Salazar vs. Simbajon

The appeal bond requirement in labor cases involving monetary awards may be relaxed where the appellant posted a partial bond within the reglementary period and subsequently posted the full amount before the period lapsed, constituting substantial compliance; and the existence of an employer-employee relationship is determined by the four-fold test, the absence of which bars a claim for illegal dismissal.

Albina Simbajon and fourteen other individuals were employed at Q.S.O. Disco Pub & Restaurant in various capacities. The business operated in a building owned by Abelardo Salazar, who claimed to be merely the lessor, while Lucia Bayang and Quirino Ortega were the actual owners and operators of the restaurant. The respondents filed a complaint for unfair labor practice, illegal dismissal, underpayment of salaries, and non-payment of benefits against the restaurant and/or Salazar, Bayang, and Ortega before the Labor Arbiter, alleging that the management harassed and terminated them after they formed a union in June 2006, using the claim of business bankruptcy as a ruse.

Albina Simbajon and fourteen other individuals (Simbajon, et al.) were employed at Q.S.O. Disco Pub & Restaurant as lady keeper, waitress, receptionist, dispatcher, bus boy, DJ, entertainer, cook, and cashier for various years. In June 2006, after they formed a union, the management allegedly began harassing them. On June 30, 2006, Lucia Bayang informed Simbajon, et al. that it was their last day of employment because the business was closing due to bankruptcy. Simbajon, et al. did not believe the claim of serious business losses, considering it a ruse to terminate them, and filed a complaint for unfair labor practice, illegal dismissal, underpayment of salaries, and non-payment of benefits against Q.S.O. Disco Pub & Restaurant and/or Abelardo Salazar, Quirino Ortega, and Lucia Bayang before the Labor Arbiter.

Abelardo Salazar denied any employment relationship with Simbajon, et al., claiming that Lucia and Quirino were the owners of the restaurant and that he was merely the lessor of the building where the business operated. In support, Abelardo submitted Contracts of Lease and Tax Returns showing his income solely from building rentals, as well as the Certificate of Registration of Business Name, Mayor's Permit, and Certificate of Registration with the Bureau of Internal Revenue, all issued in Lucia's name.

On February 28, 2007, the Labor Arbiter held Abelardo, Lucia, and Quirino solidarily liable for illegal dismissal and money claims totaling ₱3,683,394.45, finding the contracts of lease inconclusive to disavow any employment relationship between Abelardo and Simbajon, et al. Aggrieved, Abelardo appealed to the NLRC and posted a cash bond of ₱500,000.00, then moved to reduce the bond. He subsequently posted a ₱3,100,000.00 surety bond issued by Visayan Surety & Insurance Corporation. With the NLRC's approval, Abelardo later substituted the ₱500,000.00 cash bond with a surety bond of the same amount.

On March 31, 2009, the NLRC exonerated Abelardo from liability, finding no substantial evidence of an employment relationship between him and Simbajon, et al., while holding Lucia and Quirino jointly and severally liable for ₱890,398.22 plus 10% attorney's fees. Simbajon, et al. elevated the case to the Court of Appeals via a petition for certiorari, arguing that the NLRC committed grave abuse of discretion in giving due course to Abelardo's appeal despite his alleged failure to post a bond equivalent to the monetary award. On December 29, 2011, the CA granted the petition, finding that Abelardo had not perfected his appeal because only ₱500,000.00 in a cashier's check had been posted and no meritorious ground justified reduction of the bond. The CA vacated the NLRC's orders and decisions and reinstated the Labor Arbiter's decision. Abelardo's motion for reconsideration was denied, prompting the present petition.

• Perfection of Appeal: Abelardo maintained that he complied with the bond requirement, having posted a cash bond of ₱500,000.00 on March 30, 2007, within the period to appeal, evidenced by Official Receipt No. 0701343, which was subsequently substituted by a surety bond of the same amount. He further contended that on April 2, 2007, the last day of the reglementary period, he posted a surety bond of ₱3,100,000.00, bringing the total posted to ₱3,600,000.00, which substantially covered the monetary award of ₱3,683,394.45.
• Employer-Employee Relationship: Abelardo argued that the CA erred in reinstating the Labor Arbiter's decision because Simbajon, et al. failed to establish the existence of an employer-employee relationship. He pointed out that Simbajon, et al. even alleged in their consolidated position paper that it was Lucia who dismissed them, and he presented documentary evidence — Contracts of Lease, Tax Returns, and government registrations all in Lucia's name — proving he was merely the lessor of the building.

