Pacific Consultants International Asia, Inc. vs. Schonfeld

A Philippine corporation that applies for an alien employment permit for a foreign national, pays his wages, reimburses his expenses, and exercises control and dismissal over him is the employer under the four-fold test, even if the worker was originally hired abroad by a foreign parent corporation and merely seconded to the Philippine corporation; the Labor Arbiter therefore has jurisdiction, and a London arbitration clause is merely permissive absent restrictive language.

Klaus K. Schonfeld, a Canadian citizen and consultant in environmental engineering and water supply and sanitation, was engaged to work in the Philippines for Pacicon Philippines, Inc. (PPI), a Philippine corporation whose primary purpose was providing specialty and technical services and which was a subsidiary of Pacific Consultants International of Japan (PCIJ). Jens Peter Henrichsen was PPI’s president and also a director of PCIJ, commuting between Japan and Manila. The employment arrangement was documented through a January 7, 1998 letter from PCIJ and a January 9, 1998 letter from PPI, with the General Conditions of Employment containing an arbitration clause designating the Court of Arbitration in London. Because Schonfeld was an alien employed in the Philippines, PPI sought an Alien Employment Permit under Rule XIV of the Omnibus Rules Implementing the Labor Code.

Respondent Klaus K. Schonfeld is a Canadian citizen and resident of New Westminster, British Columbia, Canada, and had been a consultant in environmental engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) was a Philippine corporation established to provide specialty and technical services in and out of the Philippines and was a subsidiary of Pacific Consultants International of Japan (PCIJ). Jens Peter Henrichsen, PPI’s president and a director of PCIJ, was based in Tokyo and commuted to Manila and other countries where PCIJ did business.

In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines. In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and Sanitation Department, but PCIJ assigned him as PPI sector manager in the Philippines; his salary was to be paid partly by PPI and PCIJ. On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada, requesting him to accept it and affix his conformity. Respondent made revisions, signed the contract, and sent a copy to Henrichsen. The letter stated that he would be seconded to PPI in Manila; that PPI would provide a separate contract defining the part of the terms and conditions for which PPI was responsible; and that in case of discrepancies or contradictions between the letter and the PPI contract, or if PPI did not live up to its obligations, the letter would prevail. It fixed his position as Sector Manager, Water and Sanitation; commencement on October 1, 1997; remuneration of US$7,000 per month, paid partly as a local salary of US$2,100 by Pacicon and partly as an offshore salary of US$4,900 by PCI; a performance-related component of 17.6% of total annual remuneration; accommodation up to the peso equivalent of US$2,900 per month; two leave travels per year; shipment of personal effects up to US$4,000; and mobilization travel from New Westminster, B.C., Canada. Section 21 of the appended General Conditions of Employment provided that any question of interpretation, understanding, or fulfillment of the conditions of employment, or any question arising between the employee and the company connected with his employment which could not be settled amicably, was to be finally settled by the Court of Arbitration in London. Respondent signed above the words “Above terms and conditions accepted” on March 2, 1998, “as annotated and initialed.”

Respondent arrived in the Philippines and assumed his position as PPI Sector Manager, with resident alien status. As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor Code, PPI applied for an Alien Employment Permit for respondent before the Department of Labor and Employment (DOLE) and appended his contract of employment to the application. On February 26, 1999, the DOLE granted the application and issued the Permit, which identified respondent’s position as VP – Water & Sanitation, his employer as Pacicon Philippines, Inc., and its validity until January 7, 2000. Respondent received compensation from PPI for February to June 1998, November to December 1998, and January to August 1999; PPI also reimbursed expenses he incurred in connection with his work as sector manager. He reported for work in Manila except for occasional assignments abroad and received instructions from Henrichsen.

On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment had been terminated effective August 4, 1999, because PCIJ and PPI had not been successful in the water and sanitation sector in the Philippines. On July 24, 1999, however, Henrichsen sent an electronic mail requesting respondent to stay put in his job after August 5, 1999, until he could report on certain projects and discuss the opportunities he had developed. Respondent continued working with PPI until the end of business hours on October 1, 1999. He then filed several money claims with PPI, including unpaid salary, leave pay, air fare from Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some claims in the amount of US$5,635.99 but refused to pay the rest.

