreement with the Union Carbide Labor Union (NLU). We are sure you will
understand that our client cannot disregard said agreement without committing unfair labor practice" which
fear of the employer above described is erroneous for the reason to expire; 5. That the so-called Union
Carbide Labor Union (NLU) may be served with summons and other court processes at care: National
Labor Union, 3199 Magsaysay Blvd., Manila; and 6. That there has been no certification and/or certification
election for the past twelve months, counted from the filing of this petition with this Honorable
Court."3 It prayed for a certification election. In its answer, respondent employer, Union Carbide of the
Philippines, after inviting attention to a collective bargaining agreement with respondent Union Carbide
Labor Union, prayed that such labor union be maintained as the exclusive bargaining
representative.4 There was likewise a denial by respondent Union Carbide Labor Union of petitioner's claim
that it was the choice of the employees as "the sole and exclusive bargaining representative." 5 The petition,
after hearing, was denied in an order of respondent Court dated August 30, 1971. 6 Apparently, it relied on
the fact that under the then existing collective bargaining contract, the employees were shown to be
affiliated with respondent Union. Not that they had any choice, considering a maintenance-of-membership
clause. A motion for reconsideration met the same fate. 7

We find, to repeat, for petitioner. The gravity of the error of respondent Court must have arisen from a
wrong perspective. It appeared to have been satisfied with the failure of petitioner to make good its rather
exaggerated claim that practically the entire rank-and-file employees were with it. It could be that
petitioner's counsel promised more than he could deliver, but his sin, if such it be, should not be vested on
his client. Ordinarily it would be thus, but it should not be so in this case. For the correct perspective is
whether the electoral process should have been relied upon to determine the choice of the majority. The
basic issue then is as to the need for holding a certification election. Our recent decisions, as noted,
indicate that the answer must be in the affirmative. Their force is not to be blunted by the admitted fact that
under the then existing collective bargaining agreement it was obvious that respondent labor union had the
edge. It had to be thus. The employees were in the grip of the vise of a maintenance-membership clause.
That was how union security was assured during its existence. That was an approved technique. It did not
bar however their joining a new union for the purpose of a new collective contract to be negotiated. It could
happen thus that there would be a new exclusive bargaining representative. The freedom of
association8 safeguarded by the Constitution would be satisfied with nothing less. Respondent Court thus
ought to have decided differently. As noted at the outset, we reverse.

1. Stress is rightfully laid, to follow the off-reiterated language of the then Justice, later Chief Justice,
Concepcion, on the principle that a certification election proceeding "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." 9 What could be more logical
then as well as sounder policy than to conduct a poll to determine with accuracy and certainty such
wishes? At least, that is the incontrovertible, not to say irreversible, trend of our present decisions.
In Compania Maritima v. Compania Maritima Labor Union, 10 respondent Court was sustained when it
required a certification election, thus giving respondent union in that case an opportunity to be the exclusive
bargaining representative, as against the contention of the employer that sound business practice would
dictate that the representation be left to the other union with which it had allegedly previously dealt. Then
came Philippine Association of Free Labor Union v. Court of Industrial Relations. 11 There the usefulness of
a certification election proceeding was further emphasized by us when notwithstanding its having been
held, respondent Court's competence to continue to act further by resolving the conflict as to which of the
two labor unions should be entitled to the dues of the members in the concept of check-off was sustained.
This excerpt from Lakas ng Manggagawang Pilipino v. Benguet Consolidated, Inc., 12 decided a month
later, reflects the same approach: "Where, as is indicated in the motion to dismiss, the Court of Industrial
Relations is precisely taking the necessary steps to assure that all labor organizations having a right to take
part therein can participate in such certification election, there is no justification for the opposition to the
motion to dismiss ... As a matter of fact, it is difficult to resist the suspicion that this refusal to have the
certification election conducted as soon as possible could be the betrayal of a fear on the part of intervenor
Union that its claim of being the choice of the rank-and-file would not be borne out by the result." 13What
was held by us in B. F. Goodrich Philippines, Inc. v. B. F. Goodrich Confidential and Salaried Employees
Union 14 is self-explanatory. Thus: "Nor would any useful purpose be served by such a postponement of the
holding of a certification election until after the determination of the unfair labor practice case filed. The time
that might elapse is hard to predict, as the matter may eventually reach this Tribunal. In the meanwhile,
there is no opportunity for free choice on the part of the employees as to which labor organization shall be
their exclusive bargaining representative." 15 Lastly in requiring that a certification election be held in
Federation of the United Workers Organization v. Court of Industrial Relations, 16 notwithstanding that the
lawyer for petitioner Union, as in this case, appeared to be less than impressive in the presentation of his
client's cause thus resulting in an adverse order, which had to be set aside, we made clear: "The slightest
doubt cannot therefore be entertained that what possesses significance in a petition for certification is that
through such a device the employees are given the opportunity to make known who shall have the right to
represent them. What is equally important is that not only some but all of them should have the right to do
so." 17 We reiterate such a view.

2. Respondent Court could not of course have anticipated the trend so evident in these recent decisions,
although from the LVN decision it was quite obvious that the holding of a certification election has much to
recommend it. Moreover, it acted adversely to petitioner Union inasmuch as its counsel was unable to
make good his assertion that a great majority of the employees concerned had joined it. Apparently it was
unduly impressed with the showing made by respondent Union that as shown by the existing collective
bargaining agreement it had included in its ranks the overwhelming number of the labor force. It could not
be otherwise, as included therein was a union security clause with its maintenance-of-membership
requirement. This is how it was explicitly worded: "All present employees covered by this agreement who
are members of the [respondent Union Carbide Labor Union] at the time of the signing of this agreement
shall, as a condition of employment, maintain their membership [therein] for the duration of this
agreement." 18 Nor is it to be lost sight of how clearly emphasized that such obligation to remain members
of respondent Union was only "for the duration of this agreement." No other stipulation could have survived
the test of constitutionality. The freedom of association of the rank-and-file would have been rendered
nugatory if the letters of membership would bind for a period longer than the agreement. This is not to imply
that of their own free will, they could not continue to be included in the roster of respondent Union. It is
merely to emphasize that what the Constitution safeguards is the respect that must be shown to whatever
be their choice. If they desire to stick with it, their decision stands. If they are of different mind, however,
their wishes must prevail. Nor is there any more practical way of gauging what their feelings are on the
matter except by the holding of a certification election. When respondent Court decided otherwise, it
reached a conclusion that ran counter to the settled law on the subject.

3. There is this other equally valid consideration that calls for a reversal. On the assumption that a new
collective bargaining contract was entered into the second half of 1971, its termination is not likely to be far
off. Under the circumstances, the policy of the Industrial Peace Act, not to mention the constitutional right of
the association, would best be served by the holding of a certification election.

WHEREFORE, the order of respondent Court of August 30, 1971 denying the petition of Philippine
Communications, Electronics and Electricity Workers' Federation, as affirmed by the resolution of
November 4, 1971 is reversed and set aside, and a certification election ordered wherein both petitioner
and respondent labor union, Union Carbide Labor Union, can participate and take part, to be held at a time
and place to be designated by respondent Court. No costs.

Zaldivar (Chairman), Barredo, Fernandez, Antonio and Aquino, JJ., concur.

Footnotes

1 Cf. Compania Maritima v. Compania Maritima Labor Union, L-29504, Feb. 29, 1972, 43
SCRA 464; Phil. Association of Free Labor Unions v. Court of Industrial Relations, L-33781,
Oct. 31, 1972, 47 SCRA 390; Lakas ng Manggagawang Filipino v. Benguet Consolidated,
Inc., L-35075, Nov. 24, 1972, 48 SCRA 169; B. F. Goodrich Philippines, Inc. v. B. F.
Goodrich Confidential and Salaried Employees Union, L-34069-70, Feb. 28, 1973, 49 SCRA
532; Federation of United Workers v. Court of Industrial Relations, L-37392, Dec. 19, 1973.

2 110 Phil. 725 (1961).

3 Petition, paragraph 2.

4 Ibid, Annex E.

5 Ibid, Annex I.

6 Ibid, Annex J.

7 Ibid, Annex M.

8 According to Article IV, Section 7 of the Constitution: "The right to form associations or
societies for purposes not contrary to law shall not be abridged."

9 LVN Pictures, Inc. v. Philippine Musicians Guild, 110 Phil. 25. 728 (1961).

10 L-29504, February 29, 1972, 43 SCRA 464.

11 L-33781, October 31, 1972, 47 SCRA 390.

12 L-35075, November 24, 1972, 48 SCRA 169.

13 Ibid, 175.

14 L-34069-70, February 28, 1973, 49 SCRA 532.

15 Ibid, 541

16 L-37392, December 19, 1973.

17 Ibid. 4-5

18 Collective Bargaining Agreement, Article III on Union Security, Section 3, Petition, Annex
C
 FIRST DIVISION

[G.R. No. 138051. ]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING

CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari[1] assailing the Decision[2] of the
Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
(SONZA). The Court of Appeals affirmed the findings of the National Labor Relations
Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an

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

a. Co-host for Mel & Jay radio program, , Mondays to Fridays;

b. Co-host for Mel & Jay television program, , Sundays.[3]
 ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the
first year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay
the talent fees on the 10th and 25th days of the month.

On , SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by
your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y.
SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative of the
Agreement and the station as in breach thereof. In this connection, we hereby serve
notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]

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

On , ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee

relationship existed between the parties. SONZA filed an Opposition to the motion on .

Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, . In July 1996, ABS-CBN opened a new
account with the same bank where ABS-CBN deposited SONZAs talent fees and other
payments due him under the Agreement.
 In his Order dated , the Labor Arbiter[5] denied the motion to dismiss and directed the
parties to file their respective position papers. The Labor Arbiter ruled:

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

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

On , SONZA filed a Reply to Respondents Position Paper with Motion to Expunge

Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-
CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their
affidavits that the prevailing practice in the television and broadcast industry is to treat talents
like SONZA as independent contractors.

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

xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of
the contract of a talent, it stands to reason that a talent as above-described cannot be
considered as an employee by reason of the peculiar circumstances surrounding the
engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his
peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he undertook to render in accordance
with his own style. The benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally given to employees. For
one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits complainant
enjoyed arose from specific agreement by the parties and not by reason of
employer-employee relationship. As correctly put by the respondent, All these benefits
are merely talent fees and other contractual benefits and should not be deemed as
salaries, wages and/or other remuneration accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to this is the rule that the term or
nomenclature given to a stipulated benefit is not controlling, but the intent of the parties
to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As
held by the Supreme Court, The line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike
the second, which address both the result and the means to achieve it. (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On , the NLRC rendered a Decision affirming the Labor
Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its
Resolution dated .

On , SONZA filed a special civil action for certiorari before the Court of Appeals assailing
the decision and resolution of the NLRC. On , the Court of Appeals rendered a Decision
dismissing the case.[8]

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship
existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court
quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract
merely as an agent of complainant Sonza, the principal. By all indication and as the law
puts it, the act of the agent is the act of the principal itself. This fact is made particularly
true in this case, as admittedly MJMDC is a management company devoted exclusively
to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza
and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the
provisions of the May 1994 Agreement which specifically referred to MJMDC as the
AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May
1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between ABS-
CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr.
Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN
such that there exist[s] employer-employee relationship between the latter and Mr.
Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-
CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs
to the regular courts, the same being in the nature of an action for alleged breach of
contractual obligation on the part of respondent-appellee. As squarely apparent from
complainant-appellants Position Paper, his claims for compensation for services,
13th month pay, signing bonus and travel allowance against respondent-appellee are not
based on the Labor Code but rather on the provisions of the May 1994 Agreement, while
his claims for proceeds under Stock Purchase Agreement are based on the latter. A
portion of the Position Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stockswith FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not
lower than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a
commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that
his contractual relations with ABS-CBN are founded on the New Civil Code, rather than
the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant
served upon the latter a notice of rescission of Agreement with the station, per his letter
dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits,
he is waiving and renouncing recovery of the remaining amount stipulated in paragraph
7 of the Agreement but reserves the right to such recovery of the other benefits under
said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July
10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement
and/or the Stock Purchase Agreement by respondent-appellee that complainant-appellant
filed his complaint.Complainant-appellants claims being anchored on the alleged breach
of contract on the part of respondent-appellee, the same can be resolved by reference to
civil law and not to labor law. Consequently, they are within the realm of civil law and,
thus, lie with the regular courts. As held in the case of Dai-Chi Electronics
Manufacturing vs. Villarama, 238 SCRA 267, , an action for breach of contractual
obligation is intrinsically a civil dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship

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

The Issue

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

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

The Courts Ruling

We affirm the assailed decision.

