Labor Cases 1(Employer-Employee Relationship)

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    Republic of the Philippines

    SUPREME COURT

    Manila

    SECOND DIVISION

    G.R. No. 73887 December 21, 1989

    GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,vs.

    HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.

    G.A. Fortun and Associates for petitioner.

    Corsino B. Soco for private respondent.

    PARAS J.:

    Before us is a Petition for certiorarito review the decision of the National Labor Relations Commission (NLRC, for

    brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1)

    ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize

    private respondent Honorato Judico, as its regular employee as defined under Art. 281 of the Labor Code and 2)

    remanding the case to its origin for the determination of private respondent Judico's money claims.

    The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly

    organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said

    complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of

    cash bond, moral and exemplary damages and attorney's fees.

    Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the

    ground that the employer-employee relations did not exist between the parties but ordered Grepalife to pay

    complainant the sum of Pl,000.00 by reason of Christian Charity.

    On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art.

    281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to

    complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas bond of said company it

    ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal or factual basis to

    support its payment.

    Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal issues to

    wit:

    I. Whether the relationship between insurance agents and their principal, the insurance company, is tha

    of agent and principal to be governed by the Insurance Code and the Civil Code provisions on agency, or

    one of employer-employee, to be governed by the Labor Code.

    II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code.

    III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between

    insurance agent and the insurance company, arising from their agency relations.

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    IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J.

    Minoria and in ordering the case remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)

    The crux of these issues boil down to the question of whether or not employer-employee relationship existed between

    petitioner and private respondent.

    Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner

    Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner defines a debit agent as

    "an insurance agent selling/servicing industrial life plans and policy holders. Industrial life plans are those whosepremiums are payable either daily, weekly or monthly and which are collectible by the debit agents at the home or any

    place designated by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of public respondent

    that as such debit agent, private respondent Judico had definite work assignments including but not limited to collection

    of premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out

    that complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a

    certain percentage denominated as sales reserve of his total collections but not lesser than P 200.00. Sometime in

    September 1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's)

    allowance fixed at P110.00 per week. During the third week of November 1981, he was reverted to his former position

    as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of at least P 200.00. Finally on June 28,

    1982, complainant was dismissed by way of termination of his agency contract.

    Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that

    Judico's compensation was not based on any fixed number of hours he was required to devote to the service of

    petitioner company but rather it was the production or result of his efforts or his work that was being compensated and

    that the so-called allowance for the first thirteen weeks that Judico worked as debit agent, cannot be construed as salar

    but as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initial

    period of his training which was fixed for thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's

    compensation, in the form of commissions and bonuses, was based on actual production, (insurance plans sold and

    premium collections).

    Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a definite

    amount as his Wage known as "sales reserve" the failure to maintain the same would bring him back to a beginner's

    employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in theoffice to work on when he is not in the field; and in addition to canvassing and making regular reports, he was burdened

    with the job of collection and to make regular weekly report thereto for which an anemic performance would mean

    dismissal. He earned out of his faithful and productive service, a promotion to Zone Supervisor with additional

    supervisor's allowance, (a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic

    performance and not because of the termination of the contract of agency substantiate the fact that he was indeed an

    employee of the petitioner and not an insurance agent in the ordinary meaning of the term.

    That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment

    Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of agents who sell its insurance

    policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company;

    and (2) registered representatives who work on commission basis. The agents who belong to the second category arenot required to report for work at anytime, they do not have to devote their time exclusively to or work solely for the

    company since the time and the effort they spend in their work depend entirely upon their own will and initiative; they

    are not required to account for their time nor submit a report of their activities; they shoulder their own selling

    expenses as well as transportation; and they are paid their commission based on a certain percentage of their sales. One

    salient point in the determination of employer-employee relationship which cannot be easily ignored is the fact that the

    compensation that these agents on commission received is not paid by the insurance company but by the investor (or

    the person insured). After determining the commission earned by an agent on his sales the agent directly deducts it

    from the amount he received from the investor or the person insured and turns over to the insurance company the

    amount invested after such deduction is made. The test therefore is whether the "employer" controls or has reserved

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    the right to control the "employee" not only as to the result of the work to be done but also as to the means and

    methods by which the same is to be accomplished.

    Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on

    Judico was very much present. The record shows that petitioner Judico received a definite minimum amount per week

    as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's

    employment with a fixed weekly wage of P 200.00 for thirteen weeks regardless of production. He was assigned a

    definite place in the office to work on when he is not in the field; and in addition to his canvassing work he was

    burdened with the job of collection. In both cases he was required to make regular report to the company regardingthese duties, and for which an anemic performance would mean a dismissal. Conversely faithful and productive service

    earned him a promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside

    from the regular P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of

    work nor for a definite period.

    On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure without fear

    of dismissal from the company and short of committing acts detrimental to the business interest of the company or

    against the latter, whether he produces or not is of no moment as his salary is based on his production, his anemic

    performance or even dead result does not become a ground for dismissal. Whereas, in private respondent's case, the

    undisputed facts show that he was controlled by petitioner insurance company not only as to the kind of work; the

    amount of results, the kind of performance but also the power of dismissal. Undoubtedly, private respondent, by nature

    of his position and work, had been a regular employee of petitioner and is therefore entitled to the protection of the law

    and could not just be terminated without valid and justifiable cause.

    Premises considered, the appealed decision is hereby AFFIRMED in toto.

    SO ORDERED.

    Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ ., concur.

    Republic of the Philippines

    SUPREME COURT

    Manila

    FIRST DIVISION

    G.R. No. 84484 November 15, 1989

    INSULAR LIFE ASSURANCE CO., LTD., petitioner,

    vs.NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

    Tirol & Tirol for petitioner.

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

    NARVASA,J.:

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

    into a contract 1by which:

    1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and

    annuities in accordance with the existing rules and regulations" of the Company;

    2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of

    Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and

    3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and

    those which may from time to time be promulgated by it, ..." were made part of said contract.

    The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the

    acts prohibited to him, and the modes of termination of the agreement, viz.:

    RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place

    and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the

    relationship of employee and employer between the Agent and the Company. However, the Agent shall

    observe and conform to all rules and regulations which the Company may from time to time prescribe.

    ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates

    in any form, or from making any misrepresentation or over-selling, and, in general, from doing or

    committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance

    Commissioner.

    TERMINATION. The Company may terminate the contract at will, without any previous notice to the

    Agent, for or on account of ... (explicitly specified causes). ...

