Fuji Television Network, Inc. vs. Espiritu

An employer has the burden to prove that a person it pays for services is an independent contractor; otherwise, the person is presumed to be a regular employee. Termination of an employee due to disease is only valid if a competent public health authority certifies that the disease is incurable within six months and that continued employment is prejudicial to health, and such termination must comply with due process.

In 2005, Fuji Television Network, Inc. engaged Arlene S. Espiritu as a news correspondent/producer for its Manila Bureau. Her employment was governed by a one-year fixed-term contract that was renewed annually for four years. In January 2009, Arlene was diagnosed with lung cancer and informed Fuji of her condition. Subsequently, Fuji's management told her that they would have a problem renewing her contract due to her illness, despite her insistence that she was still fit to work. This led to a dispute over the nature of her employment and the legality of the non-renewal of her contract.

• Arlene Espiritu was engaged by Fuji in 2005 as a news correspondent/producer under a one-year contract, which was successively renewed annually until 2009.
• In January 2009, Arlene was diagnosed with lung cancer and informed Fuji about her medical condition.
• Fuji's Chief of News Agency, Yoshiki Aoki, subsequently informed Arlene that the company would have a problem renewing her contract because her illness would make it difficult for her to perform her job.
• After discussions, Arlene and Fuji signed a "Non-Renewal Contract" on May 5, 2009, stipulating that her employment would end on May 31, 2009.
• Arlene affixed the initials "U.P." (for "under protest") next to her signature on the contract.
• In consideration of the non-renewal, Arlene received US$18,050.00, representing her salary from March to May 2009, bonuses, and separation pay.
• Arlene alleged that Fuji withheld her salaries for March and April 2009, forcing her to sign the non-renewal contract to receive her pay, which she needed for her medical expenses.
• On May 6, 2009, the day after signing the contract, Arlene filed a complaint for illegal dismissal against Fuji.

• Fuji argued that Arlene was an independent contractor, not a regular employee, as she was hired for her unique skills, similar to the situation in Sonza v. ABS-CBN.
• Fuji claimed it did not exercise control over the manner Arlene performed her work, as she was a "stringer."
• The yearly fixed-term contracts were executed at Arlene's insistence so she could negotiate for annual pay increases.
• Fuji contended that Arlene was not dismissed; rather, her fixed-term contract simply expired, and the non-renewal was a mutual agreement evidenced by email correspondence.
• Fuji asserted that Arlene acted in bad faith by filing a complaint after receiving a substantial separation package and that she was not entitled to damages.
• Fuji raised a procedural issue that the verification and certification against forum shopping attached to its petition before the Supreme Court was validly executed.

• Arlene asserted that she was a regular employee because her work as a news producer was necessary and desirable to Fuji's business of broadcasting.
• She claimed that Fuji exercised control over her work, providing her with equipment (laptop, camera) and giving instructions on news coverage.
• The successive renewals of her employment contract for four years demonstrated the necessity of her role, thus making her a regular employee.
• Arlene argued that she was illegally dismissed without just cause and due process when Fuji decided not to renew her contract solely because of her illness.
• She maintained that she signed the non-renewal contract under duress because Fuji withheld her salaries, and her acceptance of separation pay does not bar her from filing an illegal dismissal case.
• Arlene raised a procedural issue, arguing that Fuji's petition should be dismissed due to a defective verification and certification against forum shopping, as the signatory was not properly authorized by Fuji's board.

• Procedural Issues:
  • Whether Fuji's petition for review should be dismissed for failure to show that its signatory for the verification and certification of non-forum shopping was duly authorized.
• Substantive Issues:
  • Whether an employer-employee relationship existed between Fuji and Arlene, making her a regular employee rather than an independent contractor.
  • Whether Arlene was illegally dismissed by Fuji.
  • Whether the Court of Appeals correctly awarded reinstatement, backwages, damages, and attorney's fees to Arlene.

• Procedural:
  • The petition should not be dismissed on procedural grounds. The Court found that Fuji had substantially complied with the requirements for verification and certification against forum shopping. The authority granted by Fuji's board to its representative to participate in appeals arising from the case was deemed sufficient. Further, the signatory, as Fuji's office manager for 23 years, was in a position to know the truthfulness of the allegations in the petition.
• Substantive:
  • Yes, Arlene was a regular employee of Fuji. Applying the four-fold test, particularly the control test, the Court found an employer-employee relationship. Unlike the high-talent independent contractor in Sonza, Arlene was a regular employee whose work was necessary and desirable for Fuji's news broadcasting business. Fuji's control was evident as it required her to work regular hours, provided her equipment, and dictated her assignments. The successive renewal of her fixed-term contract was a scheme to prevent her from acquiring security of tenure.
  • Yes, Arlene was illegally dismissed. As a regular employee, she was entitled to security of tenure. The non-renewal of her contract was a mere subterfuge for her termination, which was based on her illness. Under Article 284 of the Labor Code, disease is a valid ground for termination only if certified by a competent public health authority as incurable within six months. Fuji failed to present such certification and did not observe due process, making the dismissal illegal.
  • Yes, the award of reinstatement and other monetary claims was proper. An illegally dismissed employee is entitled to reinstatement and full backwages. The doctrine of "strained relations" as a bar to reinstatement must be proven and is not automatically assumed. The quitclaim in the non-renewal contract was invalid as it was signed under duress. The award of moral and exemplary damages was justified because the dismissal was oppressive and done in bad faith. The Court, however, modified the legal interest rate to 6% per annum in line with prevailing jurisprudence.

