Jardin vs. NLRC

Taxi drivers operating under the boundary system are employees, not lessees, of the taxi owner-operator, and the NLRC commits grave abuse of discretion amounting to lack of jurisdiction when it entertains a second motion for reconsideration expressly prohibited under its own rules, particularly where the grant overturns settled jurisprudence.

Petitioners were drivers of private respondent Philjama International, Inc., a domestic corporation engaged in the operation of "Goodman Taxi." They drove taxicabs every other day on a 24-hour work schedule under the boundary system, earning an average of ₱400.00 daily, from which the company regularly deducted ₱30.00 for washing of the taxi units. Upon deciding to form a labor union to protect their rights, petitioners were refused assignment of taxicabs when they reported for work on August 6, 1991, and on succeeding days, prompting them to file a complaint for unfair labor practice, illegal dismissal, and illegal deduction of washing fees.

Petitioners Angel Jardin, Demetrio Calagos, Urbano Marcos, Rosendo Marcos, Luis de los Angeles, Joel Ordeniza, and Amado Centeno were drivers of private respondent Philjama International, Inc., a domestic corporation operating taxicabs under the name "Goodman Taxi." They drove the company's taxicabs every other day on a 24-hour work schedule under the boundary system, under which the driver pays the owner-operator a fixed fee called the "boundary" for the use of the unit and retains whatever earnings exceed that amount. Under this arrangement, petitioners earned an average of ₱400.00 daily. Private respondent regularly deducted ₱30.00 from each petitioner's daily earnings, ostensibly for washing the taxi units.

Believing the washing-fee deduction to be illegal, petitioners decided to form a labor union to protect their rights and interests. Upon learning of the plan, private respondent refused to let petitioners drive their assigned taxicabs when they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected the refusal was motivated by their being leaders and active members of the proposed union.

Aggrieved, petitioners filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal, and illegal deduction of washing fees. The labor arbiter, in a decision dated August 31, 1992, dismissed the complaint for lack of merit. On appeal, the NLRC reversed the labor arbiter in a decision dated April 28, 1994, declaring petitioners to be employees of private respondent and ordering their reinstatement with full backwages and reimbursement of washing charges, while dismissing the unfair labor practice charge for insufficiency of evidence. Private respondent's first motion for reconsideration was denied, but upon filing a second motion for reconsideration, the NLRC reversed itself again in a decision dated October 28, 1994, ruling that no employer-employee relationship existed—characterizing the parties' relationship as leasehold under the Civil Code—and dismissing the complaint for lack of jurisdiction. Petitioners' motion for reconsideration of that decision was denied on December 13, 1994, prompting the instant petition for certiorari.

• Prohibited Pleading: Petitioner argued that the NLRC had no jurisdiction to entertain private respondent's second motion for reconsideration, which is a pleading expressly prohibited under the NLRC Rules, and that granting it on grounds not even invoked therein constituted grave abuse of discretion.
• Res Judicata: Petitioner maintained that the existence of an employer-employee relationship between the parties was already a settled issue constituting res judicata, which the NLRC had no more jurisdiction to reverse, alter, or modify.
• Prevailing Jurisprudence: Petitioner contended that existing jurisprudence on the matter supports the view that taxi drivers under the boundary system are employees of the taxi company.

• Prohibited Pleading: Whether the NLRC gravely abused its discretion in entertaining and granting private respondent's second motion for reconsideration, which is a prohibited pleading under the NLRC's own rules.
• Employer-Employee Relationship: Whether the relationship between taxi drivers operating under the boundary system and the taxi owner-operator is one of employer-employee or of lessor-lessee.
• Illegal Dismissal: Whether petitioners were illegally dismissed and, if so, entitled to reinstatement and full backwages.
• Washing Fee Deduction: Whether the daily ₱30.00 deduction for washing charges is illegal and reimbursable.

• Prohibited Pleading: Yes. The NLRC gravely abused its discretion in taking cognizance of and granting the second motion for reconsideration, which is expressly prohibited under Section 14, Rule 7 of the NLRC New Rules of Procedure allowing only one motion for reconsideration from the same party.
• Employer-Employee Relationship: Yes, the relationship is employer-employee. Under settled jurisprudence, the boundary system between taxi owners/operators and taxi drivers creates an employer-employee relationship, not a leasehold, because the owner exercises supervision and control over the driver's work.
• Illegal Dismissal: Yes. Petitioners were illegally dismissed, there being no just or authorized cause and no compliance with the twin-notice requirement under Article 277(b) of the Labor Code. They are entitled to reinstatement and full backwages.
• Washing Fee Deduction: No. The ₱30.00 daily deduction for washing is not illegal, as it is incumbent upon the driver to restore the taxi unit to the same clean condition when it was taken out; car washing after a tour of duty is a standard practice in the taxi industry dictated by fair play.

