2/22/2020 PEDRO CHAVEZ v.

NLRC

DIVISION

[ GR NO. 146530, Jan 17, 2005 ]

PEDRO CHAVEZ v. NLRC

DECISION
489 Phil. 444

CALLEJO, SR., J.:

[1]
Before the Court is the petition for review on certiorari of the Resolution dated
December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated April 28,
2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated
July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the
complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC
decision similarly reversed its earlier Decision dated January 27, 1998 which,
affirming that of the Labor Arbiter, ruled that the petitioner had been illegally
dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.

The case stemmed from the following facts:

The respondent company, Supreme Packaging, Inc., is in the business of

manufacturing cartons and other packaging materials for export and distribution. It
engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25,
1984. As such, the petitioner was tasked to deliver the respondent company's products
from its factory in Mariveles, Bataan, to its various customers, mostly in Metro
Manila. The respondent company furnished the petitioner with a truck. Most of the
petitioner's delivery trips were made at nighttime, commencing at 6:00 p.m. from
Mariveles, and returning thereto in the afternoon two or three days after. The
deliveries were made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially, the petitioner
was paid the sum of P350.00 per trip. This was later adjusted to P480.00 per trip and,
at the time of his alleged dismissal, the petitioner was receiving P900.00 per trip.

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Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent

company's plant manager, his (the petitioner's) desire to avail himself of the benefits
that the regular employees were receiving such as overtime pay, nightshift differential
pay, and 13th month pay, among others. Although he promised to extend these
benefits to the petitioner, respondent Lee failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before
the case could be heard, respondent company terminated the services of the
petitioner. Consequently, on May 25, 1995, the petitioner filed an amended complaint
against the respondents for illegal dismissal, unfair labor practice and non-payment of
overtime pay, nightshift differential pay, 13th month pay, among others. The case was
docketed as NLRC Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee

relationship between the respondent company and the petitioner. They averred that
the petitioner was an independent contractor as evidenced by the contract of service
which he and the respondent company entered into. The said contract provided as
follows:

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That the Principal [referring to Supreme Packaging, Inc.], by these presents,

agrees to hire and the Contractor [referring to Pedro Chavez], by nature of their
specialized line or service jobs, accepts the services to be rendered to the
Principal, under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the
contractor to the principal, shall only cover travel route from Mariveles to
Metro Manila. Otherwise, any change to this travel route shall be subject to
further agreement by the parties concerned.

2. That the payment to be made by the Principal for any hauling or delivery
transport services fully rendered by the Contractor shall be on a per trip
basis depending on the size or classification of the truck being used in the
transport service, to wit:

a) If the hauling or delivery service shall require a truck of six wheeler, the
payment on a per trip basis from Mariveles to Metro Manila shall be
THREE HUNDRED PESOS (P300.00) and EFFECTIVE December 15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the

payment on a per trip basis, following the same route mentioned, shall be
THREE HUNDRED FIFTY (P350.00) Pesos and Effective December 15,
1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic]
at least two (2) helpers;

4. The Contractor shall exercise direct control and shall be responsible to the
Principal for the cost of any damage to, loss of any goods, cargoes, finished
products or the like, while the same are in transit, or due to reckless [sic] of
its men utilized for the purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over
its men working for him subject to this agreement, and that the Contractor
shall hold the Principal free and harmless from any liability or claim that
may arise by virtue of the Contractor's non-compliance to the existing
provisions of the Minimum Wage Law, the Employees Compensation Act,
the Social Security System Act, or any other such law or decree that may
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hereafter be enacted, it being clearly understood that any truck drivers,

helpers or men working with and for the Contractor, are not employees who
will be indemnified by the Principal for any such claim, including damages
incurred in connection therewith;

6. This contract shall take effect immediately upon the signing by the parties,
subject to renewal on a year-to-year basis.[2]

This contract of service was dated December 12, 1984. It was subsequently renewed
twice, on July 10, 1989 and September 28, 1992. Except for the rates to be paid to the
petitioner, the terms of the contracts were substantially the same. The relationship of
the respondent company and the petitioner was allegedly governed by this contract of
service.

The respondents insisted that the petitioner had the sole control over the means and
methods by which his work was accomplished. He paid the wages of his helpers and
exercised control over them. As such, the petitioner was not entitled to regularization
because he was not an employee of the respondent company. The respondents,
likewise, maintained that they did not dismiss the petitioner. Rather, the severance of
his contractual relation with the respondent company was due to his violation of the
terms and conditions of their contract. The petitioner allegedly failed to observe the
minimum degree of diligence in the proper maintenance of the truck he was using,
thereby exposing respondent company to unnecessary significant expenses of
overhauling the said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the
Decision dated February 3, 1997, finding the respondents guilty of illegal dismissal.
The Labor Arbiter declared that the petitioner was a regular employee of the
respondent company as he was performing a service that was necessary and desirable
to the latter's business. Moreover, it was noted that the petitioner had discharged his
duties as truck driver for the respondent company for a continuous and uninterrupted
period of more than ten years.