• Four-Fold Test — This test determines the existence of an employer-employee relationship by examining four factors: (1) the selection and engagement of the employee, (2) the payment of wages, (3) the power of dismissal, and (4) the power of control. In this case, the Court emphasized the "control test," finding that Fuji controlled the means and methods of Arlene's work, which established her status as an employee.
• Control Test — This is the most crucial element of the four-fold test, which pertains to the employer's right to control not only the end result but also the means and methods by which the work is to be accomplished. The Court found that Fuji exercised control by requiring Arlene to work specific hours, providing her with equipment, and giving her instructions on news coverage.
• Regular Employment (Article 280, Labor Code) — This doctrine states that an employment is deemed regular where the employee performs activities that are usually necessary or desirable in the employer's usual business or trade. The Court ruled that Arlene's work as a news producer was integral to Fuji's broadcasting business, and her continuous service for four years confirmed her status as a regular employee.
• Brent Doctrine on Fixed-Term Employment — This doctrine recognizes the validity of fixed-term employment contracts provided that the fixed period was (1) knowingly and voluntarily agreed upon by the parties without force or duress, and (2) it appears that the employer and employee dealt with each other on more or less equal terms. The Court held that the repeated renewals of Arlene's contract were used to circumvent her right to security of tenure, failing to meet the Brent criteria.
• Security of Tenure — A constitutionally guaranteed right of employees to not be dismissed from employment except for a just or authorized cause and only after being afforded procedural due process. The Court held that as a regular employee, Arlene was entitled to this right, which Fuji violated by dismissing her without a valid cause and proper procedure.
• Disease as a Ground for Termination (Article 284, Labor Code) — This principle allows an employer to terminate an employee for disease only if two requisites are met: (1) the employee's disease is incurable within six months, and continued employment is prohibited by law or prejudicial to health; and (2) there is a certification from a competent public health authority to this effect. The Court found Arlene's dismissal illegal because Fuji failed to secure the required medical certification.
• Substantial Compliance with Procedural Rules — This principle allows courts to relax procedural rules, such as those on verification and certification against forum shopping, when there are compelling reasons and the purpose of the rule has been served. The Court applied this principle to Fuji's petition, ruling that the signatory's long-standing position and knowledge constituted substantial compliance.

• "It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather than a regular employee with or without a fixed term. That a person has a disease does not per se entitle the employer to terminate his or her services. Termination is the last resort. At the very least, a competent public health authority must certify that the disease cannot be cured within six (6) months, even with appropriate treatment."
• "To protect labor's security of tenure, we emphasize that the doctrine of 'strained relations' should be strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. Every labor dispute almost always results in 'strained relations' and the phrase cannot be given an overarching interpretation, otherwise, an unjustly dismissed employee can never be reinstated."

• Sonza v. ABS-CBN Broadcasting Corporation — Distinguished by the Court. The Court found that unlike Sonza, who was a highly paid celebrity with unique talents and was considered an independent contractor, Arlene was an ordinary employee whose work was subject to Fuji's control and supervision.
• Dumpit-Murillo v. Court of Appeals — Followed as precedent. The Court found the facts of Arlene's case to be similar to Dumpit-Murillo, where a newscaster under successive fixed-term contracts was declared a regular employee because her work was necessary to the media company's business and she was subject to its control.
• Brent School, Inc. v. Zamora — Referenced to explain the legal standard for valid fixed-term employment contracts. The Court concluded that the circumstances of Arlene's employment did not meet the criteria set in Brent, as the yearly renewals were a means to preclude her from gaining security of tenure.
• St. Martin Funeral Home v. National Labor Relations Commission — Cited to clarify the proper procedural route for challenging NLRC decisions, which is through a petition for certiorari to the Court of Appeals under Rule 65, followed by a petition for review to the Supreme Court under Rule 45.
• Nacar v. Gallery Frames — Followed to modify the legal interest rate imposed on the total monetary award from 12% to 6% per annum, effective July 1, 2013, until full satisfaction.
• Land and Housing Development Corporation v. Esquillo — Cited to support the principle that quitclaims are generally frowned upon in labor law because the employer and employee do not stand on equal footing, and such waivers are often signed out of financial necessity rather than genuine choice.

• 1987 Constitution, Article XIII, Section 3 — Cited as the constitutional basis for the right of all workers to security of tenure.
• Labor Code, Article 279 — Cited to establish the right of a regular employee to security of tenure and the remedies of reinstatement and full backwages for unjust dismissal.
• Labor Code, Article 280 — Applied to determine Arlene's status as a regular employee, as her work was necessary and desirable in Fuji's usual business.
• Labor Code, Article 284 — Applied to invalidate Arlene's dismissal on the ground of disease, as Fuji failed to comply with the mandatory requirement of a certification from a public health authority.
• Omnibus Rules Implementing the Labor Code, Book VI, Rule 1, Section 8 — Cited to detail the procedural requirements for terminating an employee on the ground of disease.
• Rules of Court, Rule 7, Sections 4 & 5 — Discussed in relation to the procedural issue of the validity of the verification and certification against forum shopping.
• Rules of Court, Rule 45 — Referenced as the basis for Fuji's petition for review on certiorari before the Supreme Court and to define the scope of review as being limited to questions of law.
• Civil Code, Article 1892 — Cited to address the issue of whether Fuji's authorized representative could validly delegate his authority to sign the verification, stating that an agent may appoint a substitute if not prohibited by the principal.