On December 5, 2000, respondent filed a Complaint for Illegal Dismissal against PPI and Henrichsen with the Labor Arbiter, docketed as NLRC-NCR Case No. 30-12-04787-00. He alleged that he was illegally dismissed; that PPI had not notified the DOLE of its decision to close one of its departments, which resulted in his dismissal; and that he was not notified that his employment was terminated after August 4, 1999. He claimed separation pay and other unpaid benefits, alleged bad faith, and prayed for reinstatement with backwages or, alternatively, full backwages and separation pay equivalent to one month pay for every year of service or US$16,400; payment of US$10,131.76 representing unpaid salaries, leave pay, air travel, and shipment costs; and damages of not less than US$10,000 plus 10% attorney’s fees and costs. Petitioners moved to dismiss on the grounds that the Labor Arbiter had no jurisdiction over the subject matter and that venue was improperly laid, contending that respondent was a Canadian citizen and transient expatriate who had left the Philippines, that he was employed and dismissed by PCIJ in Tokyo, that his cause of action was based on the January 7, 1998 letter executed in Tokyo, and that under lex loci contractus the complaint should have been filed in Tokyo; they also invoked the arbitration clause in the General Conditions of Employment. Respondent opposed the motion, insisting that he was employed by PPI under a separate contract, that PPI was his employer as a Philippine-registered corporation, that PPI’s separate personality from PCIJ was inconsequential, that he received orders from Henrichsen as PPI president, and that forum non conveniens and lex loci contractus did not apply. He presented a January 9, 1998 letter of employment from Pacicon Philippines, Inc., signed by Henrichsen as president, stating that he was engaged by Pacicon Philippines, Inc.; fixing his position as Sector Manager – Water and Sanitation Sector; commencement on January 1, 1998; remuneration of US$3,100 per month; accommodation up to US$2,300 per month; shipment of personal effects up to US$2,500; and mobilization travel from New Westminster, B.C., Canada. Petitioners replied that respondent’s employer was PCIJ, which exercised supervision and control over him, and that the January 9, 1998 letter did not bear respondent’s or Henrichsen’s signature.

The Labor Arbiter and the NLRC treated the January 7, 1998 contract with PCIJ as controlling and found that PCIJ remained respondent’s employer despite his being sent to the Philippines, with the Philippines merely his duty station. The Court of Appeals, by contrast, found substantial evidence that PPI was the true employer: PPI had applied for respondent’s Alien Employment Permit and represented him as its employee, PPI paid his salary and reimbursed his expenses, and the power to control and supervise his work performance and to terminate him was exercised by PPI’s president; the unsigned second letter of employment was not fatal because an employer-employee relationship may exist without a written contract so long as the four elements of the four-fold test are present.

• Employment Relationship: Petitioners argued that the Court of Appeals erred in finding an employer-employee relationship despite the undisputed fact that respondent, a foreign national, was hired abroad by a foreign corporation, executed his employment contract abroad, and was merely “seconded” to PPI since his work assignment was in Manila.
• Conclusive Findings: Petitioners maintained that the findings of the Labor Arbiter, affirmed by the NLRC, were conclusive on the Court of Appeals and that a petition for certiorari did not allow review of the facts and evidence absent conflicting factual findings; such findings by agencies with expertise should be binding.
• True Employer: Petitioners asserted that PCIJ employed respondent and merely seconded him to PPI; PPI, a wholly-owned subsidiary of PCIJ, was never the employer.
• Authenticity of Contract: Petitioners contended that the January 9, 1998 letter of employment relied upon by respondent was of doubtful authenticity because it was unsigned by the purported parties.
• Payment and Control: Petitioners claimed that PCIJ paid respondent’s salaries and merely coursed them through PPI; PPI, as subsidiary, had supervision and control over respondent’s work and monitored his daily administration, but respondent could not rely on pay slips, expense claim forms, and reimbursement memoranda because these were of doubtful authenticity.
• Dual Role and Termination: Petitioners argued that although Henrichsen was both a director of PCIJ and president of PPI, he signed the termination letter upon instructions of PCIJ, as shown by the use of PCIJ’s letterhead; all work instructions came from PCIJ, and PPI served only as a conduit.
• Alien Employment Permit: Petitioners asserted that the Alien Employment Permit stating PPI was respondent’s employer was merely a necessary consequence of his being seconded and was not sufficient proof of employment; the entry was made only to comply with DOLE requirements.
• Jurisdiction and Venue: Petitioners averred that the Labor Arbiter had no jurisdiction; respondent was a Canadian citizen, the principal office, officers, and staff of PCIJ were in Tokyo, and the employment contract was executed in Tokyo, making forum non conveniens and lex loci contractus applicable.
• Arbitration Clause: Petitioners claimed that under the General Conditions of Employment, disputes should be settled by the Court of Arbitration in London, and the words used showed the stipulation on venue was exclusive and restrictive.
• Labor Code Coverage: Petitioners insisted that the Labor Code of the Philippines applies only to Filipino employers and Philippine-based employers and their employees, not to PCIJ, and that NLRC and Labor Arbiter jurisdiction does not extend to foreign workers who executed employment agreements with foreign employers abroad although seconded to the Philippines.

