South Cotabato Communications Corporation and Gauvain J. Benzonan vs. Hon. Patricia Sto. Tomas, et al.

The existence of an employer-employee relationship is a statutory prerequisite and limitation on the Secretary of Labor's exercise of visitorial and enforcement power under Article 128 of the Labor Code; absent a categorical finding of such relationship supported by substantial evidence, the DOLE cannot assume jurisdiction over the complaint. Moreover, decisions of quasi-judicial bodies such as the DOLE must comply with Article VIII, Section 14 of the Constitution by expressing clearly and distinctly the facts and the law on which they are based.

Petitioner South Cotabato Communications Corporation owns DXCP Radio Station, and petitioner Gauvain J. Benzonan is its president. Private respondents are nine individuals who claimed to be employees of the station. A related case, NLRC No. MAC-01-010053-2008 (Rolando Fabrigar, et al. vs. DXCP Radio Station, et al.), was instituted by three of the private respondents — Fabrigar, Jopson, and Velarde — for illegal dismissal, in which the NLRC declared that no employer-employee relationship existed between the parties. Two separate actions thus arose from the same employment controversy: one for violation of labor standards provisions before the DOLE, and another for illegal dismissal before the NLRC.

South Cotabato Communications Corporation owns DXCP Radio Station, and Gauvain J. Benzonan is its president. Nine individuals — Rolando Fabrigar, Merlyn Velarde, Vince Lamboc, Felipe Galindo, Leonardo Miguel, Julius Rubin, Edel Roderos, Merlyn Coliao, and Edgar Jopson — claimed to be employees of the station and figured as private respondents in a labor standards complaint.

On January 19, 2004, the Department of Labor and Employment Region XII conducted a Complaint Inspection at the premises of DXCP Radio Station pursuant to Inspection Authority No. R1201-0401-CI-052. The inspection yielded findings of violations of labor standards provisions involving the nine private respondents: (a) underpayment of wages; (b) underpayment of 13th month pay; (c) non-payment of the five-day Service Incentive Leave Pay; (d) non-payment of Rest Day Premium Pay; (e) non-payment of Holiday Premium Pay; (f) non-remittance of SSS contributions; and (g) some employees being paid on commission basis aside from their allowances. The DOLE then issued a Notice of Inspection Result directing petitioners to effect restitution and/or correction of the alleged violations within five days from notice.

Because petitioners failed to comply, the DOLE scheduled a Summary Investigation on March 3, 2004 at its Regional Office No. XII, Provincial Extension Office in General Santos City. Petitioners failed to appear despite due notice. Another hearing was scheduled on April 1, 2004, but petitioners' counsel, Atty. Thomas Jacobo, failed to attend due to an alleged conflict in schedule; his secretary, Nona Gido, appeared on his behalf to request a resetting, which the DOLE Hearing Officer denied.

In an Order dated May 20, 2004, the DOLE Region XII OIC Regional Director directed petitioners to pay private respondents the total amount of ₱759,752, representing their claim for wage differentials, 13th month pay differentials, service incentive leave pay, holiday premium pay, and rest day premium pay. Petitioners appealed to the Secretary of Labor on two grounds: denial of due process and lack of factual and legal basis for the assailed Order. The due process claim rested on the Hearing Officer's refusal to reset the April 1, 2004 hearing, which allegedly deprived petitioners of the opportunity to present their evidence. Petitioners also asserted that the Order did not state that an employer-employee relationship existed between them and private respondents, which they insisted was necessary to confer jurisdiction on the DOLE.

In an Order dated November 8, 2004, the Secretary of Labor affirmed the findings of the DOLE Regional Director on the postulate that petitioners failed to question the noted violations or submit proof of compliance despite notice of hearing. Because petitioners failed to present evidence before the Regional Director, the Secretary of Labor adopted the findings of the Labor Inspector and considered the interviews conducted as substantial evidence, likewise sustaining the straight computation method adopted by the Regional Office as regards the monetary claims.

Meanwhile, in the related case of NLRC No. MAC-01-010053-2008 (Rolando Fabrigar, et al. vs. DXCP Radio Station, et al.), the NLRC, in a Resolution dated April 30, 2008, held that no employer-employee relationship existed between petitioners and private respondents Fabrigar, Jopson, and Velarde, thus negating the notion of constructive dismissal. That case arose from the three respondents' claim of constructive dismissal following the DOLE inspection.

The Regional Director's Order of May 20, 2004 merely noted the discovery of violations of labor standards provisions in the course of inspection of the DXCP premises; it made no categorical determination on the existence of an employer-employee relationship using any of the guidelines for such determination, and did not allude to the substance of the interviews during the inspection that supposedly became the basis of the finding of an employer-employee relationship. The Secretary of Labor, for his part, adverted to private respondents' allegations in their Reply to justify their status as employees of petitioners.