    Either party may terminate this contract by giving to the other notice in writing to that effect. It shall

    become ipso factocancelled if the Insurance Commissioner should revoke a Certificate of Authority

    previously issued or should the Agent fail to renew his existing Certificate of Authority upon its

    expiration. The Agent shall not have any right to any commission on renewal of premiums that may be

    paid after the termination of this agreement for any cause whatsoever, except when the termination is

    due to disability or death in line of service. As to commission corresponding to any balance of the first

    year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it

    if the balance of the first year premium is paid, less actual cost of collection, unless the termination is

    due to a violation of this contract, involving criminal liability or breach of trust.

    ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations

    shall be valid without the prior consent in writing of the Company. ...

    Some four years later, in April 1972, the parties entered into another contractan Agency Manager's Contractand

    to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates,while concurrently fulfilling his commitments under the first contract with the Company. 2

    In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao

    sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement

    under the first contract and to stop payment of his commissions starting April 1, 1980. 3

    Basiao thereafter filed with the then Ministry of Labor a complaint 4against the Company and its president. Without

    contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid

    thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that

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    he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for

    unpaid commissions under the terms and conditions of his contract. 5

    The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had

    established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the

    Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "...

    equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the

    insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6

    This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7Hence, the

    present petition for certiorariand prohibition.

    The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue

    of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive

    jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8or, contrarily, as the Company

    would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus

    cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.

    The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it

    and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessaryimplication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and

    means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He

    was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his

    prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.

    Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company,

    the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking

    precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent

    contractor is control, that is, whether or not the party who engages the services of another has the power to control the

    latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of

    Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time

    to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance,

    processed their applications and determined the amounts of insurance cover to be issued as indicative of the control,

    which made Basiao, in legal contemplation, an employee of the Company. 9

    It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case ofViana vs.

    Alejo Al-Lagadan10

    ... In determining the existence of employer-employee relationship, the following elements are generall

    considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3)

    the power of dismissal; and (4) the power to control the employees' conductalthough the latter is

    the most important element (35 Am. Jur. 445). ...

    has been followed and applied in later cases, some fairly recent. 11Indeed, it is without question a valid test of the

    character of a contract or agreement to render service. It should, however, be obvious that not every form of control

    that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be

    accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of

    the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual

    contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled

    freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.

    Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the

    mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or

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    fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote

    the result, create no employer-employee relationship unlike the second, which address both the result and the means

    used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest

    as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the

    relations between insurer and insured but also to the internal affairs of the insurance company. 12Rules and regulations

    governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance

    Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its

    commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such

    a character are the rules which prescribe the qualifications of persons who may be insured, subject insuranceapplications to processing and approval by the Company, and also reserve to the Company the determination of the

    premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to

    adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to

    establish an employer-employee relationship between him and the company.

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

    instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, 13the Court ruled

    that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his

    own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by

    the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a

    peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an

    independent contractor.

    In Investment Planning Corporation of the Philippines us. Social Security System 14a case almost on all fours with the

    present one, this Court held that there was no employer-employee relationship between a commission agent and an

    investment company, but that the former was an independent contractor where said agent and others similarly placed

    were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of

    commissions earned being payable to their legal representatives in the event of death or registration; (b) required to pu

    up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the

    agreement with the company and termination of their services for certain causes; (d) not required to report for work at

    any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and

    who, finally, shouldered their own selling and transportation expenses.

    More recently, in Sara vs. NLRC, 15it was held that one who had been engaged by a rice miller to buy and sell rice and

    palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own

    pleasure without any supervision or control on the part of his principal and relied on his own resources in the

    performance of his work, was a plain commission agent, an independent contractor and not an employee.

    The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and

    conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that

    any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively

    controlled or restricted his choice of methodsor the methods themselvesof selling insurance. Absent such

    showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the

    contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance."

    The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-

    five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status

    under the contract of July 2, 1968, not the length of his relationship with the Company.

    The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a

    commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an

    ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without

    jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it

    unnecessary and premature to consider Basiao's claim for commissions on its merits.

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    WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of

    private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.

    SO ORDERED.

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

    Footnotes

    1 Rollo, pp. 14-15.

    2 Rollo, p. 16.

    3 Rollo, p. 17.

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

    5 Rollo, p. 17.

    6 Id.,pp. 18-22.

    7 Rollo, pp., 23-27.

    8 which at that time conferred upon the Labor Arbiters such jurisdiction over, among others, ... all

    money claims of workers, including those based on non-payment or underpayment of wages, overtime

    compensation, separation pay and other benefits provided by law or appropriate agreement, except

    claims for employees compensation, social security, medicare and maternity benefits."

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

    10 99 Phil. 408. 411-412.

    11 Feati University vs. Bautista, 18 SCRA., 119: Dy Keh Beng vs. International Labor and Marine Union of

    the Phil., 90 SCRA 163: Rosario Bros. vs. Ople, 131 SCRA 72; National Mines and Allied Workers Union

    (NAMAWU) vs. Valero, 132 SCRA 578.

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

    13 70 SCRA 139.

    14 21 SCRA 924 (1967).

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

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    Republic of the Philippines

    SUPREME COURT

    Manila

    THIRD DIVISION

    G.R. No. L-72654-61 January 22, 1990

    ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP

    CERVANTES and ELEUTERIO BARBIN, petitioners,

    vs.

    NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE

    GUZMAN, respondents.

    J.C. Espinas & Associates for petitioners.

    Tomas A. Reyes for private respondent.

    FERNAN, C.J.:

    The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing vessel

    7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they

    were illegally dismissed from their employment.

    Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels

    owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing

    business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel in

    various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu,

    second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio

    Barbin, fishermen.

    For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on

    percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they

    received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of

    crude oil consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds of the sale.

    The patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per week while the

    assistant engineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 per week.1

    On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of privaterespondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold

    some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that

    the same was a countermove to their having formed a labor union and becoming members of Defender of Industrial

    Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September 3, 1983.

    During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges

    were formally filed against them. Notwithstanding, private respondent refused to allow petitioners to return to the

    fishing vessel to resume their work on the same day, September 11, 1983.

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    On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th

    month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department) of

    Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-

    83. 2They uniformly contended that they were arbitrarily dismissed without being given ample time to look for a new

    job.

    On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its position

    paper denying the employer-employee relationship between private respondent and petitioners on the theory that

    private respondent and petitioners were engaged in a joint venture.3

    After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing furnishin

    the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled joint hearings were

    postponed due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain of the

    7/B Sandyman II, testified, among others, on the manner the fishing operations were conducted, mode of payment of

    compensation for services rendered by the fishermen-crew members, and the circumstances leading to their dismissal.4

    On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint

    decision 5dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one of employer-

    employee relationship existed between private respondent and petitioners.