The contract of service invoked by the respondents was declared null and void as it
constituted a circumvention of the constitutional provision affording full protection to
labor and security of tenure. The Labor Arbiter found that the petitioner's dismissal
was anchored on his insistent demand to be regularized. Hence, for lack of a valid
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and just cause therefor and for their failure to observe the due process requirements,
the respondents were found guilty of illegal dismissal. The dispositive portion of the
Labor Arbiter's decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered
declaring respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE,
Plant Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal
dismissal, ordering said respondent to pay complainant his separation pay
equivalent to one (1) month pay per year of service based on the average monthly
pay of P10,800.00 in lieu of reinstatement as his reinstatement back to work will
not do any good between the parties as the employment relationship has already
become strained and full backwages from the time his compensation was
withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until
compliance, otherwise, his backwages shall continue to run. Also to pay
complainant his 13th month pay, night shift differential pay and service incentive
leave pay hereunder computed as follows:

a) Backwages ………………….. P248,400.00

b) Separation Pay ………….…... P140,400.00
c) 13th month pay ………….…… P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant
as attorney's fees.

[3]
SO ORDERED.

The respondents seasonably interposed an appeal with the NLRC. However, the
appeal was dismissed by the NLRC in its Decision[4] dated January 27, 1998, as it
affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the
petitioner as a "scheme" that was resorted to by the respondents who, taking
advantage of the petitioner's unfamiliarity with the English language and/or legal
niceties, wanted to evade the effects and implications of his becoming a regularized
employee.[5]

The respondents sought reconsideration of the January 27, 1998 Decision of the
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NLRC. Acting thereon, the NLRC rendered another Decision[6] dated July 10, 1998,
reversing its earlier decision and, this time, holding that no employer-employee
relationship existed between the respondent company and the petitioner. In
reconsidering its earlier decision, the NLRC stated that the respondents did not
exercise control over the means and methods by which the petitioner accomplished
his delivery services. It upheld the validity of the contract of service as it pointed out
that said contract was silent as to the time by which the petitioner was to make the
deliveries and that the petitioner could hire his own helpers whose wages would be
paid from his own account. These factors indicated that the petitioner was an
independent contractor, not an employee of the respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article
280 of the Labor Code on the regularization of employees. Said contract, including the
fixed period of employment contained therein, having been knowingly and voluntarily
entered into by the parties thereto was declared valid citing Brent School, Inc. v.
Zamora.[7] The NLRC, thus, dismissed the petitioner's complaint for illegal dismissal.

The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied
by the NLRC in its Resolution dated September 7, 1998. He then filed with this Court
a petition for certiorari, which was referred to the CA following the ruling in St.
Martin Funeral Home v. NLRC.[8]

The appellate court rendered the Decision dated April 28, 2000, reversing the July 10,
1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the
said decision, the CA ruled that the petitioner was a regular employee of the
respondent company because as its truck driver, he performed a service that was
indispensable to the latter's business. Further, he had been the respondent company's
truck driver for ten continuous years. The CA also reasoned that the petitioner could
not be considered an independent contractor since he had no substantial capital in the
form of tools and machinery. In fact, the truck that he drove belonged to the
respondent company. The CA also observed that the routing slips that the respondent
company issued to the petitioner showed that it exercised control over the latter. The
routing slips indicated the chronological order and priority of delivery, the urgency of
certain deliveries and the time when the goods were to be delivered to the customers.

The CA, likewise, disbelieved the respondents' claim that the petitioner abandoned his
job noting that he just filed a complaint for regularization. This actuation of the

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petitioner negated the respondents' allegation that he abandoned his job. The CA held
that the respondents failed to discharge their burden to show that the petitioner's
dismissal was for a valid and just cause. Accordingly, the respondents were declared
guilty of illegal dismissal and the decision of the Labor Arbiter was reinstated.

In its April 28, 2000 Decision, the CA denounced the contract of service between the
respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent
workers from attaining the status of regular employment, it is but necessary for
the courts to scrutinize with extreme caution their legality and justness. Where
from the circumstances it is apparent that a contract has been entered into to
preclude acquisition of tenurial security by the employee, they should be struck
down and disregarded as contrary to public policy and morals. In this case, the
"contract of service" is just another attempt to exploit the unwitting employee
and deprive him of the protection of the Labor Code by making it appear that the
stipulations of the parties were governed by the Civil Code as in ordinary
[9]
transactions.

