G.R. No.

151228            August 15, 2002

ROLANDO Y. TAN, petitioner,
vs.
LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF APPEALS, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision, 1 dated May 31, 2001, and the
resolution,2 dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No. 63160, annulling
the resolutions of the National Labor Relations Commission (NLRC) and reinstating the ruling of the
Labor Arbiter which found petitioner Rolando Tan guilty of illegally dismissing private respondent
Leovigildo Lagrama and ordering him to pay the latter the amount of P136,849.99 by way of
separation pay, backwages, and damages.

The following are the facts.

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of
Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama is a painter,
making ad billboards and murals for the motion pictures shown at the Empress, Supreme, and
Crown Theaters for more than 10 years, from September 1, 1988 to October 17, 1998.

On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: "Nangihi
na naman ka sulod sa imong drawinganan." ("You again urinated inside your work area.") When
Lagrama asked what Tan was saying, Tan told him, "Ayaw daghang estorya. Dili ko gusto nga mo-
drawing ka pa. Guikan karon, wala nay drawing. Gawas." ("Don't say anything further. I don't want
you to draw anymore. From now on, no more drawing. Get out.")

Lagrama denied the charge against him. He claimed that he was not the only one who entered the
drawing area and that, even if the charge was true, it was a minor infraction to warrant his dismissal.
However, everytime he spoke, Tan shouted "Gawas" ("Get out"), leaving him with no other choice
but to leave the premises.

Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor
Relations Commission (NLRC) in Butuan City. He alleged that he had been illegally dismissed and
sought reinvestigation and payment of 13th month pay, service incentive leave pay, salary
differential, and damages.

Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an
independent contractor who did his work according to his methods, while he (petitioner) was only
interested in the result thereof. He cited the admission of Lagrama during the conferences before the
Labor Arbiter that he was paid on a fixed piece-work basis, i.e., that he was paid for every painting
turned out as ad billboard or mural for the pictures shown in the three theaters, on the basis of a "no
mural/billboard drawn, no pay" policy. He submitted the affidavits of other cinema owners, an
amusement park owner, and those supervising the construction of a church to prove that the
services of Lagrama were contracted by them. He denied having dismissed Lagrama and alleged
that it was the latter who refused to paint for him after he was scolded for his habits.

As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties
to file their position papers. On June 17, 1999, he rendered a decision, the dispositive portion of
which reads:
 WHEREFORE, premises considered judgment is hereby ordered:

1. Declaring complainant's [Lagrama's] dismissal illegal and

2. Ordering respondents [Tan] to pay complainant the following:

A. Separation Pay - P 59,000.00

B. Backwages - 47,200.00
(from 17 October 1998 to 17 June
1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave Pay (3 - 2, 949.99
years)
E. Damages - 10,000.00
             TOTAL   [P136,849.99]

Complainant's other claims are dismissed for lack of merit. 3

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June
30, 2000, rendered a decision4 finding Lagrama to be an independent contractor, and for this reason
reversing the decision of the Labor Arbiter.

Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the
NLRC in a resolution of September 29, 2000. He then filed a petition for certiorari under Rule 65
before the Court of Appeals.

The Court of Appeals found that petitioner exercised control over Lagrama's work by dictating the
time when Lagrama should submit his billboards and murals and setting rules on the use of the work
area and rest room. Although it found that Lagrama did work for other cinema owners, the appeals
court held it to be a mere sideline insufficient to prove that he was not an employee of Tan. The
appeals court also found no evidence of any intention on the part of Lagrama to leave his job or
sever his employment relationship with Tan. Accordingly, on May 31, 2001, the Court of Appeals
rendered a decision, the dispositive portion of which reads:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The
Resolutions of the Public Respondent issued on June 30, 2000 and September 29, 2000 are
ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P. Legaspi on June 17,
1999 is hereby REINSTATED.

Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its
decision and so denied his motion for lack of merit. 5 Hence, this petition for review on certiorari
based on the following assignments of errors:

I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP NO.
63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had no jurisdiction
or exceeded it or otherwise gravely abused its discretion in its Resolution of 30 June 2000 in
NLRC CA-NO. M-004950-99.
 II. With all due respect, respondent Court of Appeals, absent any positive finding on its part
that the Resolution of 30 June 2000 of the NLRC is not supported by substantial evidence, is
without authority to substitute its conclusion for that of said NLRC.