    From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.

    On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6affirming the decision of the

    labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.

    Hence, the instant petition.

    Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and petitioners

    is a joint venture arrangement and not an employer-employee relationship. To stress that there is an employer-

    employee relationship between them and private respondent, petitioners invite attention to the following: that they

    were directly hired by private respondent through its general manager, Arsenio de Guzman, and its operations manager

    Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from 8 to 15 years

    in various capacities; that private respondent, through its operations manager, supervised and controlled the conduct of

    their fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing vessel, the volume

    or number of tubes of the fish-catch the time to return to the fishing port, which were communicated to the

    patron/pilot by radio (single side band); that they were not allowed to join other outfits even the other vessels owned b

    private respondent without the permission of the operations manager; that they were compensated on percentage

    commission basis of the gross sales of the fish-catch which were delivered to them in cash by private respondent's

    cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and regulations imposed on them by

    private respondent.

    Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and

    petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it addedfacts not contained in the records when it stated that the pilot-crew members do not receive compensation from the

    boat-owners except their share in the catch produced by their own efforts; that public respondent ignored the evidence

    of petitioners that private respondent controlled the fishing operations; that public respondent did not take into

    account established jurisprudence that the relationship between the fishing boat operators and their crew is one of

    direct employer and employee.

    Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and

    executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said

    decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982),

    the Solicitor General claims that the ruling of public respondent that a "joint fishing venture" exists between private

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    respondent and petitioners rests on the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De

    Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein, from

    compulsory coverage of the SSS on the ground that there is no employer-employee relations between the boat-owner

    and the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying

    to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee relationship between the

    boat-owner and the pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and

    crew members contribute the corresponding labor and the parties get specific shares in the catch for their respective

    contribution to the venture, the Solicitor General pointed out that the boat-owners in the Pajarillocase, as in the case at

    bar, did not control the conduct of the fishing operations and the pilot and crew members shared in the catch.

    We rule in favor of petitioners.

    Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than to

    dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court enunciated inFirestone

    Filipinas Employees Association,et al.vs.Firestone Tire and Rubber Co.of the Philippines,Inc., 61 SCRA 340 (1974), thus

    "the well-settled doctrine is that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim o

    a procedural misstep, the idea being that its power be exercised according to justice and equity and substantial merits o

    the controversy."

    Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl fishing

    as in the case of petitioners herein, who spend one (1) whole week or more7in the open sea performing their job to

    earn a living to support their families, convince Us to adopt a more liberal attitude in applying to petitioners the 10-

    calendar day rule in the filing of appeals with the NLRC from the decision of the labor arbiter.

    Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by

    their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision eight (8)

    days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners' occupation as

    fishermen-crew members, who during the pendency of the case understandably have to earn a living by seeking

    employment elsewhere, impress upon Us that in the ordinary course of events, the information as to the adverse

    decision against them would not reach them within such time frame as would allow them to faithfully abide by the 10-

    calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer provide

    equitable justification to conclude that there is substantial compliance with the ten-calendar day rule of filing of appealswith the NLRC when petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal with

    the NLRC through registered mail.

    We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that

    are generally considered are the following (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

    methods by which the work is to be accomplished. 8The employment relation arises from contract of hire, express or

    implied. 9In the absence of hiring, no actual employer-employee relation could exist.

    From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test10where the

    person for whom the services are performed reserves a right to control not only the end to be achieved but also themeans to be used in reaching such end. The test calls merely for the existence of the right to control the manner of

    doing the work, not the actual exercise of the right. 11

    The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing

    venture" existed between private respondent and petitioners is not applicable in the instant case. There is neither light

    of control nor actual exercise of such right on the part of the boat-owners in the Pajarillocase, where the Court found

    that the pilots therein are not under the order of the boat-owners as regards their employment; that they go out to sea

    not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that

    the boat-owners do not in any way control the crew-members with whom the former have no relationship whatsoever;

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    that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and

    that they only share in their own catch produced by their own efforts.

    The aforementioned circumstances obtaining in Pajarillocase do not exist in the instant case. The conduct of the fishing

    operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under

    the control and supervision of private respondent's operations manager. Matters dealing on the fixing of the schedule o

    the fishing trip and the time to return to the fishing port were shown to be the prerogative of private

    respondent. 12While performing the fishing operations, petitioners received instructions via a single-side band radio

    from private respondent's operations manager who called the patron/pilot in the morning. They are told to report theiractivities, their position, and the number of tubes of fish-catch in one day. 13Clearly thus, the conduct of the fishing

    operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for

    disseminating the instructions to the crew members.

    The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when De

    Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708 exempting it

    from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous for public

    respondent to apply the factual situation of the parties in the 1968 case to the instant case in the light of the changes in

    the conditions of employment agreed upon by the private respondent and petitioners as discussed earlier.

    Records show that in the instant case, as distinguished from the Pajarillocase where the crew members are under no

    obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for one day and be

    the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were directly hired by

    private respondent, through its general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman

    and have been under the employ of private respondent for a period of 8-15 years in various capacities, except for

    Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on September

    29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was

    promoted as chief engineer of the fishing vessel; Jose Parma was employed on September 29, 1974 as assistant

    engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred as a master fisherman to the fishing

    vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as

    winchman on April 15, 1976.

    While tenure or length of employment is not considered as the test of employment, nevertheless the hiring ofpetitioners to perform work which is necessary or desirable in the usual business or trade of private respondent for a

    period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor Code

    as they were indeed engaged to perform activities usually necessary or desirable in the usual fishing business or

    occupation of private respondent. 14

    Aside from performing activities usually necessary and desirable in the business of private respondent, it must be noted

    that petitioners received compensation on a percentage commission based on the gross sale of the fish-catchi.e. 13% of

    the proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during the fishing trip,

    otherwise only 10% of the proceeds of the sale. Such compensation falls within the scope and meaning of the term

    "wage" as defined under Article 97(f) of the Labor Code, thus:

    (f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable

    of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission

    basis, or other method of calculating the same, which is payable by an employer to an employee under a

    written or unwritten contract of employment for work done or to be done, or for services rendered or

    to be rendered, and included the fair and reasonable value, as determined by the Secretary of Labor, of

    board, lodging, or other facilities customarily furnished by the employer to the employee. . . .