• Denial of Due Process: Petitioners maintained that they were prevented from presenting evidence to prove that private respondents were not their employees when the Regional Director submitted the case for resolution without affording them an opportunity to ventilate their case or rebut the findings of the inspection; the refusal of the Hearing Officer to reset the April 1, 2004 hearing allegedly deprived them of the opportunity to present their evidence.
• Lack of Factual and Legal Basis: Petitioners assailed the Order of the Regional Director for want of factual and legal basis, particularly the lack of a categorical finding on the existence of an employer-employee relationship between the parties, which they insisted was a prerequisite for the exercise of the DOLE's jurisdiction, following People's Broadcasting (Bombo Radyo, Phils., Inc.) vs. The Secretary of Labor and Employment, et al.
• Silence on the Employer-Employee Relationship Issue: Petitioners noted that the November 8, 2004 Order of the DOLE Secretary denying their appeal, as well as the Decision of the CA, was silent on the employer-employee relationship issue, which further suggested that no real and proper determination of the existence of such relationship was ever made by these tribunals.

• Substantial Evidence from Interviews: The DOLE countered that the results of the interviews conducted in the premises of DXCP in the course of its inspection constituted substantial evidence that served as basis for the monetary awards to private respondents.

• Due Process: Whether petitioners were denied due process when the Hearing Officer refused to reset the April 1, 2004 hearing and the Regional Director submitted the case for resolution without affording them an opportunity to present evidence.
• DOLE Jurisdiction / Employer-Employee Relationship: Whether an employer-employee relationship had sufficiently been established between the parties as to warrant the assumption of jurisdiction by the DOLE and the issuance of the May 20, 2004 and November 8, 2004 Orders.
• Factual and Legal Basis of the Orders: Whether the Orders of the Regional Director and the Secretary of Labor are supported by factual and legal basis, and whether they comply with Article VIII, Section 14 of the Constitution.

• Due Process: No. The essence of due process is simply an opportunity to be heard, and petitioners were given ample opportunity to present their evidence before the Regional Director but failed to attend the scheduled summary investigations due to their own negligence.
• DOLE Jurisdiction / Employer-Employee Relationship: No. The existence of an employer-employee relationship is a statutory prerequisite and limitation on the DOLE's visitorial and enforcement power under Article 128 of the Labor Code; absent a categorical finding of such relationship supported by substantial evidence, the DOLE cannot assume jurisdiction.
• Factual and Legal Basis of the Orders: No. The assailed Orders do not contain a clear and distinct factual basis necessary to establish the DOLE's jurisdiction and to justify the monetary awards, and they contravene Article VIII, Section 14 of the Constitution requiring decisions to express clearly and distinctly the facts and the law on which they are based.

• Due Process: The essence of due process in administrative proceedings is simply an opportunity to be heard, or an opportunity to explain one's side or to seek a reconsideration of the action or ruling complained of; as long as parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met. Petitioners were indisputably given ample opportunity to present their evidence before the Regional Director, having been notified of the summary investigations conducted on March 3, 2004 and April 1, 2004, both of which they failed to attend. While petitioners claimed they requested a resetting of the April 1, 2004 hearing due to the unavailability of their counsel, no explanation was proffered as to why they failed to attend the first hearing. It behooved petitioners to ensure that they, as well as their counsel, would be available on the dates set for the summary investigation to enable them to prove their claim of non-existence of an employer-employee relationship. Their own negligence caused their predicament, and their claim of denial of due process is specious.