III. With all due respect, respondent Court of Appeals' discourse on "freelance artists and
painters" in the decision in question is misplaced or has no factual or legal basis in the
record.

IV. With all due respect, respondent Court of Appeals' opening statement in its decision as to
"employment," "monthly salary of P1,475.00" and "work schedule from Monday to Saturday,
from 8:00 o'clock in the morning up to 5:00 o'clock in the afternoon" as "facts" is not
supported by the evidence on record.

V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R. No.
111042 October 26, 1999] relied upon by respondent Court of Appeals is not applicable to
the peculiar circumstances of this case.6

The issues raised boil down to whether or not an employer-employee relationship existed between
petitioner and private respondent, and whether petitioner is guilty of illegally dismissing private
respondent. We find the answers to these issues to be in the affirmative.

I.

In determining whether there is an employer-employee relationship, we have applied a "four-fold

test," to wit: (1) whether the alleged employer has the power of selection and engagement of
employees; (2) whether he has control of the employee with respect to the means and methods by
which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the
employee was paid wages. These elements of the employer-employee relationship are present in
this case.

First. The existence in this case of the first element is undisputed. It was petitioner who engaged the
services of Lagrama without the intervention of a third party. It is the existence of the second
element, the power of control, that requires discussion here.

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.8 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.

In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent
contractor and never his employee, the evidence shows that the latter performed his work as painter
under the supervision and control of petitioner. Lagrama worked in a designated work area inside
the Crown Theater of petitioner, for the use of which petitioner prescribed rules. The rules included
the observance of cleanliness and hygiene and a prohibition against urinating in the work area and
any place other than the toilet or the rest rooms. Petitioner's control over Lagrama's work extended
not only to the use of the work area, but also to the result of Lagrama's work, and the manner and
means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the
materials used for the paintings, because he admitted that he paid Lagrama only for the latter's
services.10

Private respondent Lagrama claimed that he worked daily, from 8 o'clock in the morning to 5 o'clock
in the afternoon. Petitioner disputed this allegation and maintained that he paid Lagrama P1,475.00
per week for the murals for the three theaters which the latter usually finished in 3 to 4 days in one
week.11 Even assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a week
proves regularity in his employment by petitioner.

Second. That petitioner had the right to hire and fire was admitted by him in his position paper
submitted to the NLRC, the pertinent portions of which stated:

Complainant did not know how to use the available comfort rooms or toilets in and about
his work premises. He was urinating right at the place where he was working when it was so
easy for him, as everybody else did and had he only wanted to, to go to the comfort rooms.
But no, the complainant had to make a virtual urinal out of his work place! The place then
stunk to high heavens, naturally, to the consternation of respondents and everyone who
could smell the malodor.

...

Given such circumstances, the respondents had every right, nay all the compelling reason,
to fire him from his painting job upon discovery and his admission of such acts. Nonetheless,
though thoroughly scolded, he was not fired. It was he who stopped to paint for
respondents.12

By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his
employee. For the right to hire and fire is another important element of the employer-employee
relationship.13 Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for
work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was
indeed an employee of petitioner. For only an employee can nurture such an expectancy, the
frustration of which, unless satisfactorily explained, can bring about some disciplinary action on the
part of the employer.

Third. Payment of wages is one of the four factors to be considered in determining the existence of
employer-employee relation. 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
services rendered or to be rendered." 14 That Lagrama worked for Tan on a fixed piece-work basis is
of no moment. Payment by result is a method of compensation and does not define the essence of
the relation.15 It is a method of computing compensation, 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. 16

The Rules Implementing the Labor Code require every employer to pay his employees by means of
payroll.17 The payroll should show among other things, the employee's rate of pay, deductions made,
and the amount actually paid to the employee. In the case at bar, petitioner did not present the
payroll to support his claim that Lagrama was not his employee, raising speculations whether his
failure to do so proves that its presentation would be adverse to his case. 18
The primary standard for determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the
employer.19 In this case, there is such a connection between the job of Lagrama painting billboards
and murals and the business of petitioner. To let the people know what movie was to be shown in a
movie theater requires billboards. Petitioner in fact admits that the billboards are important to his
business.20

The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the
question of whether he was an employee of petitioner. 21 Otherwise, an employer would be rewarded
for his failure or even neglect to perform his obligation. 22

Neither does the fact that Lagrama painted for other persons affect or alter his employment
relationship with petitioner. That he did so only during weekends has not been denied by petitioner.
On the other hand, Samuel Villalba, for whom Lagrama had rendered service, admitted in a sworn
statement that he was told by Lagrama that the latter worked for petitioner. 23

Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a
regular employee and is thus entitled to security of tenure, as provided in Art. 279 of Labor Code:

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 other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.