• Prohibited Pleading: Section 14, Rule 7 of the NLRC New Rules of Procedure expressly provides that "only one such motion from the same party shall be entertained." The rationale is to assist parties in obtaining an expeditious and inexpensive settlement of labor cases, as delays cannot be countenanced where the livelihood of employees and the survival of businesses are at stake. Private respondent exhausted its administrative remedy by filing a first motion for reconsideration, which was denied. The second motion was indubitably a prohibited pleading that should not have been entertained at all. The NLRC cannot disregard its own rules on the pretext of satisfying the ends of justice, especially when its disposition ran afoul of clear and long-standing jurisprudence. Disregarding a settled legal doctrine is not a way of rectifying an error; the NLRC's action wrecked the orderly procedure in seeking reliefs in labor cases and constituted grave abuse of discretion amounting to lack or excess of jurisdiction.

• Employer-Employee Relationship: The NLRC's October 28, 1994 ruling that the relationship was leasehold contradicted prevailing jurisprudence. The Court had consistently ruled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee, not lessor-lessee. In a lease of chattels, the lessor loses complete control over the chattel leased. In the boundary system, however, the owner-operator exercises supervision and control over the driver: the management of the business is in the owner's hands, the owner as holder of the certificate of public convenience must ensure the driver follows the prescribed route and operational rules, and the fact that drivers do not receive fixed wages but only earnings in excess of the boundary does not withdraw the relationship from that of employer-employee. This doctrine has been applied by analogy to bus conductors, auto-calesa drivers, and taxi drivers. Petitioners, as taxi drivers, perform activities necessary or desirable in the usual business or trade of their employer, confirming the employer-employee relationship.

• Illegal Dismissal: Termination of employment must be effected in accordance with law. The just and authorized causes for termination are enumerated under Articles 282, 283, and 284 of the Labor Code, and the notice and hearing requirement is set out in Article 277(b). Private respondent had no valid cause to terminate petitioners' employment, and no two written notices were sent informing each petitioner of dismissal. The absence of valid cause and the failure to comply with the twin-notice requirement underscored the illegality of the dismissal. Under Article 279 of the Labor Code, an unjustly dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges and to full backwages inclusive of allowances and other benefits or their monetary equivalent. Recent judicial pronouncements distinguish between employees illegally dismissed before and after the effectivity of Republic Act No. 6715 on March 21, 1989; those dismissed after that date are granted full backwages without deducting earnings derived elsewhere. Since petitioners were terminated on August 1, 1991, they are entitled to full backwages computed from the date of dismissal until actual reinstatement.

• Washing Fee Deduction: After a tour of duty, it is incumbent upon the driver to restore the unit to the same clean condition as when it was taken out. Car washing after a tour of duty is a practice in the taxi industry dictated by fair play. The daily ₱30.00 deduction for washing is therefore not illegal, and the drivers are not entitled to reimbursement of washing charges. The NLRC's order of reimbursement was accordingly deleted.

• Control Test (Four-Fold Test) — The existence of an employer-employee relationship is determined by four requisites: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control over the employee's conduct. Control is the most important requisite, such that the others may even be disregarded. Under the control test, an employer-employee relationship exists if the employer has reserved the right to control the employee not only as to the result of the work done but also as to the means and methods by which it is to be accomplished. The Court applied this test to the boundary system and found that taxi operators exercise supervision and control over drivers, establishing an employer-employee relationship.

• Boundary System Doctrine — Under the boundary system, where the driver pays the owner-operator a fixed fee ("boundary") for the use of the vehicle and retains earnings in excess thereof, the relationship between the owner-operator and the driver is employer-employee, not lessor-lessee. The owner-operator retains control over the business, holds the certificate of public convenience, and must ensure compliance with franchising rules. The absence of fixed wages does not negate the relationship. This doctrine has been applied to jeepney drivers, bus conductors, auto-calesa drivers, and taxi drivers.

• Prohibition on Second Motion for Reconsideration Before the NLRC — Under Section 14, Rule 7 of the NLRC New Rules of Procedure, only one motion for reconsideration from the same party shall be entertained. Entertaining a second motion for reconsideration constitutes grave abuse of discretion amounting to lack or excess of jurisdiction, as it wrecks the orderly procedure in seeking reliefs in labor cases and undermines the policy of expeditious and inexpensive settlement of labor disputes.