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

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

The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate

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

SONZA maintains that all essential elements of an employer-employee relationship are

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

A. Selection and Engagement of Employee

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

Independent contractors often present themselves to possess unique skills, expertise or

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

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

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of
ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges which
he would not have enjoyed if he were truly the subject of a valid job contract.
 All the talent fees and benefits paid to SONZA were the result of negotiations that led to
the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties
to stipulate on benefits such as SSS, Medicare, x x x and 13 th month pay[20] which the law
automatically incorporates into every employer-employee contract. [21] Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship.
[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so
huge and out of the ordinary that they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge
talent fees precisely because of SONZAs unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary employees is a circumstance
indicative, but not conclusive, of an independent contractual relationship.

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

C. Power of Dismissal

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

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of
the Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN
still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-
CBN cancelled SONZAs programs through no fault of SONZA. [25]
 SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true
that complainant was really an employee, he would merely resign, instead. SONZA did
actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement.SONZAs letter clearly bears this out. [26] However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee or independent
contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an
employee or an independent contractor, we refer to foreign case law in analyzing the present
case. The Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De
Puerto Rico Para La Difusin Pblica (WIPR)[27] that a television program host is an
independent contractor. We quote the following findings of the court:

Several factors favor classifying Alberty as an independent contractor. First, a

television actress is a skilled position requiring talent and training not available on-
the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught with
the drama department at the University of Puerto Rico; and acted in several theater and
television productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty
provided the tools and instrumentalities necessary for her to perform. Specifically,
she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-
related supplies and services necessary for her appearance. Alberty disputes that this
factor favors independent contractor status because WIPR provided the equipment
necessary to tape the show. Albertys argument is misplaced. The equipment necessary
for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on
the show. Others provided equipment for filming and producing the show, but these were
not the primary tools that Alberty used to perform her particular function. If we accepted
this argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different aspects of
the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi
Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired her
professional services as Hostess for the Program Desde Mi Pueblo. There is no evidence
that WIPR assigned Alberty tasks in addition to work related to these tapings. x x
x[28] (Emphasis supplied)

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

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

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-

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

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

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs
power over the means and methods of the performance of his work. Although ABS-CBN did
have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs
talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods
of SONZAs performance of his work, or even with the quality or product of his work, ABS-
CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to
broadcast SONZAs show but ABS-CBN must still pay his talent fees in full. [35]
 Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over the
means and methods of the performance of SONZAs work. ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his work - how he
delivered his lines and appeared on television - did not meet ABS-CBNs approval. This
proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees
in full until the expiry of the Agreement.

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

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

A radio broadcast specialist who works under minimal supervision is an independent

contractor.[40] SONZAs work as television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not show that ABS-CBN
exercised any supervision and control over how SONZA utilized his skills and talent in his
shows.

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

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

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

Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with
the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it.[44]

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

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

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

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

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted
out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is
not an employee of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and
ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2)
the employee who is ostensibly under the employ of the labor-only contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the labor-only contractor is
the agent of the principal. The law makes the principal responsible to the employees of the
labor-only contractor as if the principal itself directly hired or employed the employees.
[48] These circumstances are not present in this case.

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

As SONZA admits, MJMDC is a management company devoted exclusively to managing

the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any
other business, not even job contracting. MJMDC does not have any other function apart from
acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and
television industry.[49]

Policy Instruction No. 40

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

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

Affidavits of ABS-CBNs Witnesses

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

While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented

from denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion
whether to conduct a formal (trial-type) hearing after the submission of the position papers of
the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx
These verified position papers shall cover only those claims and causes of action raised
in the complaint excluding those that may have been amicably settled, and shall be
accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of
the parties of their position papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At this stage, he may, at his
discretion and for the purpose of making such determination, ask clarificatory questions
to further elicit facts or information, including but not limited to the subpoena of
relevant documentary evidence, if any from any party or witness.[50]
 The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial. [51] The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of right. [52] If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and the rules
obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

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

The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if
there is an employer-employee relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship. To hold that every person who
renders services to another for a fee is an employee - to give meaning to the security of
tenure clause - will lead to absurd results.

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

Different Tax Treatment of Talents and Broadcasters

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

Nature of SONZAs Claims

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

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

SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

[1] Under Rule 45 of the Rules of Court.

[2] Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M.
Elbinias and Marina L. Buzon concurring.

[3] Rollo, p. 150.

[4] Ibid., p. 204.

[5] Donato G. Quinto, Jr.

[6] Rollo, pp. 114-130.

[7] Ibid., pp. 123-125.

[8] Ibid., p. 39.

[9] Rollo, pp. 37-39.

[10] Ibid., p. 39.

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] Ibid., p. 269.

[15] Fleischer Company, 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 School of
Technology v. NLRC, G.R. No. 101438, 13 October 1992, 214 SCRA 551. See
also Ignacio v. Coca-Cola Bottlers Phils., Inc., 417 Phil. 747 (2001); Gonzales v.
National Labor Relations Commission, G.R. No. 131653, 26 March 2001, 355
SCRA 195; Sandigan Savings and Loan Bank, Inc. v. NLRC, 324 Phil. 348
(1996); Magnolia Dairy Products Corporation v. NLRC, 322 Phil. 508 (1996).

[16] Madlos v. NLRC, 324 Phil. 498 (1996).

[17] Domasig v. National Labor Relations Commission, G.R. No. 118101, , 261 SCRA
779.

[18] De Los Santos v. NLRC, 423 Phil. 1020 (2001); Traders Royal Bank v. NLRC, 378
Phil. 1081 (1999); Aboitiz Shipping Employees Association v. National Labor
Relations Commission, G.R. No. 78711, 27 June 1990, 186 SCRA 825; Ruga v.
National Labor Relations Commission, G.R. Nos. 72654-61, 22 January 1990,
181 SCRA 266.

[19] Ibid.
[20] Paragraph 10 of the Agreement provides: The COMPANY shall provide him with
the following benefits: SSS, Medicare, Healthcare, executive life and accident
insurance, and a 13th-month pay based on an amount not lower than the amount
he was receiving prior to the effectivity of this Agreement.

[21] Presidential Decree No. 851 (Requiring All Employers to Pay their Employees a
13th-month Pay) for the 13th month pay; Republic Act No. 1161 (Social Security
Law) for the SSS benefits; and Republic Act No. 7875 (National Health Insurance
Act of 1995) for the Philhealth insurance.

[22] Article 1157 of the Civil Code explicitly provides:

Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (Emphasis supplied)

[23] See Article 283, Labor Code.

[24] Paragraph 7 of the Agreement states: Provided that the AGENT and Jay Sonza shall
faithfully and completely perform each condition of this Agreement for and in
consideration of the aforesaid services by the AGENT and its talent, the
COMPANY agrees to pay the AGENT for the first year of this Agreement the
amount of THREE HUNDRED TEN THOUSAND PESOS ONLY (P310,000.00)
per month, payable on the 10th and 25th of each month. For the second and third
year of this Agreement, the COMPANY shall pay the amount of THREE
HUNDRED SEVENTEEN THOUSAND PESOS ONLY (P317,000.00) per
month, payable likewise on the 10th and 25th of the each month.

[25] Paragraph 11 of the Agreement states: In the event of cancellation of this

Agreement through no fault of the AGENT and its talent, COMPANY agrees to
pay the full amount specified in this Agreement for the remaining period covered
 by this Agreement, provided that the talent shall not render any service for or in
any other radio or television production of any person, firm, corporation or any
entity competing with the COMPANY until the expiry hereof.

[26] The opening sentence of the second paragraph of SONZAs letter reads:

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career. xxx

[27] 361 F.3d 1, .

[28] See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980).

[29] In the , aside from the right of control test, there are the economic reality test and
the multi-factor test. The tests are drawn from statutes, regulations, rules, policies,
rulings, case law and the like. The right of control test applies under the federal
Internal Revenue Code (IRC). The economic reality test applies to the federal Fair
Labor Standards Act (FLSA).[29] The California Division of Labor Standards
Enforcement (DLSE) uses a hybrid of these two tests often referred to as
the multi-factor test in determining who an employee is.

Most courts in the United States have utilized the control test to determine whether one is an employee. Under
this test, a court must consider the hiring partys right to control the manner and means by which the
product is accomplished. Among other factors relevant to this inquiry are the skills required; the source
of the instrumentalities and tools; the 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 work; the method of payment; the hired partys role
in hiring and paying assistants; whether the work is part of the regular business of the hiring party;
whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the
hired party. (www.piercegorman.com, quoted from the article entitled Management-side employment law
advice for the entertainment industry with subtitle Classification of Workers: Independent Contractors
versus Employee by David Albert Pierce, Esq.)

[30] www.piercegorman.com, quoted from the article entitled Management-side

employment law advice for the entertainment industry with subtitle Classification
of Workers: Independent Contractors versus Employee by David Albert Pierce,
Esq.

[31] 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 production staff meetings.
[32] Paragraph 15 of the Agreement provides: AGENT, talent shall not use the Programs
as a venue to broadcast or announce any criticism on any operational,
administrative, or legal problems, situations or other matter which may 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.

[33] In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. Summers, 232 F.3d
933 (D.C. Cir.), plaintiffs superior was not involved in the actual performance that
produced the final product.

[34] Paragraph 3 of the Agreement provides: The COMPANY reserves the right to
modify the program format and likewise change airtime schedule for more
effective programming.

[35] The right not to broadcast an independent contractors show also gives the radio and
television station protection in case it deems the contents of the show libelous.

[36] 157 F.2d 26, .

[37] Ibid.

[38] In Zhengxing v. Nathanson, 215 F.Supp.2d 114, , plaintiff was also provided with
the place of work and equipment to be used.

[39] In the Alberty case, the US Court of Appeals rejected Albertys contention that
WIPR provided the equipment necessary to tape the show. The court held there
that the equipment necessary for Alberty to conduct her job as program host
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. Since Alberty provided, or obtained sponsors to
provide, the costumes, jewelry, and other image-related 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 because other individuals often provide the equipment required for
different aspects of the collaboration.

The Alberty case further ruled that while control over the manner, location, and hours of work is often critical to
the independent contractor/employee analysis, it must be considered in light of the work performed and
the industry at issue. Considering the tasks that an actor performs, the court does not believe that the
sort of control identified by Alberty necessarily indicates employee status.

[40] In Zhengxing, a Chinese language broadcaster and translator was deemed an

independent contractor because she worked under minimal supervision. The court
also found that plaintiff was required to possess specialized knowledge before
commencing her position as a broadcaster.

[41] Paragraph 13 of the Agreement provides: AGENT agrees that talent shall abide by
the rules, regulations and standards of performance of the COMPANY covering
talents, and that talent is bound to comply with the Television and Radio Code of
the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by
the COMPANY as its Code of Ethics. AGENT shall perform and keep all of the
duties and obligations assumed or entered by the AGENT hereunder using its best
talents and abilities. Any violation of or non-conformity with this provision by
talent shall be a valid and sufficient ground for the immediate termination of the
Agreement. (Emphasis supplied)

[42] Ibid.

[43] AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, , 267 SCRA 47.

[44] Ibid.

[45] Supra note 36.

[46] Rollo, p. 302.

[47] Ibid.

[48] The second paragraph of Article 106 of the Labor Code reads:

There is labor-only 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 shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

[49] Rollo, p. 90.

[50] New Rules of Procedure of the National Labor Relations Commission, as amended
by Resolution 3-99, series of 1999.

[51] University of the Immaculate v. U.I.C. Teaching and Non-Teaching Personnel and
Employees , 414 Phil. 522 (2001).

[52] Philippine Bus Corp. v. NLRC, 417 Phil. 81 (2001).

[53] Section 3, Article XIII of the Constitution.

[54] Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also provides the
following:

SECTION 1. Scope. Pursuant to the provisions of Sections 244 and 108 of the National Internal Revenue Code
of 1997, in relation to Section 17 of Republic Act No. 7716, as amended by Section 11 of Republic Act
8241, these Regulations are hereby promulgated to govern the imposition of value-added tax on sale of
services by persons engaged in the 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 choreographers; musical, radio, movie, television and
stage directors; and professional athletes.