• Non-Compliance with Bond Requirement: Simbajon, et al. argued that there was no evidence that Abelardo posted the appeal bond within the reglementary period, noting that the indemnity agreement between Abelardo and the bonding company did not indicate the effectivity period or the amount of premium paid.
• Existence of Employment Relationship: Simbajon, et al. pointed to the affidavit of Bayani Ocampo, the restaurant's former manager, stating that Abelardo had the final authority in the hiring of employees and their work assignments, thereby establishing an employer-employee relationship.

• Perfection of Appeal: Whether Abelardo substantially complied with the appeal bond requirement under Article 223 of the Labor Code and the 2005 NLRC Rules of Procedure, such that his appeal to the NLRC was properly perfected.
• Employer-Employee Relationship: Whether an employer-employee relationship existed between Abelardo and Simbajon, et al., such that Abelardo could be held liable for illegal dismissal and money claims.

• Perfection of Appeal: Yes. Abelardo substantially complied with the appeal bond requirement by posting a total of ₱3,600,000.00 within the reglementary period, which substantially covered the monetary award of ₱3,683,394.45. The bond requirement may be relaxed in meritorious cases where there is substantial compliance and a showing of willingness to abide by the rules.
• Employer-Employee Relationship: No. Applying the four-fold test, no substantial evidence was presented to establish that Abelardo exercised the power to hire, pay wages, dismiss, or control Simbajon, et al. Abelardo's evidence showing he was merely the lessor of the building was unrebutted.

• Perfection of Appeal: The right to appeal is a statutory privilege exercised only in the manner prescribed by law. Article 223 of the Labor Code and Sections 4 and 6 of Rule VI of the 2005 NLRC Rules of Procedure require the posting of a cash or surety bond equivalent to the monetary award for the perfection of an appeal. While the bond requirement is mandatory and jurisdictional, jurisprudence has relaxed it in meritorious cases — as synthesized in Nicol vs. Footjoy Industrial Corporation — where there was substantial compliance with the rules, meritorious grounds exist to reduce the bond, a liberal interpretation would serve the objective of resolving controversies on the merits, or the appellant exhibited willingness and good faith by posting a partial bond during the reglementary period. Here, Abelardo received the Labor Arbiter's decision on March 23, 2007 and had until April 2, 2007 to appeal. On March 30, 2007, he filed his appeal and posted a ₱500,000.00 cashier's check, and on April 2, 2007, the last day of the period, he posted a ₱3,100,000.00 surety bond. The total of ₱3,600,000.00 substantially covered the monetary award of ₱3,683,394.45. This constituted substantial compliance and demonstrated willingness to abide by the rules. The CA's finding that only ₱500,000.00 was posted was erroneous, as the records showed the surety bond of ₱3,100,000.00 was indeed posted on April 2, 2007. The failure of the indemnity agreement to indicate the effectivity period and premium amount did not affect the bond's validity, as the NLRC Rules do not require such formalities, and the rules expressly provide that a bond is valid and effective from the date of posting until the case is finally decided.

• Employer-Employee Relationship: Applying the four-fold test — (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control — no substantial evidence established Abelardo as the employer. On the power to hire, the affidavit of the restaurant's former manager alone, without supporting pre-employment records, appointment letters, or engagement contracts, was insufficient; mere allegation is not evidence. On payment of wages, Simbajon, et al. did not submit pay slips or related documents showing they received salaries from Abelardo. On the power to dismiss, Simbajon, et al. themselves admitted that Lucia terminated their services, with no evidence that Abelardo wielded such authority. On the power of control, there was no proof that Abelardo issued orders, instructions, or supervised the employees' work. In contrast, Abelardo substantiated his claim of being a mere lessor through Contracts of Lease, Tax Returns showing income solely from rentals, and government registrations all in Lucia's name. These documents enjoy the presumption of regularity. The quantum of proof in labor cases is substantial evidence, and the burden rests on the party asserting the affirmative. Simbajon, et al. utterly failed to meet this burden; absent an employment relationship, a claim for illegal dismissal cannot prosper.

• Substantial Compliance with Appeal Bond Requirement — The appeal bond requirement in labor cases involving monetary awards is mandatory and jurisdictional, but may be relaxed in meritorious cases. The Court, synthesizing prior jurisprudence in Nicol vs. Footjoy Industrial Corporation, identified four circumstances warranting relaxation: (1) substantial compliance with the rules; (2) surrounding facts and circumstances constitute meritorious grounds to reduce the bond; (3) a liberal interpretation would serve the desired objective of resolving controversies on the merits; or (4) the appellants exhibited willingness and good faith by posting a partial bond during the reglementary period. Reduction is not warranted when no meritorious ground is shown, the appellant absolutely failed to post any bond, or circumstances show unwillingness to satisfy workers' valid claims. In this case, Abelardo posted a total of ₱3,600,000.00 within the reglementary period, substantially covering the monetary award, constituting substantial compliance.