• Factual Issues: Respondent maintained that petitioners raised factual issues proscribed under Section 1, Rule 45 of the Rules of Court.
• CA Review and Evidence: Respondent argued that the Court of Appeals’ finding that he was an employee of PPI was buttressed by documentary evidence which the Labor Arbiter and NLRC ignored; the CA correctly took into account the evidence on record and applied case law.
• True Employer: Respondent contended that his true employer was PPI, not PCIJ, and that the Labor Arbiter therefore had jurisdiction.
• Separate Personalities: Respondent insisted that PPI, a Philippine-registered corporation, was his employer and that it was inconsequential that PPI was a wholly-owned subsidiary of PCIJ because the two corporations have separate and distinct personalities.
• Control and Payment: Respondent averred that PPI, through Henrichsen as its president, directed his work and duties as Sector Manager; PPI paid his salary and reimbursed his expenses related to transactions abroad.
• Alien Employment Permit: Respondent emphasized that Alien Employment Permit No. M-029908-5017 issued by DOLE on February 26, 1999 identified him as an employee of PPI.
• Venue: Respondent argued that the arbitration clause did not provide for an exclusive venue and that the proper venue for his complaint was the arbitration branch of the NLRC, not the Court of Arbitration in London.
• Forum Non Conveniens and Lex Loci Contractus: Respondent insisted that forum non conveniens and lex loci contractus did not apply and that Philippine labor laws applied despite his Canadian citizenship.
• Inconsistent Positions: Respondent pointed out that PPI adopted inconsistent positions: first that the complaint should have been filed in Tokyo, Japan, and later that it should have been filed in the London Court of Arbitration.

• Employer-Employee Relationship: Whether the Court of Appeals erred in ruling that an employer-employee relationship existed between petitioners and respondent despite respondent, a foreign national, having been hired abroad by a foreign corporation, executing his employment contract abroad, and being merely seconded to petitioners.
• Jurisdiction and Venue: Whether the Court of Appeals erred in ruling that the Labor Arbiter had jurisdiction over respondent’s claim despite the foreign employment contract and the stipulation that disputes be settled by the Court of Arbitration in London, and notwithstanding petitioners’ invocation of forum non conveniens and lex loci contractus.

• Employer-Employee Relationship: No. The Court of Appeals correctly found PPI to be respondent’s employer under the four-fold test; PPI’s Alien Employment Permit application, payment of wages, reimbursement of expenses, and exercise of control and dismissal established the relationship, and PPI was estopped from denying it.
• Jurisdiction and Venue: No. The Labor Arbiter had jurisdiction; the London arbitration clause was merely permissive absent restrictive words, and forum non conveniens did not warrant dismissal because the Labor Code does not include it as a ground and the requisites for assuming jurisdiction were present.