    The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form o

    share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in accordance with

    their own understanding 15is not supported by recorded evidence. Except that such claim appears as an allegation in

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    private respondent's position paper, there is nothing in the records showing such a sharing scheme as preferred by

    private respondent.

    Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at

    midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed to board

    the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their side

    on the accusation against them unmistakably reveals the disciplinary power exercised by private respondent over them

    and the corresponding sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of

    petitioners from their employment was characterized by undue haste when less extreme measures consistent with therequirements of due process should have been first exhausted. In that sense, the dismissal of petitioners was tainted

    with illegality.

    Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually

    resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the

    parties herein. A joint venture, including partnership, presupposes generally aparity of standingbetween the joint co-

    venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed16and

    where each party exercises equal lights in the conduct of the business. 17It would be inconsistent with the principle of

    parity of standing between the joint co-venturers as regards the conduct of business, if private respondent would

    outrightly exclude petitioners from the conduct of the business without first resorting to other measures consistent with

    the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent should have

    discussed with an open mind the advantages and disadvantages of petitioners' action with its joint co-venturers if

    indeed there is a "joint fishing venture" between the parties. But this was not done in the instant case. Petitioners were

    arbitrarily dismissed notwithstanding that no criminal complaints were filed against them. The lame excuse of private

    respondent that the non-filing of the criminal complaints against petitioners was for humanitarian reasons will not help

    its cause either.

    We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. InNegre

    vs. WCC135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one master fisherman

    locally known as "maestro" in charge of recruiting others to complete the crew members are considered employees, not

    industrial partners, of the boat-owners. In an earlier case ofAbong vs. WCC, 54 SCRA 379 (1973) where petitioner

    therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew

    members because of an alleged partnership agreement between him, as financier, and Simplicio Panganiban, as histeam leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the WCC that there

    existed an employer-employee relationship between the boat-owner and the fishermen crew members not only

    because they worked for and in the interest of the business of the boat-owner but also because they were subject to the

    control, supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr.

    Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not alter the

    character of their relationship with Dr. Abong as employees of the latter.

    In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we held

    that the employer-employee relationship between the crew members and the owners of the fishing vessels engaged in

    deep sea fishing is merely suspended during the time the vessels are drydocked or undergoing repairs or being loaded

    with the necessary provisions for the next fishing trip. The said ruling is premised on the principle that all theseactivities i.e., drydock, repairs, loading of necessary provisions, form part of the regular operation of the company fishing

    business.

    WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor

    Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to reinstate

    petitioners to their former positions or any equivalent positions with 3-year backwages and other monetary benefits

    under the law. No pronouncement as to costs.

    SO ORDERED.

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    Gutierrez, Jr., Bidin and Corts, JJ., concur.

    Feliciano, J., concurs in the result.

    Footnotes

    1 p. 3, Joint Decision, Labor Arbiter, p. 40, Rollo.

    2 pp. 1-8, Records.

    3 pp. 28-30, Ibid.

    4 pp. 54-101, Ibid.

    5 Annex "D" Petition, pp. 40-46, Rollo.

    6 pp. 61-65, Rollo.

    7 p. 23, T.S.N., p. 78, Records.

    8 Hydro-Resources Contractor Corporation vs. Labor Arbiter Pagalilauan G.R. No. 62909, April 18, 1989;

    Tabas, et al. vs. California Mfg. Co. et. al., G.R. No. 80680, January 26, 1989; Continental Marble

    Corporation vs. NLRC, 161 SCRA 151; Bautista vs. Inciong, 158 SCRA 665; Broadway Motors, Inc. vs. NLRC

    156 SCRA 522; Besa vs. Trajano, 146 SCRA 501; Rosario Brothers, Inc. vs. Ople, 131 SCRA 72; Shipside Inc

    vs. NLRC, 118 SCRA 99; Mafinco Trading Corporation vs. Ople, 70 SCRA 139.

    9 Yu Chuck vs. Kong Li Po, 46 Phil. 608 (1924).

    10 LVN Pictures, Inc. vs. Philippine Musicians Guild, l SCRA 132, 173 (1961), citingAlabama HighwayExpress, Co. vs. Local, 612, 108 S. 2d. 350.

    11 Dy Keh Beng vs. International Labor and Marine Union of the Philippines, 90 SCRA 161 (1979).

    12 pp. 7-8, T.S.N., pp. 61-62, Records.

    13 p. 7. T.S.N., p. 61, Records.

    14 Ochoco vs. NLRC., 120 SCRA 774 (1983); Mansol vs. P.P. Gocheco Lumber Co., 96 Phil. 941 (1955).

    15 p. 2, Private Respondent's Position Paper, p. 22, Records; p. 2, Memorandum for Private Respondent,

    p. 131, Rollo.

    16 Sevilla vs. Court of Appeals, 160 SCRA 171 (1988), citingBautista Treatise on Philippine Partnership

    Law, p. 34.

    17 Ibid. p. 37.

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    Republic of the Philippines

    SUPREME COURT

    Manila

    FIRST DIVISION

    G.R. No. 119500 August 28, 1998

    PAGUIO TRANSPORT CORPORATION, petitioner,

    vs.

    NATIONAL LABOR RELATIONS COMMISSION and WILFREDO MELCHOR, respondents.

    PANGANIBAN,J.:

    In dismissing the petition, this Court reiterates the following doctrines: (1) the "boundary system" used in taxi (and

    jeepney) operations presupposes an employer-employee relation; (2) the employer must prove just (or authorized)cause and due process to justify dismissal of an employee; (3) strained relations must be demonstrated as a fact; and (4)

    back wages and reinstatement are necessary consequences of illegal dismissal.

    The Case

    Before us is a petition for certiorariand prohibition with preliminary injunction, assailing the December 16, 1994

    Decision of the National Labor Relations Commission 1in NLRC NCR Case No. 00-02-01564-94 entitled "Wilfredo Melcho

    vs. Paguio Transport Corporation/Serafin Paguio." The dispositive portion of the challenged Decision reads:

    WHEREFORE, premises considered, the appeal insofar as it seeks reversal of the finding on illegal

    dismissal is denied for lack of merit. The decision declaring that complainant was illegally dismissed is

    affirmed. The decision is however partially modified insofar as liability therefor is concerned. The liability

    shall inure against PAGUIO TRANSPORT CORPORATION, subject to the provision of the Corporation Code

    and the Rules of Court on matters taken herein. The backwages as computed in the assailed decision is

    set aside, and a new one is hereby provided in the amount of P86,400.00 as computed in the

    immediately preceding paragraph.

    Petitioner also impugns the February 21, 1995 NLRC Resolution 2denying the motion for reconsideration.

