Perpetual Help Credit Cooperative, Inc. vs. Faburada

A cooperative member who renders services necessary to the day-to-day operations of the cooperative, works regular hours under supervision, and receives regular wages is a regular employee entitled to security of tenure and due process under the Labor Code, regardless of membership status in the cooperative. Disputes concerning payment of wages, overtime pay, rest day, and termination of employment fall within the original and exclusive jurisdiction of the Labor Arbiter under Article 217 of the Labor Code, not within cooperative conciliation mechanisms.

Perpetual Help Credit Cooperative, Inc. (PHCCI) is a credit cooperative operating in Dumaguete City. Benedicto Faburada, Sisinita Vilar, Imelda Tamayo, and Harold Catipay rendered services to PHCCI as a computer operator and clerks, respectively, performing bookkeeping, accounting, data-entry, and collection functions essential to the cooperative's daily operations. PHCCI treated them as volunteer workers by virtue of their alleged membership in the cooperative, contending that no employer-employee relationship arose from such arrangement and that disputes involving cooperative members must first undergo conciliation or mediation under the Cooperative Code before judicial recourse.

Perpetual Help Credit Cooperative, Inc. (PHCCI) is a credit cooperative based in Dumaguete City, managed by Edilberto Lantaca, Jr. Four individuals—Benedicto Faburada, Sisinita Vilar, Imelda Tamayo, and Harold Catipay—were engaged by PHCCI through its manager to perform various operational functions. Faburada worked as a part-time computer programmer/operator from June 1, 1988 to December 29, 1989, entering data into the computer, computing interests on savings deposits, maintaining the masterlist of cooperative members, and performing mimeographing and other assigned tasks. His monthly salary progressed from ₱1,000.00 to ₱1,500.00 over his tenure. Vilar served as a clerk from December 1, 1987 to December 29, 1989, preparing salary advance summaries, journal vouchers, daily disbursement summaries, loan schedules, checks, and cash vouchers, and performing bookkeeping and accounting duties, with monthly wages rising from ₱500.00 to ₱1,150.00. Tamayo, also a clerk from October 19, 1987 to December 29, 1989, handled interest computations, cash vouchers, passbooks and ledgers, loan releases, and deposit receipts, earning from ₱60.00 initially to ₱1,000.00 monthly. Catipay worked as a clerk from March 3 to December 29, 1989, performing bookkeeping, accounting, and collecting duties including posting daily collections and reconciling passbooks and ledgers, with a monthly salary of ₱900.00 rising to ₱1,050.00.

All four worked regular working hours—Monday through Friday with specified morning and afternoon schedules, Saturdays, and periodic Sunday hours—and accomplished daily time records under the supervision of the cooperative manager. On January 2, 1990, each was served a memorandum of termination signed by the Manager, effective December 29, 1989. No prior notice apprising them of any acts or omissions justifying dismissal was served; the single memorandum simultaneously informed them of the termination decision.

On January 3, 1990, the four filed a complaint with the DOLE Arbitration Branch in Dumaguete City for illegal dismissal, premium pay on holidays and rest days, separation pay, wage differential, moral damages, and attorney's fees. PHCCI moved to dismiss, arguing that no employer-employee relationship existed because the complainants were members and co-owners of the cooperative working as volunteers, and that they had failed to exhaust remedies provided in the cooperative by-laws. A supplemental motion to dismiss invoked Article 121 of R.A. No. 6939, requiring conciliation or mediation within the cooperative before resort to judicial proceedings. The Labor Arbiter denied both motions, finding an employer-employee relationship and holding that cooperative law was subservient to the Labor Code. After trial, the Labor Arbiter found the four illegally dismissed and awarded backwages, separation pay, 13th month pay, wage differentials, and attorney's fees. The NLRC affirmed on appeal, and PHCCI elevated the case to the Supreme Court via petition for certiorari.

• No Employer-Employee Relationship: Petitioner maintained that private respondents are its members and co-owners working as volunteers, not regular employees, and therefore cannot sue the cooperative for illegal dismissal.
• Failure to Exhaust Cooperative Remedies: Petitioner argued that private respondents failed to submit their dispute to the grievance machinery as required by P.D. 175 (strengthening the Cooperative Movement) and its implementing rules under LOI 23, and that no Certificate of Non-Resolution was issued by the Cooperative Development Authority pursuant to Section 8 of R.A. No. 6939.
• Jurisdiction of Labor Arbiter: Petitioner contended that the Labor Arbiter had no jurisdiction over the complaint because cooperative disputes must first undergo conciliation or mediation under Article 121 of R.A. No. 6938 and Section 8 of R.A. No. 6939 before resort to judicial proceedings.
• Reliance on Precedent: Petitioner invoked San Jose City Electric Cooperative vs. Ministry of Labor and Employment to support its position that members of a cooperative cannot be treated as employees.