• Four-Fold Test of Employment Relationship — The existence of an employer-employee relationship is determined by the presence of four elements: (1) the selection and engagement of the employee or the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power of control over the employee's conduct and performance of duties. All four elements must be present. In this case, none was substantiated by adequate evidence, while Abelardo's documentary evidence affirmatively established his status as a mere lessor.

• Quantum of Proof in Labor Cases — The quantum of proof in labor cases is substantial evidence, defined as that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The burden of proof rests on the party asserting the affirmative of an issue. A bare affidavit, without corroborating documentary evidence, does not constitute substantial proof.

• "the bond requirement on appeals involving monetary awards has been and may be [sic] relaxed in meritorious cases. These cases include instances in which (1) there was substantial compliance with the Rules, (2) surrounding facts and circumstances constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits, or (4) the appellants, at the very least, exhibited their willingness and/or good faith by posting a partial bond during the reglementary period." — This passage, quoted from Nicol vs. Footjoy Industrial Corporation, sets forth the controlling framework for when the appeal bond requirement may be relaxed, and is the analytical foundation for the Court's ruling on perfection of appeal.

• "Conversely, the reduction of the bond is not warranted when no meritorious ground is shown to justify the same; the appellant absolutely failed to comply with the requirement of posting a bond, even if partial or when circumstances show the employer's unwillingness to ensure the satisfaction of its workers' valid claims." — This passage delineates the negative boundary of the doctrine — the circumstances under which relaxation is improper — providing the counterpoint to the four meritorious grounds.

• "Simbajon et al. utterly failed to establish with substantial evidence their supposed employment relationship with Abelardo. As such, a case for Illegal Dismissal cannot prosper absent employment relationship between the parties." — This states the ratio decidendi on the second issue, tying the quantum-of-proof standard to the jurisdictional prerequisite of an employment relationship for an illegal dismissal claim.

• Nicol vs. Footjoy Industrial Corporation, 555 Phil. 275 (2007) — Synthesized the jurisprudential exceptions to the strict appeal bond requirement, providing the four-circumstance framework the Court applied to find substantial compliance. Followed and applied.
• Philippine Transmarine Carriers, Inc. vs. Cortina, 461 Phil. 422 (2003) — Held that non-compliance with the bond requirement is fatal and renders the judgment final and executory, but the requirement may be relaxed in exceptional cases in line with resolving labor controversies on the merits. Followed.
• Rosewood Processing, Inc. vs. NLRC, 352 Phil. 1013 (1998) — Found substantial compliance when the petitioner filed a Motion to Reduce Appeal Bond and posted a partial surety bond, albeit not equivalent to the full monetary award. Cited as supporting precedent for relaxing the bond requirement.
• Postigo vs. Philippine Tuberculosis Society, Inc. (PTSI), 515 Phil. 601 (2006) — Sustained the CA's ruling that the respondent substantially complied with the bond requirement by filing a justified motion for reduction and immediately submitting a bond attached to a motion for reconsideration. Cited as supporting precedent.
• Rhone-Poulene Agrochemicals Inc. vs. NLRC, et al., 291 Phil. 251 (1993) — Cited for the four-fold test of employment relationship. Followed and applied.
• Jack C. Valencia vs. Classique Vinyl Products Corporation, 804 Phil. 492 (2017) — Cited for the definition of substantial evidence as the quantum of proof in labor cases and the burden of proof on the party asserting the affirmative. Followed.

• Article 223, Labor Code — Provides that in cases of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award. Applied as the statutory basis for the appeal bond requirement, with the Court finding substantial compliance therewith.
• Sections 4 and 6, Rule VI, 2005 Revised Rules of Procedure of the NLRC — Section 4 enumerates the requisites for perfection of appeal (filing within the reglementary period, verification, memorandum of appeal, appeal fee, bond, certificate of non-forum shopping, and proof of service). Section 6 provides that the bond must be equivalent to the monetary award, exclusive of damages and attorney's fees, and that no motion to reduce bond shall be entertained except on meritorious grounds and only upon posting of a bond in a reasonable amount. Applied to determine whether Abelardo perfected his appeal.
• Rule 132, Section 23, Rules of Court — Governs the evidentiary weight of public documents executed in the performance of official duty, which enjoy the presumption of regularity unless the contrary is proved. Applied to uphold the probative value of the government-issued certificates and registrations submitted by Abelardo.

Perlas-Bernabe, Lazaro-Javier, Rosario, and J. Lopez, JJ., concurred.