• Employer-Employee Relationship: The Court of Appeals is not proscribed from reviewing evidence in a petition for certiorari; under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902, it is empowered to pass upon the evidence, if and when necessary, to resolve factual issues. If the Labor Arbiter and the NLRC misappreciated the evidence to such an extent as to compel a contrary conclusion if properly appreciated, their factual findings cannot be given great respect and finality. Here, the Labor Arbiter and the NLRC inexplicably ignored documentary evidence showing respondent was an employee of PPI and focused only on the January 7, 1998 letter and Section 21 of the General Conditions of Employment. PPI applied for an Alien Employment Permit for respondent before the DOLE and averred that respondent was its employee; it appended a copy of respondent’s employment contract. Under Section 5, Rule XIV of the Omnibus Rules Implementing the Labor Code, one requirement for an employment permit is the employment contract. Thus, respondent had an employment contract with PPI; otherwise, PPI would not have filed the application. Petitioners were estopped from alleging that PCIJ, not PPI, had been the employer all along. The Court agreed with the CA’s conclusion that there was an employer-employee relationship between PPI and respondent using the four-fold test: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) employer’s power to control the employee’s conduct. The control test is the most important index of the existence of the employer-employee relationship—whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. The CA found substantial evidence that PPI was the true employer: the power to control and supervise respondent’s work performance devolved upon PPI; the power to terminate the employment relationship was exercised by PPI’s president; the letterhead used in the termination letter did not control, but the person who exercised the power to terminate did; and the unsigned second letter of employment was inconsequential because an employer-employee relationship may exist even without a written contract so long as the four elements are present.
• Jurisdiction and Venue: The settled rule on stipulations regarding venue, as held in Philippine Banking Corporation vs. Tensuan, is that while they are valid and enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to the specified place; they are not exclusive but rather permissive. If the intention of the parties were to restrict venue, there must be accompanying language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them. In this case, no restrictive words like “only,” “solely,” “exclusively in this court,” “in no other court save —,” “particularly,” “nowhere else but/except —,” or words of equal import were stated in the contract. Thus, the Court of Arbitration in London was not an exclusive venue. Petitioners themselves admitted the permissive nature of the clause by enumerating possible venues where respondent could have filed his complaint. Petitioners’ insistence on forum non conveniens was rejected. The bare fact that respondent is a Canadian citizen and was a repatriate did not warrant its application: first, the Labor Code of the Philippines does not include forum non conveniens as a ground for dismissal of the complaint; second, the propriety of dismissing a case based on this principle requires a factual determination and is properly considered as a defense; and third, under Bank of America, NT&SA, Bank of America International, Ltd. vs. Court of Appeals, a Philippine court may assume jurisdiction if (1) it is one to which the parties may conveniently resort, (2) it is in a position to make an intelligent decision as to the law and the facts, and (3) it has or is likely to have power to enforce its decision. All these requisites were present.

• Four-Fold Test in Employer-Employee Relationship — Whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (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’s conduct. The control test is the most important index—whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. The Court applied this test and found PPI to be the employer because it applied for respondent’s Alien Employment Permit, paid his wages, reimbursed his expenses, and exercised control and dismissal through its president; the absence of a signed written contract was not fatal.
• Estoppel Arising from Alien Employment Permit Application — A Philippine corporation that applies for an alien employment permit and represents the foreign national as its employee, appending the employment contract as required by the Omnibus Rules Implementing the Labor Code, is estopped from later denying that it was the employer. PPI’s application and the DOLE’s issuance of the permit to respondent estopped PPI from alleging that PCIJ, not PPI, had been the employer all along.
• Permissive Nature of Venue Stipulations — Venue stipulations are valid and enforceable but do not, as a rule, supersede the general rule on venue in the absence of qualifying or restrictive words. They are merely an agreement or additional forum, not exclusive, but permissive. If the parties intend to restrict venue, there must be accompanying language clearly and categorically expressing their purpose and design that actions be litigated only at the place named. The London arbitration clause lacked such restrictive words and was therefore not exclusive.
• Forum Non Conveniens — The Labor Code of the Philippines does not include forum non conveniens as a ground for dismissal of a complaint. Its propriety requires a factual determination and is properly considered as a defense. A Philippine court may assume jurisdiction if (1) it is one to which the parties may conveniently resort, (2) it is in a position to make an intelligent decision as to the law and the facts, and (3) it has or is likely to have power to enforce its decision. All requisites were present, so the principle did not warrant dismissal.
• Certiorari Review of Factual Findings — In resolving a petition for certiorari, the Court of Appeals is not proscribed from reviewing the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902, it is empowered to pass upon the evidence, if and when necessary, to resolve factual issues. If the Labor Arbiter and NLRC misappreciated the evidence to such an extent as to compel a contrary conclusion if properly appreciated, their factual findings cannot be given great respect and finality. This justified the CA’s reversal of the Labor Arbiter and NLRC findings.