This Court has held that if the employee has been performing the job for at least one year, even if
not continuously but intermittently, the repeated and continuing need for its performance is sufficient
evidence of the necessity, if not indispensability, of that activity to the business of his employer.
Hence, the employment is also considered regular, although with respect only to such activity, and
while such activity exists.24

It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment
requires two elements: (1) the failure to report for work or absence without valid or justifiable reason,
and (2) a clear intention to sever the employer-employee relationship, with the second element as
the more determinative factor and being manifested by some overt acts.25 Mere absence is not
sufficient. What is more, the burden is on the employer to show a deliberate and unjustified refusal
on the part of the employee to resume his employment without any intention of returning. 26 In the
case at bar, the Court of Appeals correctly ruled:

Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just
and valid ground for dismissal, the employer must show, by clear proof, the intention of the
employee to abandon his job. . . .

In the present recourse, the Private Respondent has not established clear proof of the
intention of the Petitioner to abandon his job or to sever the employment relationship
between him and the Private Respondent. On the contrary, it was Private Respondent who
told Petitioner that he did not want the latter to draw for him and thereafter refused to give
him work to do or any mural or billboard to paint or draw on.

More, after the repeated refusal of the Private Respondent to give Petitioner murals or
billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration Branch No. X of
 the National Labor Relations Commission, a Complaint for "Illegal Dismissal and Money
Claims." Such act has, as the Supreme Court declared, negate any intention to sever
employment relationship. . . .27

II.

The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the
employer has the burden of proving the lawfulness of his employee's dismissal. 28 The validity of the
charge must be clearly established in a manner consistent with due process. The Implementing
Rules of the Labor Code29 provide that no worker shall be dismissed except for a just or authorized
cause provided by law and after due process. This provision has two aspects: (1) the legality of the
act of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor
Code and (2) the legality in the manner of dismissal. The illegality of the act of dismissal constitutes
discharge without just cause, while illegality in the manner of dismissal is dismissal without due
process.30

In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight
as the latter tried to explain his side, petitioner made it plain that Lagrama was dismissed. Urinating
in a work place other than the one designated for the purpose by the employer constitutes violation
of reasonable regulations intended to promote a healthy environment under Art. 282(1) of the Labor
Code for purposes of terminating employment, but the same must be shown by evidence. Here there
is no evidence that Lagrama did urinate in a place other than a rest room in the premises of his
work.

Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter
found that the relationship between the employer and the employee has been so strained that the
latter's reinstatement would no longer serve any purpose. The parties do not dispute this finding.
Hence, the grant of separation pay in lieu of reinstatement is appropriate. This is of course in
addition to the payment of backwages which, in accordance with the ruling in Bustamante v.
NLRC,31 should be computed from the time of Lagrama's dismissal up to the time of the finality of
this decision, without any deduction or qualification.

The Bureau of Working Conditions32 classifies workers paid by results into two groups, namely; (1)
those whose time and performance is supervised by the employer, and (2) those whose time and
performance is unsupervised by the employer. The first involves an element of control and
supervision over the manner the work is to be performed, while the second does not. If a piece
worker is supervised, there is an employer-employee relationship, as in this case. However, such an
employee is not entitled to service incentive leave pay since, as pointed out in Makati Haberdashery
v. NLRC33 and Mark Roche International v. NLRC,34 he is paid a fixed amount for work done,
regardless of the time he spent in accomplishing such work.

WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of
Appeals committed any reversible error. The decision of the Court of Appeals, reversing the decision
of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter,
is AFFIRMED with the MODIFICATION that the backwages and other benefits awarded to private
respondent Leovigildo Lagrama should be computed from the time of his dismissal up to the time of
the finality of this decision, without any deduction and qualification. However, the service incentive
leave pay awarded to him is DELETED.

SO ORDERED.