However, on motion for reconsideration by the respondents, the CA made a complete

turn around as it rendered the assailed Resolution dated December 15, 2000
upholding the contract of service between the petitioner and the respondent company.
In reconsidering its decision, the CA explained that the extent of control exercised by
the respondents over the petitioner was only with respect to the result but not to the
means and methods used by him. The CA cited the following circumstances: (1) the
respondents had no say on how the goods were to be delivered to the customers; (2)
the petitioner had the right to employ workers who would be under his direct control;
and (3) the petitioner had no working time.

The fact that the petitioner had been with the respondent company for more than ten
years was, according to the CA, of no moment because his status was determined not
by the length of service but by the contract of service. This contract, not being
contrary to morals, good customs, public order or public policy, should be given the
force and effect of law as between the respondent company and the petitioner.
Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing
the petitioner's complaint for illegal dismissal.

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Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000
Resolution of the appellate court alleging that:
(A)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE
CONSIDERATION TO THE "CONTRACT OF SERVICE" ENTERED INTO BY
PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE
LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A
REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN
AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL
AGREEMENT OF THE PARTIES;

(B)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN
FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN
HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN
AS MUCH AS THE "CONTROL TEST" WHICH IS CONSIDERED THE MOST
ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID
[10]
RELATIONSHIP IS NOT PRESENT.

The threshold issue that needs to be resolved is whether there existed an employer-
employee relationship between the respondent company and the petitioner. We rule
in the affirmative.

The elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employer's power to control the employee's conduct.[11] The
most important element is the employer's control of the employee's conduct, not only
as to the result of the work to be done, but also as to the means and methods to
accomplish it.[12] All the four elements are present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner
without the intervention of a third party.
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Second. Wages are defined as "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."
[13] That the petitioner was paid on a per trip basis is not significant. This is merely a
method of computing compensation and not a basis for determining the existence or
absence of employer-employee relationship. One may be paid on the basis of results
or time expended on the work, and may or may not acquire an employment status,
depending on whether the elements of an employer-employee relationship are present
or not.[14] In this case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that he rendered to the
latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required
to pay his employees by means of payroll.[15] The payroll should show, among other
things, the employee's rate of pay, deductions made, and the amount actually paid to
the employee. Interestingly, the respondents did not present the payroll to support
their claim that the petitioner was not their employee, raising speculations whether
this omission proves that its presentation would be adverse to their case.[16]

Third. The respondents' power to dismiss the petitioner was inherent in the fact that
they engaged the services of the petitioner as truck driver. They exercised this power
by terminating the petitioner's services albeit in the guise of "severance of contractual
relation" due allegedly to the latter's breach of his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship,

the "control test" is the most important. Compared to an employee, an independent
contractor is one who 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, 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.[17] Hence, while an independent contractor enjoys
independence and freedom from the control and supervision of his principal, an
employee is subject to the employer's power to control the means and methods by
which the employee's work is to be performed and accomplished.[18]

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Although the respondents denied that they exercised control over the manner and
methods by which the petitioner accomplished his work, a careful review of the
records shows that the latter performed his work as truck driver under the
respondents' supervision and control. Their right of control was manifested by the
following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be
[19]
used exclusively to deliver respondent company's goods;

3. Respondents directed the petitioner, after completion of each delivery, to park

the truck in either of two specific places only, to wit: at its office in Metro Manila
[20]
at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles, Bataan; and

4. Respondents determined how, where and when the petitioner would perform
[21]
his task by issuing to him gate passes and routing slips.
a. The routing slips indicated on the column REMARKS, the chronological
order and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This
meant that the petitioner had to deliver the same according to the order of
priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be

delivered urgently or not by the word RUSH printed thereon.

c. The routing slips also indicated the exact time as to when the goods were
to be delivered to the customers as, for example, the words "tomorrow
morning" was written on slip no. 2776.

These circumstances, to the Court's mind, prove that the respondents exercised
control over the means and methods by which the petitioner accomplished his work as
truck driver of the respondent company. On the other hand, the Court is hard put to
believe the respondents' allegation that the petitioner was an independent contractor
engaged in providing delivery or hauling services when he did not even own the truck
used for such services. Evidently, he did not possess substantial capitalization or
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investment in the form of tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively for the respondent company for
a continuous and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances

earlier discussed indubitably establish the existence of an employer-employee
relationship between the respondent company and the petitioner. It bears stressing
that the existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract and providing therein that the employee is an
independent contractor when, as in this case, the facts clearly show otherwise. Indeed,
the employment status of a person is defined and prescribed by law and not by what
the parties say it should be.[22]

Having established that there existed an employer-employee relationship between the

respondent company and the petitioner, the Court shall now determine whether the
respondents validly dismissed the petitioner.