• "Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (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’s conduct. It is the so-called "control test" which constitutes the most important index of the existence of the employer-employee relationship–that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished." — This passage states the canonical four-fold test and emphasizes the control test as the decisive index for determining the existence of an employer-employee relationship.
• "The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking Corporation v. Tensuan, is that while they are considered valid and enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to the specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must be accompanying language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them." — This is the ratio for rejecting the claim that the London arbitration clause was an exclusive venue.
• "The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the application of the principle for the following reasons: First. The Labor Code of the Philippines does not include forum non conveniens as a ground for the dismissal of the complaint. Second. The propriety of dismissing a case based on this principle requires a factual determination; hence, it is properly considered as defense. Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals, this Court held that: x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision. x x x Admittedly, all the foregoing requisites are present in this case." — This passage defines the Court’s treatment of forum non conveniens and enumerates the requisites for assuming jurisdiction despite the foreign elements of the case.
• "Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise, petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all along." — This excerpt articulates the estoppel arising from PPI’s Alien Employment Permit application and supports the finding that PPI was the employer.

• Philippine Banking Corporation vs. Tensuan, G.R. No. 104649, February 28, 1994, 230 SCRA 413, 420 — The Court relied on this vintage case for the rule that venue stipulations are valid but merely permissive unless accompanied by restrictive words; applied to hold the London arbitration clause non-exclusive.
• Unimasters Conglomeration, Inc. vs. Court of Appeals, 335 Phil. 415 (1997) — Cited for the requirement that restrictive words must clearly and categorically express the parties’ intent to restrict venue; the Court found no such words in the arbitration clause.
• Bank of America, NT&SA, Bank of America International, Ltd. vs. Court of Appeals, 448 Phil. 181, 196 (2003) — The Court used this precedent for the requisites of assuming jurisdiction despite forum non conveniens; all requisites were present.
• PHILSEC Investment Corporation vs. Court of Appeals, G.R. No. 103493, June 19, 1997, 274 SCRA 102 — Cited for the rule that the Labor Code does not include forum non conveniens as a ground for dismissal and that its propriety requires factual determination.
• Aurora Land Projects Corporation vs. National Labor Relations Commission, 334 Phil. 4 (1997) — Cited for the control test and the four-fold test in determining employer-employee relationship.
• Castillo vs. National Labor Relations Commission, 367 Phil. 605 (1999) — Cited for the rule that factual findings of the Labor Arbiter and NLRC cannot be given great respect and finality if they misappreciated evidence to the extent of compelling a contrary conclusion.
• R&E Transport vs. Latag, G.R. No. 155214, February 13, 2004, 422 SCRA 698 — Cited for the CA’s power to pass upon evidence in certiorari under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902.
• Tanjuan vs. Philippine Postal Savings Bank, Inc., G.R. No. 155278, September 16, 2003, 411 SCRA 168 — Cited together with R&E Transport for the same procedural point on the CA’s factual review in certiorari.

• Section 9, Batas Pambansa Blg. 129, as amended by R.A. No. 7902 — Empowers the Court of Appeals to pass upon the evidence, if and when necessary, to resolve factual issues; applied to justify the CA’s review of the Labor Arbiter and NLRC factual findings.
• Section 5, Rule XIV (Employment of Aliens), Omnibus Rules Implementing the Labor Code — Requires an employment permit application to be accompanied by a contract of employment between the employer and the principal; because PPI applied for respondent’s Alien Employment Permit and appended his employment contract, PPI was estopped from denying that it was his employer.
• Section 6, Rule XIV (Employment of Aliens), Omnibus Rules Implementing the Labor Code — Provides the grounds upon which the DOLE may issue an alien employment permit; the DOLE issued the permit to respondent based on PPI’s application, reinforcing PPI’s representation that it was his employer.
• Rule 4, Revised Rules of Court — States the general rule on venue; the Court held that the London arbitration clause did not supersede this general rule absent restrictive words.
• Section 21, General Conditions of Employment — Contractual arbitration clause providing that disputes be finally settled by the Court of Arbitration in London; construed as merely permissive, not exclusive, because it lacked restrictive words.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, and Minita V. Chico-Nazario concurred. Reynato S. Puno, Chief Justice, certified the conclusions pursuant to Section 13, Article VIII of the Constitution.