SECTION 2. Coverage. Beginning , general professional partnerships, professionals and persons described
above shall be governed by the provisions of Revenue Regulation No. 7-95, as amended, otherwise
known as the Consolidated Value-Added Tax Regulations. xxx

[55] Otherwise known as the Expanded Value-Added Tax Law.

[56] Act amending Republic Act No. 7716, otherwise known as the Expanded Value-
Added Tax Law and other pertinent provisions of the National Internal Revenue
Code, as amended (December 20, 1996).

[57] Section 109 of the NIRC provides:

Exempt transactions. The following shall be exempt from the value-added tax:

xxx
(o) Services rendered by individuals pursuant to an employer-employee relationship; xxx

[58] Singapore Airlines Ltd. v. Hon. Cruz, etc., et al., 207 Phil. 585 (1983).
 FIRST DIVISION
ABS-CBN BROADCASTING G.R. No. 164156
CORPORATION,
Petitioner, Present
PANGANIBAN, C.J., Chairperson,
YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
MARLYN NAZARENO, Promulgated:
MERLOU GERZON,
JENNIFER DEIPARINE,
and JOSEPHINE LERASAN,
Respondents. September 26, 2006
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DECISION
CALLEJO, SR., J.:
Before   us   is   a   petition   for   review   on certiorari of   the   Decision[1] of   the   Court   of
Appeals (CA) in CA­G.R. SP No. 76582 and the Resolution denying the motion for
reconsideration   thereof.   The   CA   affirmed   the   Decision[2] and   Resolution[3] of   the
National   Labor   Relations   Commission   (NLRC)   in   NLRC   Case   No.   V­000762­2001
(RAB   Case   No.   VII­10­1661­2001)   which   likewise   affirmed,   with   modification,   the
decision   of   the   Labor   Arbiter   declaring   the   respondents   Marlyn   Nazareno,   Merlou
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner   ABS­CBN   Broadcasting   Corporation   (ABS­CBN)   is   engaged   in   the
broadcasting   business   and   owns   a   network   of   television   and   radio   stations,   whose
operations revolve around the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio
and   television   operations.   It   has   a   franchise   as   a   broadcasting   company,   and   was
likewise issued a license and authority to operate by the National Telecommunications
Commission.
 Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production  assistants   (PAs)   on   different   dates.   They  were   assigned   at  the   news   and
public   affairs,   for   various   radio   programs   in   the   Cebu   Broadcasting   Station,   with   a
monthly compensation of P4,000. They were issued ABS­CBN employees identification
cards and were required to work for a minimum of eight hours a day, including Sundays
and holidays. They were made to perform the following tasks and duties:
a)      Prepare, arrange airing of commercial broadcasting based on the daily operations
log and digicart of respondent ABS­CBN;
b)      Coordinate, arrange personalities for air interviews;
c)      Coordinate, prepare schedule of reporters for scheduled news reporting and lead­in
or incoming reports;
d)      Facilitate, prepare and arrange airtime schedule for public service announcement
and complaints;
e)      Assist, anchor program interview, etc; and
f)       Record, log clerical reports, man based control radio.[4]
Their respective working hours were as follows:

Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.­8:00 A.M. 7
8:00 A.M.­12:00 noon
2. Jennifer Deiparine 4:30 A.M.­12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.­10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.­6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.­6:00 P.M. 9 hrs.[5]
The PAs were under the control and supervision of Assistant Station Manager
Dante J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS­CBN Rank­and­File Employees
executed a Collective Bargaining Agreement (CBA) to be effective during the period
from December 11, 1996 to December 11, 1999. However, since petitioner refused to
recognize PAs as part of the bargaining unit, respondents were not included to the CBA.
[6]
On July   20,   2000,   petitioner,   through   Dante   Luzon,   issued   a   Memorandum
informing the PAs that effective August 1, 2000, they would be assigned to non­drama
programs,   and   that   the   DYAB   studio   operations   would   be   handled   by   the   studio
technician. Thus, their revised schedule and other assignments would be as follows:
Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. 12:00 MN Jennifer Deiparine
Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
Respondent   Gerzon   was   assigned   as   the   full­time   PA   of   the   TV   News   Department
reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular
Employment   Status,   Underpayment   of   Overtime   Pay,   Holiday   Pay,   Premium   Pay,
Service Incentive Pay, Sick Leave Pay, and 13 th Month Pay with Damages against the
petitioner   before   the   NLRC.   The   Labor   Arbiter   directed   the   parties   to   submit   their
respective position papers. Upon respondents failure to file their position papers within
the   reglementary   period,   Labor   Arbiter   Jose   G.   Gutierrez   issued   an   Order   dated 

April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue
the case. Respondents received a copy of the Order on May 16, 2001.[7] Instead of re­
filing their complaint with the NLRC within 10 days from May 16, 2001, they filed,
on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position
Paper and Motion to Submit Case For Resolution.[8] The Labor Arbiter granted this
motion in an Order dated June 18, 2001, and forthwith admitted the position paper of the
complainants. Respondents made the following allegations:
1. Complainants   were   engaged   by   respondent   ABS­CBN   as   regular   and   full­time
employees for a continuous period of more than five (5) years with a monthly salary rate
of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint
on November 20, 2000.
Machine copies of complainants ABS­CBN Employees Identification Card and salary
vouchers are hereto attached as follows, thus:
I.                    Jennifer Deiparine:
 Exhibit A ­ ABS­CBN Employees Identification Card
Exhibit B, ­ ABS­CBN Salary Voucher from Nov.
Exhibit B­1 & 1999 to July 2000 at P4,000.00
Exhibit B­2
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon ­ ABS­CBN Employees Identification Card
Exhibit C
Exhibit D
Exhibit D­1 &
Exhibit D­2 ­ ABS­CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III.               Marlene Nazareno
Exhibit E ­ ABS­CBN Employees Identification Card
Exhibit E ­ ABS­CBN Salary Voucher from Nov.
Exhibit E­1 & 1999 to December 2000
Exhibit :E­2
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV.              Joy Sanchez Lerasan
Exhibit F ­ ABS­CBN Employees Identification Card
Exhibit F­1 ­ ABS­CBN Salary Voucher from Aug.
Exhibit F­2 & 2000 to Jan. 2001
Exhibit F­3
Exhibit F­4 ­ Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS­CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month[9]
 Respondents insisted that they belonged to a work pool from which petitioner
chose persons to be given specific assignments at its discretion, and were thus under its
direct supervision and control regardless of nomenclature. They prayed that judgment be
rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully
prayed, to issue an order compelling defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent
employees of respondent ABS­CBN as a condition precedent for their admission into
the existing union and collective bargaining unit of respondent company where they
may as such acquire or otherwise perform their obligations thereto or enjoy the benefits
due therefrom.
Complainants   pray   for   such   other   reliefs   as   are   just   and  equitable   under  the
premises.[10]
For its part, petitioner alleged in its position paper that the respondents were PAs
who   basically   assist   in   the   conduct   of   a   particular   program   ran   by   an   anchor   or
talent.Among   their   duties   include   monitoring   and   receiving   incoming   calls   from
listeners and field reporters and calls of news sources; generally, they perform leg work
for the anchors during a program or a particular production. They are considered in the
industry   as   program   employees   in   that,   as   distinguished   from   regular   or   station
employees, they are basically engaged by the station for a particular or specific program
broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were
issued talent information sheets which are updated from time to time, and are thus made
the basis to determine the programs to which they shall later be called on to assist. The
program assignments of complainants were as follows:
a.       Complainant Nazareno assists in the programs:
1)      Nagbagang Balita (early morning edition)
2)      Infor Hayupan
3)      Arangkada (morning edition)
4)      Nagbagang Balita (mid­day edition)
b.      Complainant Deiparine assists in the programs:
1)      Unzanith
2)      Serbisyo de Arevalo
3)      Arangkada (evening edition)
4)      Balitang K (local version)
5)      Abante Subu
6)      Pangutana Lang
c.       Complainant Gerzon assists in the program:
1)      On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2)      On Thursdays
Nagbagang Balita
3)      On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d)   Nagbagang Balita (mid­day edition)
4)      On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
 (e) Haranahan[11]
Petitioner   maintained   that   PAs,   reporters,   anchors   and   talents   occasionally
sideline   for   other   programs   they   produce,   such   as   drama

talents in other productions. As program employees, a PAs engagement is coterminous
with the completion of the program, and may be extended/renewed provided that the
program is on­going; a PA may also be assigned to new programs upon the cancellation
of one program and the commencement of another. As such program employees, their
compensation is computed on a program basis, a fixed amount for performance services
irrespective of the time consumed. At any rate, petitioner claimed, as the payroll will
show, respondents were paid all salaries and benefits due them under the law.[12]
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and
interpret the same, especially since respondents were not covered by the bargaining unit.
On July   30,   2001,   the   Labor   Arbiter   rendered   judgment   in   favor   of   the
respondents, and declared that they were regular employees of petitioner; as such, they
were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE,   the   foregoing   premises   considered,   judgment   is   hereby   rendered
declaring   the   complainants   regular   employees   of   the   respondent   ABS­CBN
Broadcasting Corporation and directing the same respondent to pay complainants as
follows:
I ­ Merlou A. Gerzon P12,025.00
II ­ Marlyn Nazareno 12,025.00
III ­ Jennifer Deiparine 12,025.00
IV ­ Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus   ten   (10%)   percent   Attorneys   Fees   or   a   TOTAL   aggregate   amount   of   PESOS:
FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.[13]
However, the Labor Arbiter did not award money benefits as provided in the CBA on
his belief that he had no jurisdiction to interpret and apply the agreement, as the same
was within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the
Labor Code.
Respondents   counsel   received   a   copy   of   the   decision   on August   29,
2001. Respondent   Nazareno   received   her   copy   on August   27,   2001,   while   the   other
respondents received theirs on September 8, 2001. Respondents signed and filed their
Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter
denied and considered as an appeal, conformably with Section 5, Rule V, of the NLRC
Rules   of   Procedure. Petitioner   forthwith   appealed   the   decision   to   the   NLRC,   while
respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re­opening this case which had long been
dismissed without prejudice for more than thirty (30) calendar days;
2.         That the Labor Arbiter erred in depriving the respondent of its Constitutional
right to due process of law;
3.         That the Labor Arbiter erred in denying respondents Motion for Reconsideration
on an interlocutory order on the ground that the same is a prohibited pleading;
4.         That the Labor Arbiter erred when he ruled that the complainants are regular
employees of the respondent;
5.         That the Labor Arbiter erred when he ruled that the complainants are entitled to
13th month pay, service incentive leave pay and salary differential; and
6.         That the Labor Arbiter erred when he ruled that complainants are entitled to
attorneys fees.[14]
On November 14, 2002, the NLRC rendered judgment modifying the decision of the
Labor Arbiter. The fallo of the decision reads:
WHEREFORE,   premises   considered,   the   decision   of   Labor   Arbiter   Jose   G.
Gutierrez   dated 30   July   2001 is SET   ASIDE   and   VACATED and   a   new   one   is
entered ORDERINGrespondent ABS­CBN Broadcasting Corporation, as follows:
1.      To pay complainants of their wage differentials and other benefits arising from the
CBA   as   of   30   September   2002   in   the   aggregate   amount   of   Two   Million   Five
Hundred,   Sixty­One   Thousand   Nine   Hundred   Forty­Eight   Pesos   and   22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer ­ P 716,113.49
 b. Gerzon, Merlou ­ 716,113.49
c. Nazareno, Marlyn ­ 716,113.49
d. Lerazan, Josephine Sanchez ­ 413,607.75
Total ­ P 2,561,948.22
2.      To deliver to the complainants Two Hundred Thirty­Three (233) sacks of rice as
of 30 September 2002 representing their rice subsidy in the CBA, broken down as
follows:
a. Deiparine, Jennifer ­ 60 Sacks
b. Gerzon, Merlou ­ 60 Sacks
c. Nazareno, Marlyn ­ 60 Sacks
d. Lerazan, Josephine Sanchez ­ 53 Sacks
Total 233 Sacks; and
3.      To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.[15]
The NLRC declared that the Labor Arbiter acted conformably with the Labor
Code when it granted respondents motion to refile the complaint and admit their position
paper. Although respondents were not parties to the CBA between petitioner and the
ABS­CBN   Rank­and­File   Employees   Union,   the   NLRC   nevertheless   granted   and
computed respondents monetary benefits based on the 1999 CBA, which was effective
until September 2002. The NLRC also ruled that the Labor Arbiter had jurisdiction over
the complaint of respondents because they acted in their individual capacities and not as
members of  the union. Their  claim for monetary benefits was within the context of
Article 217(6) of the Labor Code. The validity of respondents claim does not depend
upon the interpretation of the CBA.

