Continental Marble Corp. vs. NLRC

Article 262 of the Labor Code makes voluntary arbitration awards final only as to appeals to the NLRC, not as to judicial review, and an award of unpaid salaries cannot stand where the employer did not control the employee’s means and methods of work.

In May 1974, Rodito Nasayao claimed that he was appointed plant manager of Continental Marble Corp. with compensation of P3,000.00 a month, or 25% of the monthly net income of the company, whichever is greater. When the company failed to pay his salary for May, June, and July 1974, Nasayao filed a complaint with the National Labor Relations Commission, Branch IV, for recovery of the unpaid salaries, docketed as NLRC Case No. LR-6151. Continental Marble Corp. and Felipe David were named as respondents.

Continental Marble Corp. and Felipe David denied that Nasayao was employed as plant manager with a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed upon by the parties was a joint venture, a sort of partnership, wherein Nasayao was to keep the machinery in good working condition and, in return, he would get the contracts from end-users for the installation of marble products, in which the company would not interfere. Under that arrangement, Nasayao was to receive an amount equivalent to 25% of the net profits that the petitioner corporation would realize, should there be any; since there had been no profits during the period, he was not entitled to any amount.

The case was submitted for voluntary arbitration, and the parties selected Jose T. Collado as voluntary arbitrator. During the proceedings, Continental Marble Corp. and Felipe David challenged the arbitrator’s capacity to try and decide the case fairly and judiciously and asked him to desist from further hearing the case, but the arbitrator refused. The arbitrator found that the agreement between the parties was for the petitioner company to pay Nasayao a monthly salary of P3,000.00, and he ordered the company to pay Nasayao P9,000.00 covering May, June, and July 1974.

The record showed that Nasayao was not included in the company payroll or in the list of company employees furnished the Social Security System. He was not subject to definite hours or conditions of work; he decided for himself what was to be done and worked at his own pleasure; and he was compensated according to the results of his own effort. He had a free hand in running the company and its business, so much so that Felipe David did not know, until very much later, that Nasayao had collected old accounts receivables not covered by their agreement and converted them to his own personal use. It was only after Nasayao had abandoned the plant following discovery of his wrongdoings that Felipe David assumed management of the plant.

• Nature of the Agreement / No Employer-Employee Relationship: Petitioners denied that Rodito Nasayao was employed as plant manager with a fixed monthly salary of P3,000.00; they claimed that the undertaking was a joint venture, a sort of partnership, in which Nasayao was to keep the machinery in good working condition and get contracts from end-users for the installation of marble products, with the company not interfering, and that he was to receive 25% of net profits, if any, so that no amount was due because there had been no profits.
• Grave Abuse of Discretion / Judicial Review: Petitioners maintained that where there is patent and manifest abuse of discretion, the rule on unappealability of awards of a voluntary arbitrator becomes flexible and it is the inherent power of the courts to maintain the people’s faith in the administration of justice.
• Arbitrator’s Capacity: Petitioners challenged the arbitrator’s capacity to try and decide the case fairly and judiciously and asked him to desist from further hearing the case; they appealed on the ground that he gravely abused his discretion in persisting to hear and decide the case notwithstanding their request.
• Lack of Evidentiary Support: Petitioners argued that the appealed decision is not supported by evidence.

• Finality of Voluntary Arbitration Award: Respondent Rodito Nasayao contended that the judgment or award of the voluntary arbitrator is final, unappealable, and immediately executory and may not be reviewed by the SC, based on Article 262 of the Labor Code, as amended.
• Exhaustion of Administrative Remedies: Respondent claimed that the case is premature for non-exhaustion of administrative remedies; the decision of the NLRC should have first been appealed by petitioners to the Secretary of Labor, and, if they were not satisfied with his decision, to the President of the Philippines, before resort was made to the SC.
• Conclusiveness of Factual Findings: Respondent contended that only questions of law, and not findings of fact of a voluntary arbitrator, may be reviewed by the SC, since the findings of fact of the voluntary arbitrator are conclusive upon the SC.