As a rule, the employer bears the burden to prove that the dismissal was for a valid
and just cause.[23] In this case, the respondents failed to prove any such cause for the
petitioner's dismissal. They insinuated that the petitioner abandoned his job. To
constitute abandonment, these two factors must concur: (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship.[24] Obviously, the petitioner did not intend to sever
his relationship with the respondent company for at the time that he allegedly
abandoned his job, the petitioner just filed a complaint for regularization, which was
forthwith amended to one for illegal dismissal. A charge of abandonment is totally
inconsistent with the immediate filing of a complaint for illegal dismissal, more so
when it includes a prayer for reinstatement.[25]

Neither can the respondents' claim that the petitioner was guilty of gross negligence in
the proper maintenance of the truck constitute a valid and just cause for his dismissal.
Gross negligence implies a want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.[26] The negligence, to
warrant removal from service, should not merely be gross but also habitual.[27] The
single and isolated act of the petitioner's negligence in the proper maintenance of the
truck alleged by the respondents does not amount to "gross and habitual neglect"

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warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:
… As against the gratuitous allegation of the respondent that complainant was
not dismissed from the service but due to complainant's breach of their
contractual relation, i.e., his violation of the terms and conditions of the contract,
we are very much inclined to believe complainant's story that his dismissal from
the service was anchored on his insistent demand that he be considered a regular
employee. Because complainant in his right senses will not just abandon for that
reason alone his work especially so that it is only his job where he depends
chiefly his existence and support for his family if he was not aggrieved by the
respondent when he was told that his services as driver will be terminated on
[28]
February 23, 1995.

Thus, the lack of a valid and just cause in terminating the services of the petitioner
renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is
unjustly dismissed is entitled to reinstatement, without loss of seniority rights and
other privileges, and to the payment of full backwages, inclusive of allowances, and
other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.[29]
However, as found by the Labor Arbiter, the circumstances obtaining in this case do
not warrant the petitioner's reinstatement. A more equitable disposition, as held by
the Labor Arbiter, would be an award of separation pay equivalent to one month for
every year of service from the time of his illegal dismissal up to the finality of this
judgment in addition to his full backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15,
2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R.
SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of
the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents
guilty of illegally terminating the employment of petitioner Pedro Chavez, is
REINSTATED.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

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[1] Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices
Renato C. Dacudao and Andres B. Reyes, Jr., concurring.

[2] Rollo, pp. 113-114.

[3] Id., at 151.

[4] Penned by Commissioner Rogelio I. Rayala, with Presiding Commissioner Raul T.

Aquino and Commissioner Victoriano R. Calaycay, concurring; Id., at 177-184.

[5] Rollo, pp. 183-184.

[6] Penned by Commissioner Angelita A. Gacutan, with Presiding Commissioner Raul

T. Aquino and Commissioner Victoriano R. Calaycay, concurring; Id., at 60-73.

[7] 181 SCRA 702 (1990).

[8] 295 SCRA 494 (1998).

[9] Rollo, pp. 42-43.

[10] Id., at 13-14.

[11] Sy v. Court of Appeals, 398 SCRA 301 (2003).

[12] Id., at 307-308.

[13] LABOR CODE, ART. 97(f).

[14] Tan v. Lagrama, 387 SCRA 393 (2002).

[15] Book III, Rule X, Sec. 6(a).

[16] Tan v. Lagrama, supra.

[17] Id., at 399.

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[18] Id.,

[19] Annex C of Respondents' Position Paper; Rollo, p. 117.

[20] Ibid.,

[21] Annexes A to C of Petitioner's Reply to Respondents' Position Paper.

[22] AZUCENA, I THE LABOR CODE (1999 ed.) 127.

[23] Hacienda Fatima v. National Federation of Sugarcane Workers-Food and

General Trade, 396 SCRA 518 (2003).

Article 282 of the Labor Code provides: An employer may terminate an employment
for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative;

(e) Other causes analogous to the foregoing.

[24] Buenviaje v. Court of Appeals, 391 SCRA 440 (2002).

[25] Globe Telecom, Inc. v. Florendo-Flores, 390 SCRA 201 (2002)

[26] Philippine Aeolus Automotive United Corporation v. NLRC, 331 SCRA 237
(2000).

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[27] Id., at 247.

[28] Rollo, pp. 149-150.

[29] Cebu Marine Beach Resort v. NLRC, 414 SCRA 173 (2003).

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