The NLRC ruled that respondents were entitled to the benefits under the CBA
because they were regular employees who contributed to the profits of petitioner through
their labor. The NLRC cited the ruling of this Court in New Pacific Timber & Supply
Company v. National Labor Relations Commission.[16]
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA, raising both procedural and substantive issues, as follows: (a) whether
the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether
the NLRC committed palpable error in scrutinizing the reopening and revival of the
complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10
days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether
respondents were regular employees; (d) whether the NLRC acted without jurisdiction
in entertaining and resolving the claim of the respondents under the CBA instead of
referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether
the NLRC acted with grave abuse of discretion when it awarded monetary benefits to
respondents under the CBA although they are not members of the appropriate bargaining
unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held
that the perfection of an appeal shall be upon the expiration of the last day to appeal by
all parties, should there be several parties to a case. Since respondents received their
copies of the decision on September 8, 2001 (except respondent Nazareno who received
her copy of the decision on August 27, 2001), they had until September 18, 2001 within
which to file their Appeal Memorandum. Moreover, the CA declared that respondents
failure to submit their position paper on time is not a ground to strike out the paper from
the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not
mere   project   employees,   but   regular   employees   who   perform   tasks   necessary   and
desirable in the usual trade and business of petitioner and not just its project employees.
Moreover, the CA added, the award of benefits accorded to rank­and­file employees
under   the   1996­1999   CBA   is   a   necessary   consequence   of   the   NLRC   ruling   that
respondents, as PAs, are regular employees.
Finding no merit  in petitioners motion for  reconsideration, the CA denied the
same in a Resolution[17] dated June 16, 2004.
Petitioner thus filed the instant petition for  review on certiorari and raises the
following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION
AND GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS
COMMISSION   NOTWITHSTANDING   THE   PATENT   NULLITY   OF   THE
LATTERS DECISION AND RESOLUTION.
 2.                  THE   HONORABLE   COURT   OF   APPEALS   GRAVELY   ERRED   IN
AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS REGULAR
EMPLOYEES.
3.                  THE   HONORABLE   COURT   OF   APPEALS   GRAVELY   ERRED   IN
AFFIRMING   THE   RULING   OF   THE   NLRC   AWARDING   CBA   BENEFITS   TO
RESPONDENTS.[18]
Considering that the assignments of error are interrelated, the Court shall resolve
them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of
law when it affirmed the rulings of the NLRC, and entertained respondents appeal from
the decision of the Labor Arbiter despite the admitted lapse of the reglementary period
within   which   to   perfect

the   same.   Petitioner   likewise   maintains   that   the   10­day   period   to   appeal   must   be
reckoned from receipt of a partys counsel, not from the time the party learns of the
decision, that  is, notice to counsel is notice to party and not the other way around.
Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has
dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules;
such order of dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non­issue because
it was petitioners own timely appeal that empowered the NLRC to reopen the case. They
assert that although the appeal was filed 10 days late, it may still be given due course in
the interest of substantial justice as an exception to the general rule that the negligence
of a counsel binds the client. On the issue of the late filing of their position paper, they
maintain   that   this   is   not   a   ground   to   strike   it   out   from   the   records   or   dismiss   the
complaint.
We find no merit in the petition.
We agree with petitioners contention that the perfection of an appeal within the
statutory or reglementary period is not only mandatory, but also jurisdictional; failure to
do so renders the assailed decision final and executory and deprives the appellate court
or body of the legal authority to alter the final judgment, much less entertain the appeal.
However, this Court has time and again ruled that in exceptional cases, a belated appeal
may be given due course if greater injustice may occur if an appeal is not given due
course than if the reglementary period to appeal were strictly followed.[19] The Court
resorted   to   this   extraordinary   measure   even   at   the   expense   of   sacrificing   order   and
efficiency if only to serve the greater principles of substantial justice and equity.[20]
In the case at bar, the NLRC did not commit a grave abuse of its discretion in
giving Article 223[21] of the Labor Code a liberal application to prevent the miscarriage
of  justice. Technicality should  not be allowed to stand  in the  way of  equitably and
completely resolving the rights and obligations of the parties.[22] We have held in a
catena of cases that technical rules are not binding in labor cases and are not to be
applied strictly if the result would be detrimental to the workingman.[23]
Admittedly, respondents failed to perfect their appeal from the decision of the
Labor Arbiter within the reglementary period therefor. However, petitioner perfected its
appeal   within   the   period,   and   since   petitioner   had   filed   a   timely   appeal,   the   NLRC
acquired   jurisdiction   over   the   case   to   give   due   course   to   its   appeal   and   render   the
decision of November 14, 2002. Case law is that the party who failed to appeal from the
decision of the Labor Arbiter to the NLRC can still participate in a separate appeal
timely filed by the adverse party as the situation is considered to be of greater benefit to
both parties.[24]
We   find   no   merit   in   petitioners   contention   that   the   Labor   Arbiter   abused   his
discretion when he admitted respondents position paper which had been belatedly filed.
It bears stressing that the Labor Arbiter is mandated by law to use every reasonable
means to ascertain the facts in each case speedily and objectively, without technicalities
of law or procedure, all in the interest of due process.[25] Indeed, as stressed by the
appellate court, respondents failure to submit a position paper on time is not a ground for
striking   out   the   paper   from   the   records,   much   less   for   dismissing   a   complaint.
[26] Likewise, there is simply no truth to petitioners assertion that it was denied due
process when the Labor Arbiter admitted respondents position paper without requiring it
to file a comment before admitting said position paper. The essence of due process in
administrative   proceedings   is   simply   an   opportunity   to   explain   ones   side   or   an
opportunity to seek reconsideration of the action or ruling complained of. Obviously,
there is nothing in the records that would suggest that petitioner had absolute lack of
opportunity to be heard.[27] Petitioner had the right to file a motion for reconsideration
of the Labor Arbiters admission of respondents position paper, and even file a Reply
thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be stressed
that  Article 280 of  the Labor  Code was encoded in our  statute books to hinder the
circumvention by unscrupulous employers of the employees right to security of tenure
by   indiscriminately   and   absolutely   ruling   out   all   written   and   oral   agreements
inharmonious with the concept of regular employment defined therein.[28]
We quote with approval the following pronouncement of the NLRC:
The   complainants,   on   the   other   hand,   contend   that   respondents   assailed   the
Labor Arbiters order dated 18 June 2001 as violative of the NLRC Rules of Procedure
and as such is violative of their right to procedural due process. That while suggesting
that an Order be instead issued by the Labor Arbiter for complainants to refile this case,
respondents impliedly submit that there is not any substantial damage or prejudice upon
the   refiling,   even   so,   respondents   suggestion   acknowledges   complainants   right   to
prosecute   this   case,   albeit   with   the   burden   of   repeating   the   same   procedure,   thus,
entailing additional time, efforts, litigation cost and precious time for the Arbiter to
repeat the same process twice. Respondents suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and
re­opened the dismissed case without prejudice beyond the ten (10) day reglementary
period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the
NLRC which states:
A party may file a motion to revive or re­open a case dismissed
without prejudice within ten (10) calendar days from receipt of notice of
the order dismissing the same; otherwise, his only remedy shall be to re­
file the case in the arbitration branch of origin.
the   same   is   not   a   serious   flaw   that   had   prejudiced   the   respondents   right   to   due
process. The case can still be refiled because it has not yet prescribed. Anyway, Article
221 of the Labor Code provides:
In any proceedings before the Commission or any of the Labor Arbiters,
the rules of evidence prevailing in courts of law or equity shall not be
controlling   and   it   is   the   spirit   and   intention   of   this   Code   that   the
Commission and its members and the Labor Arbiters shall use every and
all   reasonable   means   to   ascertain   the   facts   in   each   case   speedily   and
 objectively and without regard to technicalities of law or procedure, all in
the interest of due process.
The   admission   by   the   Labor   Arbiter   of   the   complainants   Position   Paper   and
Supplemental Manifestation which were belatedly filed just only shows that he acted
within his discretion as he is enjoined by law to use every reasonable means to ascertain
the facts in each case speedily and objectively, without regard to technicalities of law or
procedure, all in the interest of due process.Indeed, the failure to submit a position paper
on  time   is   not  a  ground  for  striking   out  the   paper  from   the  records,  much   less   for
dismissing   a   complaint   in   the   case   of   the   complainant.(University of Immaculate
Conception vs.   UIC   Teaching   and   Non­Teaching   Personnel   Employees,   G.R.   No.
144702, July 31, 2001).
In admitting the respondents position paper albeit late, the Labor
Arbiter acted within her discretion. In fact, she is enjoined by law to use
every reasonable means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the interest
of due process. (Panlilio vs. NLRC, 281 SCRA 53).
The   respondents   were   given   by   the   Labor   Arbiter   the   opportunity   to   submit
position   paper. In   fact,   the   respondents   had   filed   their   position   paper   on 2   April
2001. What is material in the compliance of due process is the fact that the parties are
given the opportunities to submit position papers.
Due process requirements are satisfied where the parties are given
the  opportunities  to submit position  papers. (Laurence vs. NLRC, 205
SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process
of law.[29]
We reject, as barren of factual basis, petitioners contention that respondents are
considered   as   its   talents,   hence,   not   regular   employees   of   the   broadcasting
company. Petitioners claim that the functions performed by the respondents are not at all
necessary, desirable, or even vital to its trade or business is belied by the evidence on
record.
Case law is that this Court has always accorded respect and finality to the findings
of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the
National Labor Relations Commission, when supported by substantial evidence.[30] The
question   of   whether   respondents   are   regular   or   project   employees   or   independent
contractors   is   essentially   factual   in   nature;   nonetheless,   the   Court   is   constrained   to
resolve it due to its tremendous effects to the legions of production assistants working in
the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least
one year of service, regardless of the nature of the activity performed, or where the work
is   continuous   or   intermittent,   the   employment   is   considered   regular   as   long   as   the
activity   exists,   the   reason   being   that   a   customary   appointment   is   not   indispensable
before one may be formally declared as having attained regular status. Article 280 of the
Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been
engaged   to   perform   activities   which   are   usually   necessary   or   desirable   in   the   usual
business or trade of the employer except where the employment has been fixed for a
specific   project   or   undertaking   the   completion   or   termination   of   which   has   been
determined at the time of the engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is for the duration of the
season.
In Universal Robina Corporation v. Catapang,[31] the Court reiterated the test in
determining whether one is a regular employee:
The   primary   standard,   therefore,   of   determining   regular   employment   is   the
reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test is whether the former is
usually   necessary   or   desirable   in   the   usual   business   or   trade   of   the   employer.   The
connection   can   be

determined by considering the nature of work performed and its relation to the scheme
of   the   particular   business   or   trade   in   its   entirety.   Also,   if   the   employee   has   been
performing the job for at least a year, even if the performance is not continuous and
merely intermittent, the law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the business.
 Hence, the employment is considered regular, but only with respect to such activity and
while such activity exists.[32]
As elaborated by this Court in Magsalin v. National Organization of Working
Men:[33]
Even while the language of law might have been more definitive, the clarity of
its spirit and intent, i.e., to ensure a regular workers security of tenure, however, can
hardly be doubted.In determining whether an employment should be considered regular
or non­regular, the applicable test is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the
employer. The standard, supplied by the law itself, is whether the work undertaken is
necessary or desirable in the usual business or trade of the employer, a fact that can be
assessed   by   looking   into   the   nature   of   the   services   rendered   and   its   relation   to   the
general scheme under which the business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from the normal activities
required in carrying on the particular business or trade. But, although the work to be
performed is only for a specific project or seasonal, where a person thus engaged has
been performing the job for at least one year, even if the performance is not continuous
or   is   merely   intermittent,   the   law   deems   the   repeated   and   continuing   need   for   its
performance as being sufficient to indicate the necessity or desirability of that activity to
the  business  or trade of the  employer. The employment of such person is  also then
deemed to be regular with respect to such activity and while such activity exists.[34]
Not   considered   regular   employees   are   project   employees,   the   completion   or
termination of which is more or less determinable at the time of employment, such as
those   employed   in   connection   with   a   particular   construction   project,   and   seasonal
employees whose employment by its nature is only desirable for a limited period of
time. Even then, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity performed and
while such activity actually exists.
It   is   of   no   moment   that   petitioner   hired   respondents   as   talents.   The   fact   that
respondents received pre­agreed talent fees instead of salaries, that they did not observe
the required office hours, and that they were permitted to join other productions during
their free time are not conclusive of the nature of their employment. Respondents cannot
be considered talents because they are not actors or actresses or radio specialists or mere
clerks or utility employees. They are regular employees who perform several different
duties under the control and direction of ABS­CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged
to perform activities which are necessary or desirable in the usual business or trade of
the employer; and (2) those casual employees who have rendered at least one year of
service, whether continuous or broken, with respect to the activities in which they are
employed.[35]
The law overrides such conditions which are prejudicial to the interest of  the
worker   whose   weak   bargaining   situation   necessitates   the   succor   of   the   State.   What
determines whether a certain employment is regular or otherwise is not the will or word
of the employer, to which the worker oftentimes acquiesces, much less the procedure of
hiring the  employee  or   the manner   of   paying the  salary  or   the actual  time  spent  at
work. It is the character of the activities performed in relation to the particular trade or
business taking into account all the circumstances, and in some cases the length of time
of its performance and its continued existence.[36] It is obvious that one year after they
were employed by petitioner, respondents became regular employees by operation of
law.[37]