• Judicial Review of Voluntary Arbitration Awards: Whether the decision or award of a voluntary arbitrator is final, unappealable, and immediately executory, and thus may not be reviewed by the SC.
• Exhaustion of Administrative Remedies: Whether the petition is premature for failure to appeal the NLRC resolution to the Secretary of Labor and then to the President of the Philippines.
• Review of Factual Findings: Whether only questions of law, and not findings of fact of a voluntary arbitrator, may be reviewed by the SC.
• Employer-Employee Relationship: Whether Rodito Nasayao was employed as plant manager of Continental Marble Corp. with a monthly salary of P3,000.00 or 25% of monthly net income, whichever is greater, or was entitled only to 25% of net profits, if any.

• Judicial Review of Voluntary Arbitration Awards: Yes. Article 262’s finality refers to appeals to the NLRC, not judicial review; the SC may review voluntary arbitration awards where there is want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of law.
• Exhaustion of Administrative Remedies: No. The doctrine cannot be invoked because no law provides for an appeal from NLRC decisions; certiorari lies where the NLRC acts without or in excess of jurisdiction or with grave abuse of discretion.
• Review of Factual Findings: Yes. Although great respect is accorded to a voluntary arbitrator’s factual findings, they must be supported by substantial evidence; the finding that Nasayao was an employee was not supported by evidence or law.
• Employer-Employee Relationship: No. No employer-employee relationship existed because the element of control was lacking; absent control over the means and methods of work, there was no basis for an award of unpaid salaries.

• Judicial Review of Voluntary Arbitration Awards: The SC began with Article 262 of the Labor Code, as amended, which makes voluntary arbitration awards final, inappealable, and executory except where the money claims exceed P100,000.00 or 40% of the employer’s paid-up capital, or where there is abuse of discretion or gross incompetence. The SC held that this finality refers to appeals to the NLRC and not to judicial review. It relied on Oceanic Bic Division (FFW) vs. Romero and Mantrade FMMC Division Employees and Workers Union vs. Bacungan, which ruled that the SC can review decisions of voluntary arbitrators. Even statutes making administrative decisions final do not preclude review where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law is shown. A voluntary arbitrator acts in a quasi-judicial capacity, and there is no reason why decisions involving interpretation of law should be beyond the SC’s review. Section 29 of Republic Act No. 876 also allows an appeal from a judgment entered upon an award through certiorari proceedings, limited to questions of law.
• Exhaustion of Administrative Remedies: The SC rejected Nasayao’s claim that the case was premature. It cited John Clement Consultants, Inc. vs. National Labor Relations Commission: no law provides for an appeal from decisions of the NLRC, so there can be no review and reversal on appeal by higher authority of its factual or legal conclusions. When the NLRC decides a case without or in excess of its jurisdiction, or with grave abuse of discretion, the party adversely affected may obtain review and nullification by the SC through certiorari. Since the petition challenged the NLRC resolution, the doctrine of exhaustion of administrative remedies could not be invoked.
• Review of Factual Findings: The SC acknowledged that it has accorded great respect for, and finality to, findings of fact of a voluntary arbitrator and administrative agencies which have acquired expertise in their respective fields, like the Labor Department and the NLRC. However, their findings of fact and the conclusions drawn therefrom must be supported by substantial evidence. The SC found that the voluntary arbitrator’s finding that Nasayao was an employee of the petitioner corporation was not supported by the evidence or by the law. The record showed that Nasayao was not included in the company payroll or in the list of company employees furnished the SSS, and the petitioners’ version was more plausible and in accord with human nature and the ordinary course of things because it was illogical to hire Nasayao as plant manager with a monthly salary of P3,000.00 when the business was losing and they were about to close shop in a few months’ time.
• Employer-Employee Relationship: The SC applied the elements of employer-employee relationship enumerated in Brotherhood Labor Unity Movement in the Philippines vs. Zamora: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished. The control test is the most important element. In this case, the petitioners had no control over Nasayao’s conduct in the performance of his work. He decided for himself on what was to be done and worked at his own pleasure. He was not subject to definite hours or conditions of work and, in turn, was compensated according to the results of his own effort. He had a free hand in running the company and its business, so much so that Felipe David did not know, until very much later, that Nasayao had collected old accounts receivables not covered by their agreement and converted them to his own personal use. It was only after Nasayao had abandoned the plant following discovery of his wrongdoings that Felipe David assumed management of the plant. Absent the power to control the employee with respect to the means and methods by which his work was to be accomplished, there was no employer-employee relationship between the parties. Hence, there was no basis for an award of unpaid salaries or wages to Nasayao.