• DOLE Jurisdiction / Employer-Employee Relationship: Findings of fact of quasi-judicial agencies are accorded great respect, even finality, and this Court is not a trier of facts; however, such findings must be supported by substantial evidence, and findings tainted with grave abuse of discretion will not be upheld. The case falls under the exception. The assailed Orders were issued pursuant to Article 128 of the Labor Code, which grants the Secretary of Labor visitorial and enforcement powers. Under the provision, and as established in Bombo Radyo, the DOLE may exercise its powers only where the employer-employee relationship still exists; the determination of such relationship is merely preliminary, incidental, and collateral to the DOLE's primary function of enforcing labor standards provisions, and is primarily lodged with the NLRC. Before the DOLE may exercise its powers under Article 128, two questions must be resolved: (1) whether the employer-employee relationship still exists, or alternatively, whether there was ever an employer-employee relationship to speak of; and (2) whether there are violations of the Labor Code or of any labor law. The DOLE has the authority to rule on the existence of an employer-employee relationship using the same guidelines courts use — (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 — but without an employer-employee relationship, or if one has already been terminated, the Secretary of Labor is without jurisdiction to determine if violations of labor standards provisions had in fact been committed. Here, the Regional Director merely noted the discovery of violations in the course of inspection and made no categorical determination on the existence of an employer-employee relationship utilizing any of the guidelines; the Regional Director had presumed, not demonstrated, the existence of the relationship. Of particular note was the DOLE's failure to show that petitioners exercised control over private respondents' conduct in the workplace, the control test being the most significant determinant of the existence of an employer-employee relationship. Neither did the Orders state nor make reference to any concrete evidence to support a finding of an employer-employee relationship and justify the monetary awards; substantial evidence such as proofs of employment, clear exercise of control, and the power to dismiss were grossly absent. The Secretary of Labor adverted to private respondents' allegations in their Reply to justify their status as employees, but mere allegation, without more, is not evidence and is not equivalent to proof; such self-serving statements can hardly be taken as the substantial evidence contemplated. The use of the straight computation method in awarding ₱759,752 without reference to any other evidence other than the interviews conducted during the inspection indicated that the DOLE failed to consider evidence in arriving at its award, and the amount was arrived at arbitrarily; it was implausible for the nine private respondents to be entitled to uniform amounts of Service Incentive Leave pay, holiday pay premium, and rest day premium pay for three years without any disparity, since entitlement to said benefits would largely depend on the actual rest days and holidays worked and the amount of remaining leave credits in a year. The burden of proving entitlement to overtime pay and premium pay for holidays and rest days lies with the employee because these are not incurred in the normal course of business. While petitioners failed to refute the allegation that private respondents were employees of DXCP, it was incumbent upon private respondents to prove their allegation that they were under petitioners' employ and that the latter violated their labor rights; a person who alleges a fact has the onus of proving it, and the proof should be clear, positive, and convincing. The pronouncement in Bombo Radyo that the determination by the DOLE of the existence of an employer-employee relationship must be respected should not be construed so as to dispense with the evidentiary requirement when called for. Without an express finding of an employer-employee relationship, the DOLE cannot assume jurisdiction to resolve the complaints, as jurisdiction in that instance lies with the NLRC.

• Factual and Legal Basis of the Orders: The Orders contravene Article VIII, Section 14 of the Constitution, which requires courts to express clearly and distinctly the facts and law on which decisions are based. As stressed in San Jose vs. NLRC, faithful compliance by courts and quasi-judicial bodies such as the DOLE with Article VIII, Section 14 is a vital element of due process, as it enables the parties to know how decisions are arrived at as well as the legal reasoning behind them. University of the Philippines vs. Hon. Dizon instructs that the Constitution and the Rules of Court require not only that a decision should state the ultimate facts but also that it should specify the supporting evidentiary facts, for they are what are called the findings of fact; a decision that does not clearly and distinctly state the facts and the law on which it is based leaves the parties in the dark as to how it was reached and is especially prejudicial to the losing party, who is unable to pinpoint the possible errors of the court or quasi-judicial body for review by a higher tribunal. The Court will not hesitate to strike down decisions not hewing to the constitutional directive, as it did in Anino, et al. vs. Hinatuan Mining Corporation. While the State's policy is to zealously safeguard the rights of workers, the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer; the constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers, and an employer cannot be made to answer for claims that have neither been sufficiently proved nor substantiated.

• Employer-Employee Relationship as Statutory Prerequisite to DOLE's Visitorial and Enforcement Power — Under Article 128 of the Labor Code, the Secretary of Labor or authorized representatives may exercise visitorial and enforcement powers to determine violations of and enforce the Labor Code, but the existence of an actual employer-employee relationship between the parties is indispensable. Before the DOLE may exercise its powers under Article 128, two questions must be resolved: (1) whether the employer-employee relationship still exists, or alternatively, whether there was ever an employer-employee relationship to speak of; and (2) whether there are violations of the Labor Code or of any labor law. Without an employer-employee relationship, or if one has already been terminated, the Secretary of Labor is without jurisdiction to determine if violations of labor standards provisions had in fact been committed. In this case, the Regional Director merely presumed, rather than demonstrated, the existence of the relationship, and the DOLE failed to establish its jurisdiction.

• Four-Fold Test for Determining Employer-Employee Relationship — The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's power to control the employee's conduct. The DOLE Secretary, or his or her representatives, can utilize the same test even in the course of inspection, making use of the same evidence that would have been presented before the NLRC. The power of the employer to control the work of the employee, or the control test, is considered the most significant determinant of the existence of an employer-employee relationship. In this case, the Regional Director made no categorical determination using any of these guidelines, and the DOLE failed to show that petitioners exercised control over private respondents' conduct in the workplace.