Additionally, respondents cannot be considered as project or program employees
because no evidence was presented to show that the duration and scope of the project
were   determined   or   specified   at   the   time   of   their   engagement.   Under   existing
jurisprudence, project could   refer   to   two   distinguishable   types   of   activities. First,   a
project may refer to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and identifiable as such,
from the other undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times. Second, the term project may also refer to a particular
job or undertaking that is not within the regular business of the employer. Such a job or
undertaking must also be identifiably separate and distinct from the ordinary or regular
business operations of the employer. The job or undertaking also begins and ends at
determined or determinable times.[38]
 The principal test is whether or not the project employees were assigned to carry
out a specific project or undertaking, the duration and scope of which were specified at
the time the employees were engaged for that project.[39]
In this case, it is undisputed that respondents had continuously performed the
same   activities   for   an   average   of   five   years.   Their   assigned   tasks   are   necessary   or
desirable in the usual business or trade of the petitioner. The persisting need for their
services is sufficient evidence of the necessity and indispensability of such services to
petitioners business or trade.[40] While length of time may not be a sole controlling test
for project employment, it can be a strong factor to determine whether the employee was
hired for a specific undertaking or in fact tasked to perform functions which are vital,
necessary and indispensable to the usual trade or business of the employer.[41] We note
further that petitioner did not report the termination of respondents employment in the
particular project to the Department of Labor and Employment Regional Office having
jurisdiction over the workplace within 30 days following the date of their separation
from work, using the prescribed form on employees termination/ dismissals/suspensions.
[42]
As gleaned from the records of this case, petitioner itself is not certain how to
categorize   respondents.   In   its   earlier   pleadings,   petitioner   classified   respondents
as program   employees,   and   in   later   pleadings, independent   contractors.   Program
employees, or project employees, are different from independent contractors because in
the case of the latter, no employer­employee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS­CBN Broadcasting
Corporation[43] is misplaced. In that case, the Court explained why Jose Sonza, a well­
known television and radio personality, was an independent contractor and not a regular
employee:
A. Selection and Engagement of Employee
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   respondent   in   specifically   selecting   and   hiring
complainant over other broadcasters of possibly similar experience and qualification as
complainant belies respondents claim of independent contractorship.
 Independent   contractors   often   present   themselves   to   possess   unique   skills,
expertise or talent to distinguish them from ordinary employees. The specific selection
and   hiring   of   SONZA, because   of   his   unique   skills,   talent   and   celebrity   status   not
possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent   contractual   relationship. If   SONZA   did   not   possess   such   unique   skills,
talent and celebrity status, ABS­CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other
employee.
In   any   event,   the   method   of   selecting   and   engaging   SONZA   does   not
conclusively   determine   his   status. We   must   consider   all   the   circumstances   of   the
relationship, with the control test being the most important element.
B. Payment of Wages
ABS­CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee
of   ABS­CBN.SONZA   also   points   out   that   ABS­CBN   granted   him   benefits   and
privileges which he would not have enjoyed if he were truly the subject of a valid job
contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to
the Agreement. If SONZA were ABS­CBNs employee, there would be no need for the
parties to stipulate on benefits such as SSS, Medicare, x x x and 13 th month pay which
the law  automatically incorporates into every employer­employee contract. Whatever
benefits SONZA enjoyed arose from contract and not because of an employer­employee
relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are
so huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an employer­employee relationship. ABS­CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAS unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for his
services. The   power   to   bargain   talent   fees   way   above   the   salary   scales   of   ordinary
employees   is   a   circumstance   indicative,   but   not   conclusive,   of   an   independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the
status of SONZA as an independent contractor. The parties expressly agreed on such
 mode of payment.Under the Agreement, MJMDC is the AGENT of SONZA, to whom
MJMDC would have to turn over any talent fee accruing under the Agreement.[44]
In   the   case   at   bar,   however,   the   employer­employee   relationship   between
petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill,
talent   or   celebrity   status   was   required   from   them   because   they   were   merely   hired
through petitioners personnel department just like any ordinary employee.
Second. The so­called talent fees of respondents correspond to wages given as a
result of an employer­employee relationship. Respondents did not have the power to
bargain   for   huge   talent   fees,   a   circumstance   negating   independent   contractual
relationship.
Third. Petitioner   could  always   discharge   respondents   should   it  find  their   work
unsatisfactory, and respondents are highly dependent on the petitioner for  continued
work.
Fourth. The   degree   of   control   and   supervision   exercised   by   petitioner   over
respondents   through   its   supervisors   negates   the   allegation   that   respondents   are
independent contractors.
The presumption is that when the work done is an integral part of the regular
business of the employer and when the worker, relative to the employer, does not
furnish   an   independent   business   or   professional   service,   such   work   is   a   regular
employment of such employee and not an independent contractor.[45] The Court will
peruse beyond any such agreement to examine the facts that typify the parties actual
relationship.[46]
It follows then that respondents are entitled to the benefits provided for in the
existing CBA between petitioner and its rank­and­file employees. As regular employees,
respondents   are   entitled   to   the   benefits   granted   to all   other   regular   employees   of
petitioner under the CBA.[47] We quote with approval the ruling of the appellate court,
that  the reason  why production assistants  were  excluded from the CBA is precisely
because they were erroneously classified and treated as project employees by petitioner:

x x x The award in favor of private respondents of the benefits accorded to rank­
and­file employees of ABS­CBN under the 1996­1999 CBA is a necessary consequence
 of   public   respondents   ruling   that   private   respondents   as   production   assistants   of
petitioner   are   regular   employees. The   monetary   award   is   not   considered   as   claims
involving   the   interpretation   or   implementation   of   the   collective   bargaining
agreement. The   reason   why   production   assistants   were   excluded   from   the   said
agreement is precisely because they were classified and treated as project employees by
petitioner.
As earlier stated, it is not the will or word of the employer which determines the
nature of employment of an employee but the nature of the activities performed by such
employee in relation to the particular business or trade of the employer. Considering that
We have clearly found that private respondents are regular employees of petitioner, their
exclusion from the said CBA on the misplaced belief of the parties to the said agreement
that they are project employees, is therefore not proper. Finding said private respondents
as regular employees and not as mere project employees, they must be accorded the
benefits due under the said Collective Bargaining Agreement.
A   collective   bargaining   agreement   is   a   contract   entered   into   by   the   union
representing   the   employees   and   the   employer. However,   even   the   non­member
employees are entitled to the benefits of the contract. To accord its benefits  only to
members of the union without any valid reason would constitute undue discrimination
against non­members. A collective bargaining agreement is binding on all employees of
the company. Therefore, whatever benefits are given to the other employees of ABS­
CBN must likewise be accorded to private respondents who were regular employees of
petitioner.[48]
Besides,   only   talent­artists   were   excluded   from   the   CBA   and   not   production
assistants who are regular employees of the respondents. Moreover, under Article 1702
of the New Civil Code: In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living of the laborer.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
merit. The assailed Decision and Resolution of the Court of Appeals in CA­G.R. SP No.
76582 are AFFIRMED. Costs against petitioner.

SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
C E R T I F I CAT I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice

[1] Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Rodrigo V. Cosico and Rosalinda
Asuncion-Vicente, concurring, rollo, pp. 9-34.
[2] at 170-219.
[3] at 220-227.
[4] Rollo, p. 180.
[5] at 183.
[6] at 213.
[7] at 174.
[8] at 248-250.
[9] CA rollo, pp. 128-129.
[10] at 138-139.
[11] See CA rollo, pp. 7-8.
[12] Rollo, pp. 229-233.
[13] at 257-258.
[14] Rollo, p. 172.
[15] Rollo, p. 218.
[16] 385 Phil. 93 (2000).
[17] Rollo, p. 36.
[18] at 58-59.
[19] Mabuhay Development Industries v. National Labor Relations Commission, 351
Phil. 227, 234-235 (1998), citing City Fair Corporation v. National Labor Relations
Commission, 313 Phil. 464, 465 (1995).
[20] Sublay v. National Labor Relations Commission, 381 Phil. 198, 204 (2000).
[21] Art. 223. APPEAL
Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions, awards, or orders. x x x
[22] Buenaobra v. Lim King Guan, G.R. No. 150147, , 420 SCRA 359, 364 (2004).
[23] Huntington Steel Products, Inc. v. National Labor Relations Commission, G.R. No.
158311, November 14, 2004, 442 SCRA 551, 560.
[24] See Sandol v. Pilipinas Kao, Inc., et al., G.R. No. 87530, , 186 SCRA 491.
[25] Panlilio v. National Labor Relations Commission, 346 Phil. 30, 35-36 (1997).
[26] U.I.C. v. U.I.C. Teaching & Non-Teaching Personnel and Employees Union, 414
Phil. 522, 533 (2001).
[27] Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458 SCRA
609, 629-630.
[28] Philips Semiconductors (Phils.), Inc. v. Fadriquela, Infra note 35, at 418.
[29] CA rollo, pp. 51-52.
[30] Lopez v. National Steel Corporation, G.R. No. 149674, , 423 SCRA 109, 113.
[31] G.R. No. 164736, , 473 SCRA 189.
[32] Id. at 203-204, citing Abasolo v. National Labor Relations Commission, 400 Phil.
86, 103 (2000), De Leon v. National Labor Relations Commission, G.R. No. 70705,
August 21, 1989, 176 SCRA 615, 621.
[33] 451 Phil. 254 (2003).
[34] at 260-261.
[35] Philips Semiconductors (Phils.), Inc. v. Fadriquela, G.R. No. 141717, , 427 SCRA
408, 419.
[36] De Leon v. National Labor Relations Commission, supra note 32, at 624.
[37] Kimberly Independent Labor Union for Solidarity v. Drilon, et al., G.R. Nos. 77629
and 78791, May 9, 1990, 185 SCRA 190, 204.
[38] Villa v. National Labor Relations Commission, 348 Phil. 116, 143 (1998).
[39] ALU-TUCP, et al. v. National Labor Relations Commission, G.R. No. 109902, , 234
SCRA 678, 685.
[40] Samson v. National Labor Relations Commission, 323 Phil 135, 148 (1996).
[41] Tomas Lao Construction v. National Labor Relations Commission, 344 Phil. 268,
279 (1997).
[42] Section 2.2 of Department Order No. 19, cited in Integrated Contractor and
Plumbing Works, Inc. v. National Labor Relations Commission, G.R. No. 152427,
August 9, 2005, 466 SCRA 265, 273-274 and Samson v. National Labor Relations
Commission, supra note 40, at 147.
[43] G.R. No. 138051, , 431 SCRA 538.
[44] at 595-596.
[45] David Albert Pierce, Esq., Management-side employment law advice for
entertainment industry with subtitle Classification of Workers: Independent Contractor
versus
Employee http://www.piercegorman.com/Classification_of_Workers.html(visited ).
[46]
[47] Cinderella Marketing Corporation v. National Labor Relations Commission,
Second Division, G.R. Nos. 112535 and 113758, June 22, 1998, 291 SCRA 91, 96.
[48] Rollo, pp. 121-122.
SECOND DIVISION
TELEVISION AND PRODUCTION G.R. No. 167648
EXPONENTS, INC. and/or ANTONIO
P. TUVIERA, Present:
Petitioners,
QUISUMBING, J.,
Chairperson,
CARPIO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
ROBERTO C. SERVAA,
Respondent. Promulgated:
January 28, 2008
x----------------------------------------------------------------------------x
DECISION
TINGA, J.:
This petition for review under Rule 45 assails the 21 December
2004 Decision[1] and 8 April 2005 Resolution[2] of the Court of Appeals declaring
Roberto Servaa (respondent) a regular employee of petitioner Television and Production
Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE to pay nominal
damages for its failure to observe statutory due process in the termination of respondents
employment for authorized cause.
 TAPE is a domestic corporation engaged in the production of television programs,
such as the long-running variety program, Eat Bulaga!. Its president is Antonio P.
Tuviera (Tuviera). Respondent Roberto C. Servaa had served as a security guard for
TAPE from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against
TAPE. He alleged that he was first connected with Agro-Commercial Security Agency
but was later on absorbed by TAPE as a regular company guard. He was detailed at
Broadway Centrum in Quezon City where Eat Bulaga! regularly staged its
productions. On 2 March 2000, respondent received a memorandum informing him of
his impending dismissal on account of TAPEs decision to contract the services of a
professional security agency. At the time of his termination, respondent was receiving a
monthly salary of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick
leave benefits and other monetary considerations were withheld from him. He further
contended that his dismissal was undertaken without due process and violative of
existing labor laws, aggravated by nonpayment of separation pay.[3]
In a motion to dismiss which was treated as its position paper, TAPE countered that the
labor arbiter had no jurisdiction over the case in the absence of an employer-employee
relationship between the parties. TAPE made the following assertions: (1) that
respondent was initially employed as a security guard for Radio Philippines Network
(RPN-9); (2) that he was tasked to assist TAPE during its live productions, specifically,
to control the crowd; (3) that when RPN-9 severed its relationship with the security
agency, TAPE engaged respondents services, as part of the support group and thus a
talent, to provide security service to production staff, stars and guests of Eat Bulaga! as
well as to control the audience during the one-and-a-half hour noontime program; (4)
that it was agreed that complainant would render his services until such time that
respondent company shall have engaged the services of a professional security agency;
(5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a
talent and a member of the support group, until such time that TAPE shall have engaged
the services of a professional security agency; (6) that respondent was not prevented
from seeking other employment, whether or not related to security services, before or
after attending to his Eat Bulaga! functions; (7) that sometime in late 1999, TAPE started
negotiations for the engagement of a professional security agency, the Sun Shield
Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all talents,
whose functions would be rendered redundant by the engagement of the security agency,
informing them of the managements decision to terminate their services.[4]
TAPE averred that respondent was an independent contractor falling under the
talent group category and was working under a special arrangement which is recognized
in the industry.[5]
Respondent for his part insisted that he was a regular employee having been engaged to
perform an activity that is necessary and desirable to TAPEs business for thirteen (13)
years.[6]
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a
regular employee of TAPE. The Labor Arbiter relied on the nature of the work of
respondent, which is securing and maintaining order in the studio, as necessary and
desirable in the usual business activity of TAPE. The Labor Arbiter also ruled that the
termination was valid on the ground of redundancy, and ordered the payment of
respondents separation pay equivalent to one (1)-month pay for every year of
service. The dispositive portion of the decision reads:
WHEREFORE, complainants position is hereby declared redundant. Accordingly,
respondents are hereby ordered to pay complainant his separation pay computed at the
rate of one (1) month pay for every year of service or in the total amount of P78,000.00.
[7]