• Employer-Employee Relationship: Whether an employer-employee relationship exists between PHCCI and the private respondents despite their alleged status as cooperative members and volunteer workers.
• Regular Employment Status: Whether private respondents qualify as regular employees under Article 280 of the Labor Code.
• Illegal Dismissal: Whether private respondents were illegally dismissed for lack of just or authorized cause and failure to observe procedural due process.
• Jurisdiction: Whether the Labor Arbiter has jurisdiction over the dispute, or whether cooperative conciliation and mediation mechanisms under P.D. 175, R.A. No. 6938, and R.A. No. 6939 must first be exhausted.

• Employer-Employee Relationship: Yes. All four elements of the employer-employee relationship—selection and engagement, power to dismiss, payment of wages, and power of control—were present, the power of control being primordial.
• Regular Employment Status: Yes. Private respondents rendered services necessary to the day-to-day operations of the cooperative, and all except Catipay rendered more than one year of service, qualifying them as regular employees under Article 280 of the Labor Code.
• Illegal Dismissal: Yes. Private respondents were dismissed without any just or authorized cause under Articles 282, 283, and 284 of the Labor Code, and only one notice was served, failing to satisfy the twin-notice requirement of procedural due process.
• Jurisdiction: Yes, the Labor Arbiter has jurisdiction. The dispute concerns payment of wages, overtime pay, rest day, and termination of employment—matters within the original and exclusive jurisdiction of the Labor Arbiter under Article 217 of the Labor Code. P.D. 175 provides no grievance machinery, LOI 23 is irrelevant, and the cooperative conciliation provisions of R.A. No. 6938 and 6939 apply to intra-cooperative disputes among members, officers, and directors, not to employer-employee labor disputes.

• Employer-Employee Relationship: The four-fold test—(1) selection and engagement of the worker, (2) power to dismiss, (3) payment of wages, and (4) power to control the worker's conduct—was applied, with the power of control assuming primacy. PHCCI, through its Manager Lantaca, hired the private respondents, assigned them specific duties, paid them regular wages, and supervised their work. They worked regular hours and accomplished daily time records like any other regular employee. The findings of both the Labor Arbiter and the NLRC on the existence of these elements were supported by substantial evidence, the quantum required in quasi-judicial proceedings, and the Court declined to disregard them. Petitioner's reliance on San Jose City Electric Cooperative vs. Ministry of Labor and Employment was misplaced, as that case concerned whether employee-members of a cooperative could organize for collective bargaining, not whether members could be employees.

• Regular Employment Status: Article 280 of the Labor Code classifies employees into regular, project, and casual. Regular employees are those engaged to perform activities usually necessary or desirable in the employer's usual business or trade, and casual employees who render at least one year of service also attain regular status. The private respondents performed bookkeeping, accounting, data-entry, and collection functions indispensable to PHCCI's daily operations. All except Catipay served more than one year—Faburada for one and a half years, Vilar for two years, and Tamayo for two years and two months. That Faburada worked part-time did not disqualify him, as regularity of employment is determined not by the number of hours worked but by the nature and length of time in the particular job.

• Illegal Dismissal: As regular employees, the private respondents enjoyed security of tenure, and their services could be terminated only for valid cause with observance of due process. The valid causes are categorized into just causes under Article 282 (serious misconduct, gross neglect, fraud, commission of a crime, or analogous cases) and authorized causes under Articles 283 and 284 (installation of labor-saving devices, redundancy, retrenchment, closing of operations, or disease). The private respondents were dismissed not for any of these causes but because PHCCI considered them mere voluntary workers who served at its pleasure. Procedural due process requires two written notices: the first apprising the employee of the acts or omissions for which dismissal is sought, and the second informing the employee of the decision to dismiss. Only one notice—a memorandum dated January 2, 1990—was served, simultaneously terminating their services effective December 29, 1989. The twin-notice requirement was thus violated.

• Jurisdiction: P.D. 175 does not provide for a grievance machinery where disputes may first be submitted. LOI 23 pertains to instructions for the dismissal of Bureau of Post employees and has no relevance. Article 121 of R.A. No. 6938 and Section 8 of R.A. No. 6939 govern disputes among members, officers, directors, and committee members, and intra-cooperative disputes—not employer-employee labor disputes. There was no evidence that the private respondents were even members of PHCCI, and in any event, the dispute concerned payment of wages, overtime pay, rest day, and termination of employment, which under Article 217 of the Labor Code fall within the original and exclusive jurisdiction of the Labor Arbiter.

• Four-Fold Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by four elements: (1) the selection and engagement of the worker or the power to hire; (2) the power to dismiss; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct. The power of control assumes primacy in the overall consideration. No particular form of proof is required; any competent and relevant evidence may show the relationship. The Court applied this test and found all four elements present, notwithstanding the workers' alleged membership in the cooperative.

• Regular Employment Under Article 280 — Regular employees are those engaged to perform activities usually necessary or desirable in the usual business or trade of the employer. Casual employees who render at least one year of service, whether continuous or broken, also attain regular status. Regularity of employment is not determined by the number of hours worked but by the nature and length of time one has been in the particular job. The Court held that part-time status does not negate regular employment.