    The June 28, 1994 Decision of the labor arbiter, 3which the NLRC modified as to the amount of back wages, disposed as

    follows:

    WHEREFORE, the respondents are hereby ordered to reinstate the complainant with full backwagesfrom the time his salaries were withheld from him until his actual reinstatement.

    The respondents are further ordered to pay him his 13th month pay in the amount of P5,600.00.

    Complainant's backwages up to the date of this Decision as computed by LEILANI E. CALALANG of the

    Commission's NLRC NCR Branch is:

    11/28/93 - 6/28/94 = 7 mos.

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    P800.00 x 3 days x 4 weeks = P9,600.00

    P9,600.00 x 7 mos. = P67,200.00

    The aspect of reinstatement either in the job or payroll at the option of the employers being

    immediately executory pursuant to Article 223 of the Labor Code, the respondents are hereby directed

    to so reinstate him when he reports for work by virtue of this Decision.

    Other claims are hereby dismissed for lack of evidence.

    The Facts

    The facts, as summarized in the challenged Decision, are as follows:

    Complainant Wilfredo Melchor was hired by respondent company as a taxi driver on 25 December 1992

    under the "[b]oundary [s]ystem. He [was] engaged to drive the taxi unit assigned to him on a 24-hour

    schedule per trip every two (2) days, for which he used to earn an average income from P500 to P700

    per trip, exclusive of the P650.00 boundary and other deductions imposed on him. On 24 [sic] Novembe

    1993, complainant allegedly met a vehicular accident along Quirino Avenue near the PNR Station and

    Plaza Dilao when he accidentally bumped a car which stopped at the intersection even when the trafficlight was green and go. After he submitted the traffic accident report to the office of respondents, he

    was allegedly advised to stop working and have a rest. After several days[,] he allegedly reported for

    work only to be told that his service was no longer needed. Hence, the complaint for illegal dismissal,

    among others.

    Respondent[s] for their part maintained that complainant was not illegally dismissed, there being in the

    first place no employer-employee relationship between them. In amplification, it was argued that the

    element of control which [was] a paramount test to determine the existence of such a relationship [was

    lacking. So too, it argued the element of the payment of compensation. Considering that in lieu of the

    latter, payment of boundary is instead made allegedly makes the relationship between them of a "wase

    agreement" [sic]. Respondents then argued that even if an employer-employee relationship were to be

    presumed as present, still complainant's termination arose out of a valid cause and after he refused to

    articulate his stand on the investigation being conducted on him. Respondents then harped on the

    supposed three occasions when complainant figured in a vehicular accident involving the taxi unit he

    was driving, viz: On August 3, which resulted in damages to the respondent in the amount of P150.00;

    On August 4 which again resulted [in] the damages to the respondent in the amount of P615.00; and,

    again on 4 November 1993, the mishap costing the respondents this time P25,370.00 in damages. As a

    result of the alleged compounded damages which the respondents had to shoulder on account of the

    supposed reckless driving of the complainant, the former was allegedly left with no alternative but to

    ask complainant's explanation why he should still be allowed to drive. Complainant, despite several

    chances, allegedly failed to do so. 4

    Ruling of the NLRC

    The NLRC held that private respondent was an illegally dismissed employee of petitioner. Upholding the existence of an

    employer-employee relationship, it cited Doce v. WCC, 5in which the Supreme Court ruled that "the relationship created

    between the parties operating under a 'boundary system' is one of an employer and employee, and not of a lessor and a

    lessee." 6

    The NLRC sustained the ruling of the labor arbiter that the private respondent was illegally dismissed, for he "was not

    afforded the twin requirements of due process . . . ." 7It rejected petitioner's claim that private respondent had figured

    in three vehicular incidents because of his reckless driving. It found that "except for petitioner's bare statements, no

    proof was presented to establish with particularity the circumstances being claimed. . . . The guilt and culpability of

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    [private respondent] which would give [petitioner] valid ground to effect his dismissal cannot be established by a mere

    allegation of his reckless driving." 8

    Public Respondent NLRC found petitioner liable for back wages in the amount of P86,400, and not P67,200 as computed

    by the labor arbiter. It found, however, that this liability should be imposed on Petitioner Corporation only, and not on

    its president who was also impleaded by private respondent.

    Hence, this petition. 9

    Issues

    Petitioner raises the following issues:

    a. Whether or not public respondent Commission acted in excess of jurisdiction and/or with grave abuse

    of discretion amounting to lack of jurisdiction in ordering the reinstatement of private respondent with

    full backwages, despite its strained relations with the petitioner and the reinstatement would, in effect,

    be inimical to the interest of the latter in particular, and to the riding public in general;

    b. Whether or not public respondent acted in excess of jurisdiction and/or with grave abuse of

    discretion in refusing to reconsider its decision and resolution complained of despite the facts prevailingto support the reconsideration. 10

    In resolving the petition, we shall address the following points: (1) employer-employee relation, (2) presence of just

    cause, (3) due process, (4) strained relationship, and (5) propriety of reinstatement and backwages.

    The Court's Ruling

    The petition is not meritorious.

    First Issue:

    Employer-Employee Relation

    Under the "boundary system," private respondent was engaged to drive petitioner's taxi unit on a 24-hour schedule

    every two days. On each such trip, private respondent remitted to petitioner a "boundary" of P650. Whatever he earned

    in excess of that amount was considered his income.

    Petitioner argues that under said arrangement, he had no control over the number of hours private respondent had to

    work and the routes he had to take. Therefore, he concludes that the employer-employee relationship cannot be

    deemed to exist.