On appeal, the National Labor Relations Commission (NLRC) in a

Decision[8] dated 22 April 2002 reversed the Labor Arbiter and considered respondent a
mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor
Arbiters conclusion that complainant was a regular employee.
xxxx
The primary standard to determine regularity of employment is the reasonable
connection between the particular activity performed by the employee in relation to the
usual business or trade of the employer. This connection can be determined by
considering the nature and work performed and its relation to the scheme of the
particular business or trade in its entirety. x x x Respondent company is engaged in the
business of production of television shows. The records of this case also show that
complainant was employed by respondent company beginning 1995 after respondent
company transferred from RPN-9 to GMA-7, a fact which complainant does not
 dispute. His last salary was P5,444.44 per month. In such industry, security services
may not be deemed necessary and desirable in the usual business of the employer. Even
without the performance of such services on a regular basis, respondents companys
business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of respondent company. Unlike [a]
regular employee, he did not observe working hours x x x. He worked for other
companies, such as M-Zet TV Production, Inc. at the same time that he was working for
respondent company. The foregoing indubitably shows that complainant-appellee was a
program employee. Otherwise, he would have two (2) employers at the same time.[9]
Respondent filed a motion for reconsideration but it was denied in a
Resolution[10] dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that the
NLRC acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when it reversed the decision of the Labor Arbiter. Respondent asserted that he was a
regular employee considering the nature and length of service rendered.[11]
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a
regular employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision
dated 22 April 2002 of the public respondent NLRC reversing the Decision of the Labor
Arbiter and its Resolution dated 28 June 2002 denying petitioners motion for
reconsideration are REVERSED and SET ASIDE. The Decision dated of the Labor
Arbiter is REINSTATED with MODIFICATION in that private respondents are
ordered to pay jointly and severally petitioner the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process.
SO ORDERED.[12]
Finding TAPEs motion for reconsideration without merit, the Court of Appeals issued a
Resolution[13] dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as those
in its petition for certiorari before the Court of Appeals. These matters may be summed
up into one main issue: whether an employer-employee relationship exists between
TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered
the case submitted for decision.[14]
At the outset, it bears emphasis that the existence of employer-employee relationship is
ultimately a question of fact. Generally, only questions of law are entertained in appeals
by certiorari to the Supreme Court. This rule, however, is not absolute. Among the
several recognized exceptions is when the findings of the Court of Appeals and Labor
Arbiters, on one hand, and that of the NLRC, on the other, are conflicting, [15] as
obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in
determining the existence of employer-employee relationship, namely: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee with respect to the means and
method by which the work is to be accomplished. [16] The most important factor
involves the control test. Under the control test, there is an employer-employee
relationship when the person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used to achieve that
end.[17]
In concluding that respondent was an employee of TAPE, the Court of Appeals
applied the four-fold test in this wise:
First. The selection and hiring of petitioner was done by private respondents. In
fact, private respondents themselves admitted having engaged the services of petitioner
only in 1995 after TAPE severed its relations with RPN Channel 9.
By informing petitioner through the Memorandum dated , that his services will
be terminated as soon as the services of the newly hired security agency begins, private
respondents in effect acknowledged petitioner to be their employee. For the right to hire
and fire is another important element of the employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in
determining the existence of employer-employee relation. . . Payment as admitted by
private respondents was given by them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the control
test is the most important. x x x
The bundy cards representing the time petitioner had reported for work are
evident proofs of private respondents control over petitioner more particularly with the
time he is required to report for work during the noontime program of Eat Bulaga! If it
were not so, petitioner would be free to report for work anytime even not during the
noontime program of Eat Bulaga! from to and still gets his compensation for being a
talent. Precisely, he is being paid for being the security of Eat Bulaga! during the above-
mentioned period. The daily time cards of petitioner are not just for mere record
purposes as claimed by private respondents. It is a form of control by the management of
private respondent TAPE.[18]
TAPE asseverates that the Court of Appeals erred in applying the four-fold test in
determining the existence of employer-employee relationship between it and
respondent. With respect to the elements of selection, wages and dismissal, TAPE
proffers the following arguments: that it never hired respondent, instead it was the latter
who offered his services as a talent to TAPE; that the Memorandum dated 2 March 2000
served on respondent was for the discontinuance of the contract for security services and
not a termination letter; and that the talent fees given to respondent were the pre-agreed
consideration for the services rendered and should not be construed as wages. Anent the
element of control, TAPE insists that it had no control over respondent in that he was
free to employ means and methods by which he is to control and manage the live
audiences, as well as the safety of TAPEs stars and guests.[19]

The position of TAPE is untenable. Respondent was first connected with Agro-
Commercial Security Agency, which assigned him to assist TAPE in its live productions.
When the security agencys contract with RPN-9 expired in 1995, respondent was
absorbed by TAPE or, in the latters language, retained as talent.[20] Clearly, respondent
was hired by TAPE. Respondent presented his identification card[21] to prove that he is
indeed an employee of TAPE. It has been in held that in a business establishment, an
identification card is usually provided not just as a security measure but to mainly
identify the holder thereof as a bona fide employee of the firm who issues it.[22]
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE
prefers to designate such amount as talent fees. Wages, as defined in the Labor Code, are
remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done, or for
service rendered or to be rendered. It is beyond dispute that respondent received a fixed
amount as monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that
TAPE had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was
required to report daily and observe definite work hours. To negate the element of
control, TAPE presented a certification from M-Zet Productions to prove that respondent
also worked as a studio security guard for said company. Notably, the said certificate
categorically stated that respondent reported for work on Thursdays from 1992 to
1995. It can be recalled that during said period, respondent was still working for RPN-
9. As admitted by TAPE, it absorbed respondent in late 1995.[23]
TAPE further denies exercising control over respondent and maintains that the
latter is an independent contractor.[24] Aside from possessing substantial capital or
investment, a legitimate job contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or service on its own
account and under its own responsibility according to its own manner and method, and
free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof. [25] TAPE failed to establish
that respondent is an independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove
that herein petitioner is indeed an independent contractor. None of the above conditions
exist in the case at bar. Private respondents failed to show that petitioner has substantial
capital or investment to be qualified as an independent contractor. They likewise failed
to present a written contract which specifies the performance of a specified piece of
work, the nature and extent of the work and the term and duration of the relationship
between herein petitioner and private respondent TAPE.[26]
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in
classifying respondent as a program employee and equating him to be an independent
contractor.
Policy Instruction No. 40 defines program employees as
x x x those whose skills, talents or services are engaged by the station for a
particular or specific program or undertaking and who are not required to observe
normal working hours such that on some days they work for less than eight (8) hours
and on other days beyond the normal work hours observed by station employees and are
allowed to enter into employment contracts with other persons, stations, advertising
agencies or sponsoring companies. The engagement of program employees, including
those hired by advertising or sponsoring companies, shall be under a written contract
specifying, among other things, the nature of the work to be performed, rates of pay and
the programs in which they will work. The contract shall be duly registered by the
 station with the Broadcast Media Council within three (3) days from its consummation.
[27]
TAPE failed to adduce any evidence to prove that it complied with the
requirements laid down in the policy instruction. It did not even present its contract with
respondent.Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying
him as an independent contractor is misplaced. The Court of Appeals had this to say:
We cannot subscribe to private respondents conflicting theories. The theory of
private respondents that petitioner is an independent contractor runs counter to their
very own allegation that petitioner is a talent or a program employee. An independent
contractor is not an employee of the employer, while a talent or program employee is an
employee. The only difference between a talent or program employee and a regular
employee is the fact that a regular employee is entitled to all the benefits that are being
prayed for. This is the reason why private respondents try to seek refuge under the
concept of an independent contractor theory. For if petitioner were indeed an
independent contractor, private respondents will not be liable to pay the benefits prayed
for in petitioners complaint.[28]
More importantly, respondent had been continuously under the employ of TAPE
from 1995 until his termination in March 2000, or for a span of 5 years. Regardless of
whether or not respondent had been performing work that is necessary or desirable to the
usual business of TAPE, respondent is still considered a regular employee under Article
280 of the Labor Code which provides:
Art. 280. Regular and Casual Employment.The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
engagement of the employee or where the work or service to be performed is seasonal in
nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph. Provided, that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.
As a regular employee, respondent cannot be terminated except for just cause or
when authorized by law.[29] It is clear from the tenor of the 2 March 2000 Memorandum
that respondents termination was due to redundancy. Thus, the Court of Appeals
correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also terminate the
employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the Ministry
of Labor and Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every year or service, whichever is
higher.
xxxx
We uphold the finding of the Labor Arbiter that complainant [herein petitioner]
was terminated upon [the] managements option to professionalize the security services
in its operations. x x x However, [we] find that although petitioners services [sic] was
for an authorized cause, i.e., redundancy, private respondents failed to prove that it
complied with service of written notice to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment. It bears stressing that
although notice was served upon petitioner through a Memorandum dated , the
effectivity of his dismissal is fifteen days from the start of the agencys take over which
was on . Petitioners services with private respondents were severed less than the month
requirement by the law.
Under prevailing jurisprudence the termination for an authorized cause requires
payment of separation pay. Procedurally, if the dismissal is based on authorized causes
under Articles 283 and 284, the employer must give the employee and the Deparment of
Labor and Employment written notice 30 days prior to the effectivity of his separation.
Where the dismissal is for an authorized cause but due process was not observed, the
dismissal should be upheld. While the procedural infirmity cannot be cured, it should
not invalidate the dismissal. However, the employer should be liable for non-compliance
with procedural requirements of due process.
xxxx
Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00
as nominal damages. The basis of the violation of petitioners right to statutory due
process by the private respondents warrants the payment of indemnity in the form of
nominal damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. We believe this form of
damages would serve to deter employer from future violations of the statutory due
process rights of the employees. At the very least, it provides a vindication or
recognition of this fundamental right granted to the latter under the Labor Code and its
 Implementing Rules. Considering the circumstances in the case at bench, we deem it
proper to fix it at P10,000.00.[30]