• Judicial review of voluntary arbitration awards — Article 262 of the Labor Code makes voluntary arbitration awards final, inappealable, and executory, but that finality refers to appeals to the NLRC, not to judicial review. The SC may review such awards where there is want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law. Applied: the SC reviewed and set aside Arbitrator Collado’s award.
• Exhaustion of administrative remedies — The doctrine cannot be invoked where no law provides for an appeal from NLRC decisions; certiorari lies where the NLRC acts without or in excess of jurisdiction or with grave abuse of discretion. Applied: Nasayao’s argument that petitioners should have appealed to the Secretary of Labor and then the President was rejected.
• Substantial evidence for factual findings — Findings of fact of voluntary arbitrators and administrative agencies are accorded great respect and finality, but they must be supported by substantial evidence. Applied: the arbitrator’s finding that Nasayao was an employee was unsupported by evidence or law.
• Control test in employer-employee relationship — The elements are (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished; the control test is the most important. Applied: Continental Marble had no control over Nasayao’s conduct, hours, or methods; he worked at his own pleasure and was compensated by results, so no employer-employee relationship existed.

• "Article 262 of the Labor Code making voluntary arbitration awards final, inappealable, and executory except where the money claims exceed P l 00,000.00 or 40% of paid-up capital of the employer or where there is abuse of discretion or gross incompetence refers to appeals to the National Labor Relations Commission and not to judicial review." — The SC construed Article 262’s finality rule as barring appeals to the NLRC, not judicial review of voluntary arbitration awards.
• "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. It is the so-called "control test" that is the most important element..." — The SC enumerated the elements and identified the control test as the decisive factor in determining employment.
• "Absent the power to control the employee with respect to the means and methods by which his work was to be accomplished, there was no employer-employee relationship between the parties. Hence, there is no basis for an award of unpaid salaries or wages to Rodito Nasayao." — The SC applied the control test to conclude that Nasayao was not an employee and that the unpaid salary award could not stand.

• Oceanic Bic Division (FFW) vs. Romero, G.R. No. L-43890, July 16, 1984, 130 SCRA 392 — Controlling precedent; held that the SC can review decisions of voluntary arbitrators and that Article 262’s finality refers to appeals to the NLRC, not judicial review.
• Mantrade FMMC Division Employees and Workers Union vs. Bacungan, G.R. No. L-48437, Sept. 30, 1986, 144 SCRA 510 — Reiterated the Oceanic Bic ruling on judicial review of voluntary arbitration awards.
• John Clement Consultants, Inc. vs. National Labor Relations Commission, G.R. No. 72096, January 29, 1988 — Held that no law provides for an appeal from NLRC decisions, but certiorari lies where the NLRC acts without or in excess of jurisdiction or with grave abuse of discretion.
• Brotherhood Labor Unity Movement in the Philippines vs. Zamora, G.R. No. L-48645, Jan. 7, 1987, 147 SCRA 49 — Enumerated the elements of employer-employee relationship and identified the control test as the most important.
• Franklin Baker Company of the Philippines vs. Trajano, G.R. No. 75039, Jan. 28, 1988 — Cited for the rule that findings of fact of administrative agencies with expertise are accorded respect but must be supported by substantial evidence.

• Article 262, Labor Code, as amended — Makes voluntary arbitration awards final, inappealable, and executory except where the money claims exceed P100,000.00 or 40% of the employer’s paid-up capital, or where there is abuse of discretion or gross incompetence; the SC held this refers to appeals to the NLRC and not to judicial review.
• Section 29, Republic Act No. 876 (Arbitration Law) — Allows an appeal from an order made in a proceeding under the Act, or from a judgment entered upon an award, through certiorari proceedings, limited to questions of law; the SC cited this as support for judicial review of the voluntary arbitrator’s award.