    Petitioner's contention is not novel. In Martinez v. National Labor Relations Commission, 11this Court already ruled that

    the relationship of taxi owners and taxi drivers is the same as that between jeepney owners and jeepney drivers under

    the "boundary system." In both cases, the employer-employee relationship was deemed to exist,viz.:

    The relationship between jeepney owners/operators on one hand and jeepney drivers on the other

    under the boundary system is that of employer-employee and not of lessor-lessee. . . . In the lease of

    chattels[,] the lessor loses complete control over the chattel leased . . . . In the case of jeepney

    owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The

    fact that the drivers do not receive fixed wages but get only the excess of that so-called boundary they

    pay to the owner/operator is not sufficient to withdraw the relationship between them from that of

    employer and employee. The doctrine is applicable in the present case. Thus, private respondents were

    employees. . . because they had been engaged to perform activities which were usually necessary or

    desirable in the usual trade or business of the employer. 12

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    Second Issue:

    Just Cause

    Petitioner also asserts that private respondent's involvement in three vehicular accidents within a span of several

    months constitutes just cause for his dismissal. It alleges that, according to the police report concerning the most recent

    and serious vehicular mishap, it was private respondent who was at fault and that the "city prosecutor of Quezon City

    recommended that an Information for reckless imprudence resulting in damage to property be filed against him." 13

    Petitioner, however, did not submit any proof to support these allegations. Well-settled is the rule that the employerhas the burden of proving that the dismissal of an employee is for a just cause. The failure of the employer to discharge

    this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and

    backwages. 14In this case, petitioner failed to prove any just or authorized cause for his dismissal. Private respondent,

    therefore, must be deemed illegally dismissed. 15

    Petitioner contends that he "submitted and presented material and competent documentary evidence consisting of

    police reports of vehicular accidents of taxicab units owned by petitioner and driven by private respondent, the repairs

    and expenses suffered by the petitioner as a result thereof and the resolution of the [c]ity [p]rosecutor of Quezon City

    finding private respondent at fault for the November 4, 1993 vehicular accident caused by the latter." 16Adding that the

    submission of these documents only on appeal does not diminish their probative value, petitioner cites Article 221 of

    the Labor Code which reads:

    Art. 221. Technical rules not binding and prior resort to amicable settlement.In any proceeding before

    the Commission or any of the Labor Arbiters, the rules of procedure prevailing in courts of law and

    equity shall not be controlling and it is the spirit and intention of the 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 without regard to technicalities of law and procedure, all in the interest of

    due process. In any proceeding before the Commission or any Labor Arbiter, the parties may be

    represented by legal counsel but it shall be the duty of the Chairman, any Presiding Commissioner or

    Commissioner or any Labor Arbiter to exercise complete control of the proceedings at all stages.

    Any provision of law to the contrary notwithstanding, the Labor Arbiter shall exert all efforts towards

    [t]he amicable settlement of a labor dispute within his jurisdiction on or before the first hearing. The

    same rule shall apply to the Commission in the exercise of its original jurisdiction.

    However, a careful examination of both the original Complaint and the Petitioner's Memorandum of Appeal from the

    labor arbiter's Decision reveals that said pieces of documentary evidence were not mentioned or included therein,17but

    were submitted by petitioner only when he filed his present petition with this Court. These pieces of evidence were

    attached and referred to as Annexes "G", "H", "I", "J", "K" and "L" of the said petition. Such factual issues cannot be

    resolved in a petition for certiorarilike the present case, because the Court's review of NLRC decisions is limited to

    questions of jurisdiction and grave abuse of discretion. In PMI Colleges v. NLRC, 18the Court held:

    This Court is definitely not the proper venue to consider this matter for it is not a trier of

    facts. . . .Certiorariis a remedy narrow in its scope and inflexible in character. It is not a general utilitytool in the legal workshop. Factual issues are not a proper subject for certiorari, as the power of the

    Supreme Court to review labor cases is limited to the issue of jurisdiction and grave abuse of

    discretion. . . . .

    Of the same tenor was our disquisition in Ilocos Sur Electric Cooperative, Inc. v. NLRCwhere we made

    plain that:

    In certiorariproceedings under Rule 65 of the Rules of Court, judicial review by this

    Court does not go so far as to evaluate the sufficiency of evidence upon which the Labor

    Arbiter and the NLRC based their determinations, the inquiry being limited essentially to

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    whether or not said public respondents had acted without or in excess of [their]

    jurisdiction or with grave abuse of discretion.

    . . . Our deference to the expertise acquired by quasi-judicial agencies and the limited scope granted us

    in the exercise of certiorarijurisdiction restrain us from going so far as to probe into the correctness of a

    tribunal's evaluation of evidence, unless there is a palpable mistake and complete disregard thereof in

    which case certiorariwould be proper. In plain terms, in certiorariproceedings, we are concerned with

    mere errors of jurisdiction and not errors of judgment.

    Equally devoid of correctness is petitioner's claim that the documents should be considered, pursuant to Article 221 of

    the Labor Code which stares that technical rules are not binding in proceedings before the labor arbiters and the NLRC.

    The Supreme Court is not a trier of facts; as earlier stated, its jurisdiction in a petition for certiorari, like the present case

    is confined to questions of jurisdiction and grave abuse of discretion. The unexplained failure of petitioner to present its

    evidence before the labor arbiter and the NLRC cannot compel this Court to expand the scope of its review. Indeed,

    petitioner has not proffered a sufficient reason for this Court to do so.

    Petitioner's reliance on Canete v. National Labor Relations Commission19is misplaced. In that case, the documents were

    submitted to the NLRC before they were tackled by the Supreme Court.

    Private respondent's admission that he was involved in the November 4, 1993 accident did not give petitioner a justcause to dismiss him. Mere involvement in an accident, absent any showing of fault or recklessness on the part of an

    employee, is not a valid ground for dismissal.

    Third Issue:

    No Due Process

    Petitioner insists that private respondent was accorded due process, because he was allowed to explain his side and to

    show cause why he should still be allowed to act as one of petitioner's drivers.

    This does not persuade. The Court has consistently held that in the dismissal of employees, the twin requirements of

    notice and hearing are essential elements of due process. The employer must furnish the worker two written notices: (1

    one to apprise him of the particular acts or omissions for which his dismissal is sought and (2) the other to inform him of

    his employer's decision to dismiss him. As to the requirement of a hearing, the essence of due process lies simply in an

    opportunity to be heard, and not always and indispensably in an actual hearing. 20

    In the present case, petitioner failed to present proof, other than its bare allegations, that it had complied with these

    requirements. 21We reiterate: the burden of proof rests on the employer. Private respondent, in fact, was not given

    notice that he was being dismissed. When ordered to explain the vehicular accident that happened on November 4,

    1993, he was not informed that petitioner was contemplating his dismissal and that his involvement in said vehicular

    accident was the cause thereof. Private respondent was merely asked to explain the vehicular accidentper se, not his

    defense against a charge of dismissal arising from the vehicular accident. He became aware of his employer's intention

    to dismiss him only when he was actually told not to report for work anymore.