• Twin-Notice Requirement for Termination — Procedural due process in dismissal requires two written notices: (a) the first, to apprise the employee of the particular acts or omissions for which dismissal is sought; and (b) the second, to inform the employee of the employer's decision to dismiss. Service of only one notice that simultaneously effects termination violates this requirement.

• Full Backwages for Illegal Dismissal — An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time compensation was withheld up to actual reinstatement. For dismissals occurring after March 21, 1989 (the effectivity of R.A. No. 6715), backwages are paid in full, meaning earnings derived elsewhere during the period of illegal dismissal are not deducted. If reinstatement is no longer feasible due to strained relations, separation pay is awarded in lieu of reinstatement.

• "One's regularity of employment is not determined by the number of hours one works but by the nature and by the length of time one has been in that particular job." — This passage establishes that part-time workers can attain regular employment status, a principle frequently cited in subsequent labor jurisprudence on regular employment classification.

• "Petitioner's contention that private respondents are mere volunteer workers, not regular employees, must necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of Labor and Employment (173 SCRA 697, 703 (1989) is misplaced. The issue in this case is whether or not the employees-members of a cooperative can organize themselves for purposes of collective bargaining, not whether or not the members can be employees. Petitioner missed the point" — This passage distinguishes the San Jose City Electric Cooperative precedent and clarifies that cooperative membership does not preclude the existence of an employer-employee relationship.

• "There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the dispute is about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217 of the Labor Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter." — This passage delineates the boundary between cooperative dispute-resolution mechanisms and Labor Arbiter jurisdiction, holding that labor disputes fall within the latter regardless of cooperative membership.

• San Jose City Electric Cooperative vs. Ministry of Labor and Employment, 173 SCRA 697 (1989) — Distinguished. Petitioner invoked this case to argue that cooperative members cannot be employees, but the Court held the precedent was inapplicable because it concerned whether employee-members of a cooperative could organize for collective bargaining, not whether members could be employees.

• Opulencia Ice Plant and Storage vs. National Labor Relations Commission, G.R. No. 98368, December 15, 1993, 228 SCRA 473 — Cited for the four-fold test of employer-employee relationship and the rule that no particular form of proof is required to establish the relationship.

• International Pharmaceuticals, Inc. vs. National Labor Relations Commission, G.R. No. 106331, March 9, 1998, 287 SCRA 213 — Cited for the principle that part-time status does not preclude regular employment, as regularity is determined by the nature and length of service, not hours worked.

• Bustamante vs. National Labor Relations Commission, G.R. No. 111651, November 28, 1996, 265 SCRA 61 — Cited for the rule that employees dismissed after the effectivity of R.A. No. 6715 are entitled to full backwages without deduction of earnings derived elsewhere during the period of illegal dismissal.

• Samillano vs. National Labor Relations Commission, G.R. No. 117582, December 23, 1996, 265 SCRA 788 — Cited for the rule that separation pay in lieu of reinstatement is proper when reinstatement is no longer feasible due to strained relations, and for the computation of backwages up to finality of the decision.

• Article 280, Labor Code — Defines three categories of employees (regular, project, and casual) and provides that casual employees rendering at least one year of service attain regular status. Applied to classify the private respondents as regular employees because they performed activities necessary to the cooperative's daily operations.

• Article 279, Labor Code — Provides that an illegally dismissed employee is entitled to reinstatement without loss of seniority rights and to full backwages inclusive of allowances and other benefits. Applied to award full backwages and reinstatement or separation pay.

• Articles 282, 283, and 284, Labor Code — Enumerate just causes (serious misconduct, gross neglect, fraud, crime, analogous cases) and authorized causes (installation of labor-saving devices, redundancy, retrenchment, closing of operations, disease) for termination. Applied to determine that none of the private respondents were dismissed for any valid cause.

• Article 217, Labor Code — Confers original and exclusive jurisdiction on Labor Arbiters over disputes concerning termination of employment and payment of wages. Applied to uphold the Labor Arbiter's jurisdiction over the complaint.

• Article 121, R.A. No. 6938 (Cooperative Code of the Philippines) — Provides for amicable settlement of disputes among members, officers, directors, and committee members through conciliation or mediation embodied in cooperative by-laws. Held inapplicable because the dispute was an employer-employee labor dispute, not an intra-cooperative dispute.

• Section 8, R.A. No. 6939 (Cooperative Development Authority Law) — Requires mediation and conciliation of disputes within or between cooperatives, with issuance of a Certificate of Non-Resolution if no settlement is reached within three months. Held inapplicable for the same reason as Article 121.

• R.A. No. 6715 — Extended protection to labor and, among other reforms, established the full backwages rule for illegally dismissed employees. Applied because the private respondents were dismissed after its effectivity date of March 21, 1989.

Melo, Vitug, and Panganiban, JJ., concurred.