In sum, we find no reversible error committed by the Court of Appeals in its

assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE,
absent any showing that he acted with malice or bad faith in terminating respondent, he
cannot be held solidarily liable with TAPE.[31] Thus, the Court of Appeals ruling on this
point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED with MODIFICATION in that only petitioner Television and Production
Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process and petitioner Antonio P.
Tuviera is accordingly absolved from liability.
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

[1]Rollo, pp. 47-64. Penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justices
Renato C. Dacudao and Edgardo F. Sundiam.
[2] at 66-67.
[3] at 98.
[4] at 100-102.
[5] at 98, 103.
[6] at 103.
[7] at 106.
[8] at 107-118.
[9] at 115-117.
[10] a t 119-120.
[11] at 130.
[12] at 63.
[13] at 66-67.
[14] at 284.
[15]Molina v. Pacific Plans, Inc., G.R. No. 165476, , 484 SCRA 498.
[16]Dumpit-Murillo v. Court of Appeals, G.R. No. 164652, 8 June 2007, 524
SCRA 290, 302 citing Manila Water Company, Inc. v. Pena, G.R. No. 158255, 8 July
2004, 434 SCRA 53; Coca-Cola Bottlers v. Climaco, G.R. No. 146881, 5 February
2007, 514 SCRA 164, 177; Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-
Pinagbuklod ng Manggagawang Promo ng Burlingame v. Burlingame Corporation,
G.R. No. 162833, 15 June 2007, 524 SCRA 690, 695.
[17]Leonardo v. Court of Appeals, G.R. No. 152459, .
[18]Rollo, pp. 56-57.
[19] at 30-34.
[20] at 101.
[21]CA rollo, p. 37.
 [22]Villamaria v. Court of Appeals, G.R. No. 165881, .
[23] at 16-17.
[24] at 28.
[25]Department of Labor and Employment, Department Order No. 10 (1997).
[26]Rollo, p. 55.
[27]Department of Labor and Employment Policy Instruction No. 40 (1979).
[28] at 57-58.
[29]LABOR CODE, Art. 279.
[30]Rollo, pp. 60-63.
[31]Kay Products, Inc. v. Court of Appeals, G.R. No. 162472, 28 July 2005, 464
SCRA 544.
542 SCRA 578 – Labor Law – Labor Standards – Regular Employee – Employer-employee
relationship – Four Fold Test

Servaña started out as a security for the Agro-Commercial Security Agency (ACSA)
since 1987. The agency had a contract with TV network RPN 9.
On the other hand, Television and Production Exponents, Inc (TAPE). is a company in
charge of TV programming and was handling shows like Eat Bulaga! Eat Bulaga! was
then with RPN 9.
In 1995, RPN 9 severed its relations with ACSA. TAPE retained the services of Servaña
as a security guard and absorbed him.
In 2000, TAPE contracted the services of Sun Shield Security Agency. It then notified
Servaña that he is being terminated because he is now a redundant employee.
Servaña then filed a case for illegal Dismissal. The Labor Arbiter ruled that Servaña’s
dismissal is valid on the ground of redundancy but though he was not illegally
dismissed he is still entitled to be paid a separation pay which is amounting to one
month pay for every year of service which totals to P78,000.00.
TAPE appealed and argued that Servaña is not entitled to receive separation pay for he
is considered as a talent and not as a regular employee; that as such, there is no
employee-employer relationship between TAPE and Servaña. The National Labor
Relations Commission ruled in favor of TAPE. It ruled that Servaña is a program
employee. Servaña appealed before the Court of Appeals.
The Court of Appeals reversed the NLRC and affirmed the LA. The CA further ruled that
TAPE and its president Tuviera should pay for nominal damages amounting to
P10,000.00.
ISSUE: Whether or not there is an employee-employer relationship existing between
TAPE and Servaña.
HELD: Yes. Servaña is a regular employee.
In determining Servaña’s nature of employment, the Supreme Court employed the Four
Fold Test:
1. Whether or not employer conducted the selection and engagement of the
employee.
Servaña was selected and engaged by TAPE when he was absorbed as a “talent” in
1995. He is not really a talent, as termed by TAPE, because he performs an activity
which is necessary and desirable to TAPE’s business and that is being a security guard.
Further, the primary evidence of him being engaged as an employee is his employee
identification card. An identification card is usually provided not just as a security
measure but to mainly identify the holder thereof as a bona fide employee of the firm
who issues it.
2. Whether or not there is payment of wages to the employee by the
employer.
Servaña is definitely receiving a fixed amount as monthly compensation. He’s receiving
P6,000.00 a month.
3. Whether or not employer has the power to dismiss employee.
The Memorandum of Discontinuance issued to Servaña to notify him that he is a
redundant employee evidenced TAPE’s power to dismiss Servaña.
4. Whether or not the employer has the power of control over the employee.
The bundy cards which showed that Servaña was required to report to work at fixed
hours of the day manifested the fact that TAPE does have control over him. Otherwise,
Servaña could have reported at any time during the day as he may wish.
Therefore, Servaña is entitled to receive a separation pay.
On the other hand, the Supreme Court ruled that Tuviera, as president of TAPE, should
not be held liable for nominal damages as there was no showing he acted in bad faith in
terminating Servaña.
Regular Employee Defined:
One having been engaged to perform an activity that is necessary and desirable to a
company’s business.
BS-CBN vs NAZARENO Case Digest
ABS-CBN BROADCASTING CORPORATION vs. MARLYN NAZARENO et al.
G.R. No. 164156
September 26, 2006

Facts: Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and
owns a network of television and radio stations, whose operations revolve around the broadcast, transmission, and
relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio
and television operations. It has a franchise as a broadcasting company, and was likewise issued a license and
authority to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on
different dates. They were assigned at the news and public affairs, for various radio programs in the Cebu
Broadcasting Station. On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a
Collective Bargaining Agreement (CBA) to be effective during the period from December 11, 1996 to December 11,
1999. However, since petitioner refused to recognize PAs as part of the bargaining unit, respondents were not
included to the CBA.

On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment
of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with
Damages against the petitioner before the NLRC. The Labor Arbiter rendered judgment in favor of the respondents,
and declared that they were regular employees of petitioner as such, they were awarded monetary benefits. NLRC
affirmed the decision of the Labor Arbiter. Petitioner filed a motion for reconsideration but CA dismissed it.

Issue: Whether or not the respondents were considered regular employees of ABS-CBN.

Ruling: The respondents are regular employees of ABS-CBN. It was held that where a person has rendered at
least one year of service, regardless of the nature of the activity performed, or where the work is continuous or
intermittent, the employment is considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having attained regular status.

In Universal Robina Corporation v. Catapang, the Court states that the primary standard, therefore, of determining
regular employment is the reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. The connection can be determined by considering the
nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the
employee has been performing the job for at least a year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity
if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with
respect to such activity and while such activity exists.

Additionally, respondents cannot be considered as project or program employees because no evidence was
presented to show that the duration and scope of the project were determined or specified at the time of their
engagement. In the case at bar, however, the employer-employee relationship between petitioner and respondents
has been proven. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity
status was required from them because they were merely hired through petitioner’s personnel department just like
any ordinary employee. Respondents did not have the power to bargain for huge talent fees, a circumstance
negating independent contractual relationship. Respondents are highly dependent on the petitioner for continued
work. The degree of control and supervision exercised by petitioner over respondents through its supervisors
negates the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer and when
the worker, relative to the employer, does not furnish an independent business or professional service, such work is
a regular employment of such employee and not an independent contractor. As regular employees, respondents
are entitled to the benefits granted to all other regular employees of petitioner under the CBA . Besides, only talent-
artists were excluded from the CBA and not production assistants who are regular employees of the respondents.
Moreover, under Article 1702 of the New Civil Code: “In case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living of the laborer.”
SONZA vs. ABS-CBN Case Digest
JOSE SONZA vs. ABS-CBN BROADCASTING CORPORATION
G.R. No. 138051
June 10, 2004

Facts: In May 1994, ABS-CBN signed an agreement with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by
Sonza, as President and general manager, and Tiangco as its EVP and treasurer. Referred to in the agreement as
agent, MJMDC agreed to provide Sonza’s services exclusively to ABS-CBN as talent for radio and television. ABS-
CBN agreed to pay Sonza a monthly talent fee of P310, 000 for the first year and P317, 000 for the second and
third year.

On April 1996, Sonza wrote a letter to ABS-CBN where he irrevocably resigned in view of the recent events
concerning his program and career. After the said letter, Sonza filed with the Department of Labor and Employment
a complaint alleging that ABS-CBN did not pay his salaries, separation pay, service incentive pay,13th month pay,
signing bonus, travel allowance and amounts under the Employees Stock Option Plan (ESOP). ABS-CBN
contended that no employee-employer relationship existed between the parties. However, ABS-CBN continued to
remit Sonza’s monthly talent fees but opened another account for the same purpose.

The Labor Arbiter dismissed the complaint and found that there is no employee-employer relationship. NLRC
affirmed the decision of the Labor Arbiter. CA also affirmed the decision of NLRC.

Issue: Whether or not there was employer-employee relationship between the parties.

Ruling: Case law has consistently held that the elements of an employee-employer relationship are selection and
engagement of the employee, the payment of wages, the power of dismissal and the employer’s power to control
the employee on the means and methods by which the work is accomplished. The last element, the so-called
"control test", is the most important element.
Sonza’s services to co-host its television and radio programs are because of his peculiar talents, skills and celebrity
status. Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish
them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. For violation of any provision of the Agreement, either party may terminate their
relationship. Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor.

The control test is the most important test our courts apply in distinguishing an employee from an independent
contractor. This test is based on the extent of control the hirer exercises over a worker. The greater the supervision
and control the hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well
– the less control the hirer exercises, the more likely the worker is considered an independent contractor. To
perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBN’s control. ABS-CBN did not instruct SONZA how to perform his job.
ABS-CBN merely reserved the right to modify the program format and airtime schedule "for more effective
programming." ABS-CBN’s sole concern was the quality of the shows and their standing in the ratings.

Clearly, ABS-CBN did not exercise control over the means and methods of performance of Sonza’s work. A radio
broadcast specialist who works under minimal supervision is an independent contractor. Sonza’s work as television
and radio program host required special skills and talent, which SONZA admittedly possesses.