    Fourth Issue:

    Strained Relations

    Notwithstanding its failure to prove just cause and due process in the dismissal of private respondent, petitioner seeks

    to bar his reinstatement by invoking the doctrine of strained relations. It contends that as a result of private

    respondent's "reckless and incompetent manner of driving . . ., compounded by the damages suffered by petitioner in

    terms of repairs, related expenses, and the institution of the instant case, the relationship between the parties are so

    strained as to preclude a harmonious working atmosphere to the prejudice of the petitioner as well as private

    respondent." 22

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    We are not persuaded. Strained relations must be demonstrated as a fact. Petitioner failed to do so. Its allegation that

    private respondent was incompetent and reckless in his manner of driving, which led to the his involvement in three

    vehicular accidents, is not supported by the records. As earlier noted, no evidence was properly submitted by petitioner

    to prove or give credence to his assertions. Thus, Respondent NLRC ruled:

    Despite allegation on the matter, not an iota of proof was presented to establish the claim. This

    observation equally applies to the allegation that complainants, in three (3) occasions had figured in [a]

    vehicular accident due to his reckless driving . . . . 23

    Because the claim of petitioner has no factual basis, the doctrine on strained relations cannot be applied in this case.

    Moreover, the filing of the Complaint for illegal dismissal does not by itself justify the invocation of this doctrine. As the

    Court held in Capili vs. NLRC: 24

    . . . [T]he doctrine on "strained relations" cannot be applied indiscriminately since every labor dispute

    almost invariably results in "strained relations"; otherwise, reinstatement can never be possible simply

    because some hostility is engendered between the parties as a result of their disagreement. That is

    human nature.

    Fifth Issue:

    Reinstatement and Back Wages

    Because he was illegally dismissed, private respondent is entitled to reinstatement and back wages pursuant to Section

    279 of the Labor Code, which reads:

    Art. 279. Security of Tenure.In cases of regular employment, the employer shall not terminate the

    services of an employee except for a just cause or when authorized by this Title. An employee who is

    unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and othe

    privileges and to hisfull backwages, inclusive of allowances, and to his other benefits or their monetary

    equivalent computed from the time his compensation was withheld from him up to the time of his

    actual reinstatement.

    Interpreting this provision, the Court held in Bustamante v. NLRC25that illegally dismissed employees are entitled to full

    back wages without conditions or limitations, viz.:

    . . . [A] closer adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as

    meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the

    concerned employee during the period of his illegal dismissal. In other words, the provision calling for

    "full backwages" to illegally dismissed employees is clear, plain and free from ambiguity and, therefore,

    must be applied without attempted or strained interpretation.

    The labor arbiter awarded back wages in the sum of P67,200 based on the following computation:

    11/28/93 - 6/28/94 = 7 mos.

    P800.00 x 3 days x 4 weeks = P6,600.00

    P9,600 x 7 mos. = P67,200.00 26

    In modifying the foregoing award, the NLRC relied on this other formula:

    11/28/93 - 11/28/94 = 12 months

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    P600.00 x 3 days x 4 weeks = P 7,200.00

    P7,200 x 12 months = P86,400.00. 27

    Although the NLRC adjusted the amount of private respondent's monthly income and the period during which back

    wages may be awarded, neither the petitioner nor the private respondent questioned the new computation.

    Accordingly we sustain the award but stress that the back wages ought to be computed from the time of the illegal

    dismissal to the time of reinstatement, either actual or in the payroll, without any deduction or qualification.

    WHEREFORE, the petition is hereby DISMISSED for utter lack merit, and the assailed Decision and Resolution are hereby

    AFFIRMED. Costs against petitioners.

    SO ORDERED.

    Davide, Jr. and Vitug, JJ., concur.

    Bellosillo, J., took no part.

    Quisumbing, J., concurs in the result.

    Footnotes

    1 Third Division composed of Comm. Joaquin A. Tanodra,ponente; Presiding Comm. Lourdes C. Javier

    and Comm. Ireneo B. Bernardo, concurring.

    2 Rollo, pp. 46-47.

    3 Potenciano S. Canizares, Jr.

    4 NLRC Decision, pp. 2-4; rollo, pp. 39-41.

    5 104 Phil. 946, December 22, 1958.

    6 NLRC Decision, p. 6; rollo, p. 43.

    7 Ibid., p. 5; rollo, p. 42.

    8 Ibid.

    9 This case was deemed submitted for resolution on January 14, 1998, when the Court noted and

    granted the solicitor general's Manifestation and Motion dated November 25, 1997.

    10 Memorandum for Petitioner, p. 6; rollo, p. 144. It should be noted that private respondent did not

    assail the NLRC Decision or any part thereof.

    11 Martinez v. National Labor Relations Commission, 272 SCRA 793, May 29, 1997, per Bellosillo, J.

    12 Ibid., pp. 799-800.

    13 Memorandum for Petitioner, p. 8; rollo, p. 146.

    14 Mabeza v. National Labor Relations Commission, 271 SCRA 670, 680, April 18, 1997, per Kapunan J.

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    15 SeeArt. 282 and 283 of the Labor Code.

    16 Memorandum for Petitioner, p. 10; rollo, p. 148.

    17 NLRC Decision, p. 5; rollo, p. 42.

    18 GR No. 121466, August 15, 1997, per Romero, J.

    19 250 SCRA 259, November 23, 1995.

    20 Conti v. National Labor Relations Commission, 271 SCRA 114, 118, April 10, 1997.

    21 NLRC Decision, p. 5; rollo, p. 42.

    22 Memorandum for Petitioner, pp. 9-10; rollo, pp. 147-148.

    23 NLRC Decision, p. 5; rollo, p. 42.

    24 270 SCRA 488, 495, March 26, 1997, per Bellosillo J.

    25 265 SCRA 61, November 28, 1996, per Padilla, J. See alsoHighway Copra Traders v. NLRC, GR No.

    108889, July 30, 1998. Bustamante applies to illegal dismissals effected after March 21, 1989. In the

    present case, private respondent was hired on December 25, 1992 and illegally dismissed on November

    28, 1993.

    26 Labor arbiter's Decision, p. 4; rollo, p. 32.

    27 Assailed Decision, p. 7; rollo, p. 44.

    Republic of the Philippines

    SUPREME COURT

    Manila

    SECOND DIVISION

    G.R. No. 121605 February 2, 2000

    PAZ MARTIN JO and CESAR JO,petitioners,

    vs.

    NATIONAL LABOR RELATIONS COMMISSION and PETER MEJILA,respondents.

    QUISUMBING,J.:

    This petition for certiorariseeks to set aside the Decision1of National Labor Relations Commission (Fifth Division)

    promulgated on November 21, 1994, and its Resolution dated June 7, 1995, which denied petitioners' motion for

    reconsideration.

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    Private respondent Peter Mejila worked as barber on a piece rate basis at Dina's Barber Shop. In 1970, the owner, Dina

    Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees, including private respondent,

    were absorbed by the new owners. The name of the barbershop was changed to Windfield Barber Shop.