• Full Backwages Under Republic Act No. 6715 — Employees illegally dismissed after March 21, 1989 (the effectivity date of Republic Act No. 6715) are entitled to full backwages inclusive of allowances and other benefits or their monetary equivalent, computed from the time compensation was withheld up to actual reinstatement, without deducting earnings derived elsewhere during the period of illegal dismissal.

• Twin-Notice Requirement — An employee can be dismissed only for just or authorized cause and after affording notice and hearing prior to termination. Two written notices are required: one informing the employee of the grounds for dismissal and another informing the employee of the decision to dismiss. Failure to comply renders the dismissal illegal.

• "As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a prohibited pleading which should have not been entertained at all. Public respondent cannot just disregard its own rules on the pretext of 'satisfying the ends of justice', especially when its disposition of a legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction." — This passage articulates the ratio decidendi on the procedural issue: the NLRC's grave abuse of discretion in entertaining a prohibited second motion for reconsideration, compounded by its disregard of settled jurisprudence.

• "In a number of cases decided by this Court, we ruled that 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." — This passage states the controlling doctrine on the boundary system, establishing that the relationship is employer-employee because the owner-operator retains supervision and control over the driver's work.

• "Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called 'boundary' they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee." — This formulation is frequently cited for the proposition that the absence of fixed wages under the boundary system does not negate the employer-employee relationship.

• Garcia vs. NLRC, 264 SCRA 261 (1996) — Followed. The Court cited this case as an example of the NLRC gravely abusing its discretion by disregarding its own rules on appeal, supporting the principle that procedural violations by labor tribunals constitute grave abuse of discretion.
• Philippine Airlines Inc. vs. NLRC, 263 SCRA 638 (1996) — Followed. Cited as an instance where a labor arbiter's failure to follow mandatory procedural rules constituted grave abuse of discretion.
• Unicane Workers Union-CLUP vs. NLRC, 261 SCRA 573 (1996) — Followed. The NLRC gravely abused its discretion by allowing and deciding an appeal without the required appeal bond under Article 223 of the Labor Code.
• Mañebo vs. NLRC, 229 SCRA 240 (1994) — Followed. Cited both for the principle that disregarding NLRC rules constitutes grave abuse of discretion and for the rationale that delays in labor cases cannot be countenanced given their impact on employees' livelihood and business survival.
• National Labor Union vs. Dinglasan, 98 Phil. 649 (1996); Magboo vs. Bernardo, 7 SCRA 952 (1963); Lantaco, Sr. vs. Llamas, 108 SCRA 502 (1981) — Followed. These cases established the doctrine that the boundary system between jeepney owners/operators and drivers creates an employer-employee relationship, which the Court applied by analogy to taxi drivers.
• Martinez vs. NLRC, 272 SCRA 793 (1997) — Followed. This case extended the boundary system employer-employee doctrine to taxi owners/operators and taxi drivers, directly supporting the Court's ruling.
• Bustamante vs. NLRC, 265 SCRA 61 (1996) — Followed. Cited for the distinction in backwages computation between employees illegally dismissed before and after the effectivity of Republic Act No. 6715.
• Five Taxi vs. NLRC, 235 SCRA 556 (1994) — Followed. Cited for the proposition that car washing after a tour of duty is a standard practice in the taxi industry dictated by fair play, supporting the validity of the washing-fee deduction.

• Section 14, Rule 7, NLRC New Rules of Procedure — Provides that only one motion for reconsideration from the same party shall be entertained. Applied to hold that the NLRC gravely abused its discretion in entertaining private respondent's second motion for reconsideration.
• Article 277(b), Labor Code — Sets out the requirement of notice and hearing prior to termination of employment. Applied to find that private respondent's failure to serve two written notices rendered the dismissal illegal.
• Articles 282, 283, and 284, Labor Code — Enumerate the just and authorized causes for termination of employment. Applied to determine that private respondent had no valid cause to dismiss petitioners.
• Article 279, Labor Code — Provides that an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and other privileges and to full backwages inclusive of allowances and other benefits. Applied to award reinstatement and full backwages to petitioners.
• Article 223, Labor Code — Requires the posting of an appeal bond for appeals to the NLRC. Cited in the context of Unicane Workers Union-CLUP vs. NLRC as a procedural requirement the NLRC disregarded.
• Republic Act No. 6715 (effective March 21, 1989) — Amended the Labor Code provisions on backwages. Applied to determine that petitioners, dismissed after its effectivity, are entitled to full backwages without deduction of earnings derived elsewhere.

Bellosillo, Mendoza, and De Leon, Jr., JJ., concurred. Buena, J., was on official leave.