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents
like Sonza as independent contractors. The right of labor to security of tenure as guaranteed in the Constitution
arises only if there is an employer-employee relationship under labor laws. Individuals with special skills, expertise
or talent enjoy the freedom to offer their services as independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot
operate to deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor.
DEPARTMENT ORDER NO. 18 - 02
(Series of 2002)

RULES IMPLEMENTING ARTICLES 106 TO 109

OF THE LABOR CODE, AS AMENDED
By virtue of the power vested in the Secretary of Labor and Employment under
Articles 5 (Rule-making) and 106 (Contractor or Subcontractor) of the Labor Code
of the Philippines, as amended, the following regulations governing contracting
and subcontracting arrangements are hereby issued: chanroblesvirtuallawlibrary

Section 1. Guiding principles. - Contracting and subcontracting arrangements are

expressly allowed by law and are subject to regulation for the promotion of
employment and the observance of the rights of workers to just and humane
conditions of work, security of tenure, self-organization, and collective bargaining.
Labor-only contracting as defined herein shall be prohibited.
Section 2Coverage. - These Rules shall apply to all parties of contracting
and subcontracting arrangements where employer-employee
relationship exists. Placement activities through private recruitment and
placement agencies as governed by Articles 25 to 39 of the Labor
Code are not covered by these Rules.
Section 3. Trilateral Relationship in Contracting Arrangements. - In
legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the capacity to
independently undertake the performance of the job, work or service,
and the contractual workers engaged by the contractor or subcontractor
to accomplish the job work or service.
Section 4. Definition of Basic Terms. - The following terms as used in
these Rules, shall mean: chanroblesvirtuallawlibrary

(a) "Contracting" or "subcontracting" refers to an arrangement

whereby a principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the
principal.
(b) "Contractor or subcontractor" refers to any person or entity
engaged in a legitimate contracting or subcontracting
arrangement.
(c) "Contractual employee" includes one employed by a
contractor or subcontractor to perform or complete a job, work
or service pursuant to an arrangement between the latter and
a principal.
(d) "Principal" refers to any employer who puts out or farms
out a job, service or work to a contractor or subcontractor.
Section 5. Prohibition against labor-only contracting. - Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements
are present:chanroblesvirtuallawlibrary

(i) The contractor or subcontractor does not have substantial

capital or investment which relates to the job, work or service
to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the
principal; or
(ii) the contractor does not exercise the right to control over
the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248 (C ) of theLabor Code, as amended.
"Substantial capital or investment" refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of
the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
Section 6. Prohibitions. - Notwithstanding Section 5 of these Rules, the
following are hereby declared prohibited for being contrary to law or
public policy:
chanroblesvirtuallawlibrary

(a) Contracting out of a job, work or service when not done in

good faith and not justified by the exigencies of the business
and the same results in the termination of regular employees
and reduction of work hours or reduction or splitting of the
bargaining unit;
(b) Contracting out of work with a "cabo" as defined in Section
1 (ii), Rule I, Book V of these Rules. "Cabo" refers to a person
or group of persons or to a labor group which, in the guise of a
labor organization, supplies workers to an employer, with or
without any monetary or other consideration whether in the
capacity of an agent of the employer or as an ostensible
independent contractor;
(c) Taking undue advantage of the economic situation or lack
of bargaining strength of the contractual employee, or
undermining his security of tenure or basic rights, or
circumventing the provisions of regular employment, in any of
the following instances: chanroblesvirtuallawlibrary

(i) In addition to his assigned functions, requiring the

contractual employee to perform functions which are
currently being performed by the regular employees
of the principal or of the contractor or subcontractor;
(ii) Requiring him to sign, as a precondition to
employment or continued employment, an antedated
resignation letter; a blank payroll; a waiver of labor
standards including minimum wages and social or
welfare benefits; or a quitclaim releasing the
principal, contractor or subcontractor from any
liability as to payment of future claims; and
(iii) Requiring him to sign a contract fixing the period
of employment to a term shorter than the term of the
contract between the principal and the contractor or
subcontractor, unless the latter contract is divisible
into phases for which substantially different skills are
required and this is made known to the employee at
the time of engagement;
(d) Contracting out of a job, work or service through an in-
house agency which refers to a contractor or subcontractor
engaged in the supply of labor which is owned, managed or
controlled by the principal and which operates solely for the
principal;
 (e) Contracting out of a job, work or service directly related to
the business or operation of the principal by reason of a strike
or lockout whether actual or imminent;
(f) Contracting out of a job, work or service being performed
by union members when such will interfere with, restrain or
coerce employees in the exercise of their rights to self
organization as provided in Art. 248 (c) of the Labor Code, as
amended.
Section 7. Existence of an employer-employee relationship. - The
contractor or subcontractor shall be considered the employer of the
contractual employee for purposes of enforcing the provisions of the
Labor Code and other social legislation. The principal, however, shall be
solidarily liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual
employee in any of the following cases as declared by a
competent authority: chanroblesvirtuallawlibrary

(a) where there is labor-only contracting; or

(b) where the contracting arrangement falls within the
prohibitions provided in Section 6 (Prohibitions) hereof.
Section 8. Rights of Contractual Employees. - Consistent with Section 7
of these Rules, the contractual employee shall be entitled to all the
rights and privileges due a regular employee as provided for in
the Labor Code, as amended, to include the following: chanroblesvirtuallawlibrary

(a) Safe and healthful working conditions;

(b) Labor standards such as service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay and separation
pay;
(c) Social security and welfare benefits;
(d) Self-organization, collective bargaining and peaceful
concerted action; and
(e) Security of tenure.
Section 9. Contract between contractor or subcontractor and contractual
employee. - Notwithstanding oral or written stipulations to the contrary,
the contract between the contractor or subcontractor and the
contractual employee, which shall be in writing, shall include the
following terms and conditions: chanroblesvirtuallawlibrary

(a) The specific description of the job, work or service to be

performed by the contractual employee;
(b) The place of work and terms and conditions of
employment, including a statement of the wage rate applicable
to the individual contractual employee; and
(c) The term or duration of employment, which shall be
coextensive with the contract of the principal and
 subcontractor, or with the specific phase for which the
contractual employee is engaged, as the case may be.
The contractor or subcontractor shall inform the contractual employee of
the foregoing terms and conditions on or before the first day of his
employment.
Section 10. Effect of Termination of Contractual Employment. - In cases
of termination of employment prior to the expiration of the contract
between the principal and the contractor or subcontractor, the right of
the contractual employee to separation pay or other related benefits
shall be governed by the applicable laws and jurisprudence on
termination of employment.
Where the termination results from the expiration of the contract
between the principal and the contractor or subcontractor, or from the
completion of the phase of the job, work or service for which the
contractual employee is engaged, the latter shall not be entitled to
separation pay. However, this shall be without prejudice to completion
bonuses or other emoluments, including retirement pay as may be
provided by law or in the contract between the principal and the
contractor or subcontractor.
Section 11. Registration of Contractors or Subcontractors. - Consistent
with the authority of the Secretary of Labor and Employment to restrict
or prohibit the contracting out of labor through appropriate regulations,
a registration system to govern contracting arrangements and to be
implemented by the Regional Offices is hereby established.
The registration of contractors and subcontractors shall be necessary for
purposes of establishing an effective labor market information and
monitoring.
Failure to register shall give rise to the presumption that the contractor
is engaged in labor-only contracting.
Section 12. Requirements for registration. - A contractor or
subcontractor shall be listed in the registry of contractors and
subcontractors upon completion of an application form to be provided by
the DOLE. The applicant contractor or subcontractor shall provide in the
application form the following information:chanroblesvirtuallawlibrary

(a) The name and business address of the applicant and the
area or areas where it seeks to operate;
(b) The names and addresses of officers, if the applicant is a
corporation, partnership, cooperative or union;
(c) The nature of the applicant's business and the industry or
industries where the applicant seeks to operate;
(d) The number of regular workers; the list of clients, if any;
the number of personnel assigned to each client, if any and the
services provided to the client;
 (e) The description of the phases of the contract and the
number of employees covered in each phase, where
appropriate; and
(f) A copy of audited financial statements if the applicant is a
corporation, partnership, cooperative or a union, or copy of the
latest ITR if the applicant is a sole proprietorship.
The application shall be supported by:
chanroblesvirtuallawlibrary

(a) A certified copy of a certificate of registration of firm or

business name from the Securities and Exchange Commission
(SEC), Department of Trade and Industry (DTI), Cooperative
Development Authority (CDA), or from the DOLE if the
applicant is a union; and
(b) A certified copy of the license or business permit issued by
the local government unit or units where the contractor or
subcontractor operates.
The application shall be verified and shall include an undertaking that
the contractor or subcontractor shall abide by all applicable labor laws
and regulations.
Section 13. Filing and processing of applications. - The application and
its supporting documents shall be filed in triplicate in the Regional
Offices where the applicant principally operates. No application for
registration shall be accepted unless all the foregoing requirements are
complied with. The contractor or subcontractor shall be deemed
registered upon payment of a registration fee of P100.00 to the Regional
Office.
Where all the supporting documents have been submitted, the Regional
Office shall deny or approve the application within seven (7) working
days after its filing.
Upon registration, the Regional Office shall return one set of the duly-
stamped application documents to the applicant, retain one set for its
file, and transmit the remaining set to the Bureau of Local Employment.
The Bureau shall devise the necessary forms for the expeditious
processing of all applications for registration.
Section 14. Duty to produce copy of contract between the principal and
the contractor or subcontractor. - The principal or the contractor or
subcontractor shall be under an obligation to produce a copy of the
contract between the principal and the contractor in the ordinary course
of inspection. The contractor shall likewise be under an obligation to
produce a copy of the contract of employment of the contractual worker
when directed to do so by the Regional Director or his authorized
representative.
A copy of the contract between the contractual employee and the
contractor or subcontractor shall be furnished the certified bargaining
agent, if there is any.
Section 15. Annual Reporting of Registered Contractors. - The contractor
or subcontractor shall submit in triplicate its annual report using a
prescribed form to the appropriate Regional Office not later than the
15th of January of the following year. The report shall include: chanroblesvirtuallawlibrary

(a) A list of contracts entered with the principal during the

subject reporting period;
(b) The number of workers covered by each contract with the
principal;
(c) A sworn undertaking that the benefits from the Social
Security System (SSS), the Home Development Mutual Fund
(HDMF), PhilHealth, Employees Compensation Commission
(ECC), and remittances to the Bureau of Internal Revenue
(BIR) due its contractual employees have been made during
the subject reporting period.
The Regional Office shall return one set of the duly-stamped report to
the contractor or subcontractor, retain one set for its file, and transmit
the remaining set to the Bureau of Local Employment within five (5)
days from receipt thereof.
Section 16. Delisting of contractors or subcontractors. - Subject to due
process, the Regional Director shall cancel the registration of contractors
or subcontractors based on any of the following grounds: chanroblesvirtuallawlibrary

(a) Non-submission of contracts between the principal and the

contractor or subcontractor when required to do so;
(b) Non-submission of annual report;
(c) Findings through arbitration that the contractor or
subcontractor has engaged in labor-only contracting and the
prohibited activities as provided in Section 6 (Prohibitions)
hereof; and
(d) Non-compliance with labor standards and working
conditions.
Section 17. Renewal of registration of contractors or subcontractors. -
All registered contractors or subcontractors may apply for renewal of
registration every three years. For this purpose, the Tripartite Industrial
Peace Council (TIPC) as created under Executive Order No. 49, shall
serve as the oversight committee to verify and monitor the following: chanroblesvirtuallawlibrary

(a) Engaging in allowable contracting activities; and

(b) Compliance with administrative reporting requirements.
Section 18. Enforcement of Labor Standards and Working Conditions. -
Consistent with Article 128 (Visitorial and Enforcement Power) of
the Labor Code, as amended, the Regional Director through his duly
authorized representatives, including labor regulation officers shall have
the authority to conduct routine inspection of establishments engaged in
contracting or subcontracting and shall have access to employer's
records and premises at any time of the day or night whenever work is
being undertaken therein, and the right to copy therefrom, to question
 any employee and investigate any fact, condition or matter which may
be necessary to determine violations or which may aid in the
enforcement of the Labor Code and of any labor law, wage order, or
rules and regulations issued pursuant thereto.
The findings of the duly authorized representative shall be referred to
the Regional Director for appropriate action as provided for in Article
128, and shall be furnished the collective bargaining agent, if any.
Based on the visitorial and enforcement power of the Secretary of Labor
and Employment in Article 128 (a), (b), (c) and (d), the Regional
Director shall issue compliance orders to give effect to the labor
standards provisions of the Labor Code, other labor legislation and these
guidelines.
Section 19. Solidary liability. - The principal shall be deemed as the
direct employer of the contractual employees and therefore, solidarily
liable with the contractor or subcontractor for whatever monetary claims
the contractual employees may have against the former in the case of
violations as provided for in Sections 5 (Labor-Only contracting), 6
(Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of
these Rules. In addition, the principal shall also be solidarily liable in
case the contract between the principal and contractor or subcontractor
is preterminated for reasons not attributable to the fault of the
contractor or subcontractor.
Section 20. Supersession. - All rules and regulations issued by the
Secretary of Labor and Employment inconsistent with the provisions of
this Rule are hereby superseded. Contracting or subcontracting
arrangements in the construction industry, under the licensing coverage
of the PCAB and shall not include shipbuilding and ship repairing works,
however, shall continue to be governed by Department Order No. 19,
series of 1993.
Section 21. Effectivity. - This Order shall be effective fifteen (15) days
after completion of its publication in two (2) newspapers of general
circulation.

Manila, Philippines, 21 February 2002