    The owners and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the fee paid

    for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop.

    In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker became

    physically unfit. Private respondent's duties as caretaker, in addition to his being a barber, were: (1) to report to theowners of the barbershop whenever the airconditioning units malfunctioned and/or whenever water or electric power

    supply was interrupted, (2) to call the laundry woman to wash dirty linen; (3) to recommend applicants for interview and

    hiring; (4) to attend to other needs of the shop. For this additional job, he was given an honorarium equivalent to one-

    third (1/3) of the net income of the shop.1wphi1.nt

    When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place nearby was

    rented by petitioners and the barbershop resumed operations as Cesar's Palace Barbershop and Massage Clinic. In this

    new location, private respondent continued to be a barber and caretaker, but with a fixed monthly honorarium as

    caretaker, to wit: from February 1986 to 1990P700; from February 1990 to March 1991P800; and from July 1992

    P1,300.

    In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings, characterized

    by constant exchange of personal insults during working hours, became serious so that private respondent reported the

    matter to Atty. Allan Macaraya of the labor department. The labor official immediately summoned private respondent

    and petitioners to a conference. Upon investigation, it was found out that the dispute was not between private

    respondent and petitioners; rather, it was between the former and his fellow barber. Accordingly, Atty. Macaraya

    directed petitioners' counsel, Atty. Prudencio Abragan, to thresh out the problem.

    During the mediation meeting held at Atty. Abragan's office a new twist was added. Despite the assurance that he was

    not being driven out as caretaker-barber, private respondent demanded payment for several thousand pesos as his

    separation pay and other monetary benefits. In order to give the parties enough time to cool off, Atty. Abragan set

    another conference but private respondent did not appear in such meeting anymore.

    Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he turned ove

    the duplicate keys of the shop to the cashier and took away all his belongings therefrom. On January 8, 1993, he began

    working as a regular barber at the newly opened Goldilocks Barbershop also in Iligan City.

    On January 12, 1993, private respondent filed a complaint2for illegal dismissal with prayer for payment of separation

    pay, other monetary benefits, attorney's fees and damages. Significantly, the complaint did not seek reinstatement as a

    positive relief.

    In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of petitioners, and

    that private respondent was not dismissed but had left his job voluntarily because of his misunderstanding with his co-

    worker.3

    The Labor Arbiter dismissed the complaint, but ordered petitioners to pay private respondent his 13th monthpay and attorney's fees.

    Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiter's judgment. The

    NLRC sustained the labor arbiter's finding as to the existence of employer-employee relationship between petitioners

    and private respondent, but it ruled that private respondent was illegally dismissed. Hence, the petitioners were ordere

    to reinstate private respondent and pay the latter's backwages, 13th month pay, separation pay and attorney's fees,

    thus:

    For failure of respondents to observe due process before dismissing the complainant, We rule and hold that he

    was illegally terminated. Consequently, he should be reinstated and paid his backwages starting from January 1,

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    1993 up , the time of his reinstatement and payment of separation pay, should reinstatement not be feasible on

    account of a strained employer-employee relationship.

    As complainant's income was mixed, (commission and caretaker), he becomes entitled to 13th month pay only

    in his capacity as caretaker at the last rate pay given to him.

    With respect to separation pay, even workers paid on commission are given separation pay as they are

    considered employees of the company. Complainant should be adjudged entitled to separation pay reckoned

    from 1970 up to the time he was dismissed on December 31, 1992 at one-half month pay of his earnings as abarbers; and as a caretaker the same should be reckoned from 1977 up to December 31, 1992.

    As complainant has been assisted by counsel not only in the preparation of the complaint, position paper but in

    hearings before the Labor Arbiter a quoattorney's fees equivalent to 10% of the money awards should likewise

    be paid to complainant.

    WHEREFORE, the decision appealed from is Vacatedand Set Asideand a new one entered in accordance with

    the above-findings and awards.

    SO ORDERED.4

    Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the instant

    petition.

    The issues for resolution are as follows:

    1. Whether or not there exists an employee-employee relationship between petitioners and private respondent

    2. Whether or not private respondent was dismissed from or had abandoned his employment.

    Petitioners contend that public respondent gravely erred in declaring that private respondent was their employee. They

    claim that private respondent was their "partner in trade" whose compensation was based on a sharing arrangement

    per haircut or shaving job done. They argue that private respondent's task as caretaker could be considered an

    employment because the chores are very minimal.

    At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately a questio

    of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only respect but even

    finality when supported by ample evidence.5

    In determining the existence of an employer-employee relationship, the following elements are considered: (1) the

    selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4)

    the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. The power of

    control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the

    employer to actually supervise the performance of duties of the employee; it is enough that the employer has the rightto wield that power.

    6

    Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of industrial

    partnership, we entertain no doubt that private respondent was employed by petitioners as caretaker-barber. Initially,

    petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing the latter in their

    employ. Undoubtedly, the services performed by private respondent as barber is related to, and in the pursuit of the

    principal business activity of petitioners. Later on, petitioners tapped private respondent to serve concurrently as

    caretaker of the shop. Certainly, petitioners had the power to dismiss private respondent being the ones who engaged

    the services of the latter. In fact, private respondent sued petitioners for illegal dismissal, albeit contested by the latter.

    As a caretaker, private respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of

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    one-third (1/3) of the shop's net income but subsequently pegged at a fixed amount per month. As a barber, private

    respondent earned two-thirds (2/3) of the fee paid per haircut or shaving job done. Furthermore, the following facts

    indubitably reveal that petitioners controlled private respondent's work performance, in that: (1) private respondent

    had to inform petitioners of the things needed in the shop; (2) he could only recommend the hiring of barbers and

    masseuses, with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and could leave only at

    9:00 p.m. because he was the one who opened and closed it, being the one entrusted with the key.7These duties were

    complied with by the private respondent upon instructions of petitioners. Moreover, such task was far from being

    negligible as claimed by petitioners. On the contrary, it was crucial to the business operation of petitioners as shown in

    the preceding discussion. Hence, there was enough basis to declare private respondent an employee of petitioners.Accordingly, there is no cogent reason to disturb the findings of the labor arbiter and NLRC on the existence of

    employer-employee relationship between herein private parties.

    With regard to the second issue, jurisprudence has laid out the rules and valid ground for termination of employment.

    To constitute abandonment, there must be concurrence of the intention to abandon and some overt acts from which it

    may be inferred that the employee concerned has no more interest in working.8In other words, there must be a clear,

    deliberate and unj