• Substantial Evidence in Labor Cases — In labor cases, as in other administrative and quasi-judicial proceedings, the quantum of proof necessary is substantial evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Although no particular form of evidence is required to prove the existence of an employer-employee relationship, and any competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence. Mere allegation, without more, is not evidence and is not equivalent to proof; self-serving statements are devoid of evidentiary weight. In this case, the DOLE failed to adduce substantial evidence to support its finding of an employer-employee relationship and the monetary awards.

• Burden of Proving Entitlement to Labor Benefits — Whoever claims entitlement to the benefits provided by law should establish his or her right thereto. The burden of proving entitlement to overtime pay and premium pay for holidays and rest days lies with the employee because these are not incurred in the normal course of business. A person who alleges a fact has the onus of proving it, and the proof should be clear, positive, and convincing. In this case, private respondents failed to discharge this burden, and evidence pointing not only to the existence of an employer-employee relationship but also to their entitlement to these benefits was miserably lacking.

• Article VIII, Section 14 Compliance by Quasi-Judicial Bodies — No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. Faithful compliance by courts and quasi-judicial bodies such as the DOLE with Article VIII, Section 14 is a vital element of due process, as it enables the parties to know how decisions are arrived at as well as the legal reasoning behind them. The Constitution and the Rules of Court require not only that a decision should state the ultimate facts but also that it should specify the supporting evidentiary facts, for they are what are called the findings of fact. A decision that does not clearly and distinctly state the facts and the law on which it is based leaves the parties in the dark as to how it was reached and is especially prejudicial to the losing party. In this case, the Orders of the Regional Director and the Secretary of Labor failed to comply with this constitutional directive.

• Full Protection to Labor Not a Sword to Oppress Employers — The State's policy is to zealously safeguard the rights of workers, as the Constitution mandates the State to afford full protection to labor. Nevertheless, the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer; the constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. An employer cannot be made to answer for claims that have neither been sufficiently proved nor substantiated. In this case, the Court applied this doctrine in annulling the monetary awards against petitioners.

• "Indispensable to the DOLE'S exercise of such power is the existence of an actual employer-employee relationship between the parties." — This passage states the ratio decidendi on the jurisdictional prerequisite for the DOLE's visitorial and enforcement power under Article 128 of the Labor Code, establishing that the existence of an employer-employee relationship is a condition sine qua non for the exercise of such power.

• "The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to follow, the same guide the courts themselves use. The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employer's power to control the employee's conduct. The use of this test is not solely limited to the NLRC." — This passage, quoted from Bombo Radyo, articulates the four-fold test that the DOLE must apply in determining the existence of an employer-employee relationship, and clarifies that the DOLE may utilize the same test even in the course of inspection.

• "As can be gleaned from the above-quoted Order, the Regional Director merely noted the discovery of violations of labor standards provisions in the course of inspection of the DXCP premises. No such categorical determination was made on the existence of an employer-employee relationship utilizing any of the guidelines set forth. In a word, the Regional Director had presumed, not demonstrated, the existence of the relationship." — This passage applies the four-fold test to the facts, explaining why the DOLE failed to establish its jurisdiction over the case.

• "The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers." — This passage states the Court's balancing principle that the policy of protecting labor does not authorize oppression of employers, and that an employer cannot be made to answer for claims that have neither been sufficiently proved nor substantiated.

• People's Broadcasting (Bombo Radyo, Phils., Inc.) vs. The Secretary of Labor and Employment, et al., G.R. No. 179652, May 8, 2009, 587 SCRA 724 (and G.R. No. 179652, March 6, 2012, 667 SCRA 538) — Controlling precedent. The Court relied on this case for the rule that the existence of an employer-employee relationship is a statutory prerequisite and limitation on the DOLE's visitorial and enforcement power under Article 128 of the Labor Code, and for the four-fold test the DOLE must apply in determining such relationship.
• San Jose vs. NLRC, G.R. No. 121227, August 17, 1998, 294 SCRA 336 — Followed. Cited for the rule that faithful compliance by courts and quasi-judicial bodies with Article VIII, Section 14 of the Constitution is a vital element of due process, enabling parties to know how decisions are arrived at and the legal reasoning behind them.
• University of the Philippines vs. Hon. Dizon, G.R. No. 171182, August 23, 2012 — Followed. Cited for the rule that the Constitution and the Rules of Court require not only that a decision should state the ultimate facts but also that it should specify the supporting evidentiary facts, or the findings of fact.
• Anino, et al. vs. Hinatuan Mining Corporation, et al., G.R. No. 123226, May 21, 1998 — Followed. Cited as an instance where the Court struck down a decision rendered by the NLRC for non-observance of the constitutional requirement that decisions express clearly and distinctly the facts and the law on which they are based.
• Coca Cola Bottlers Phils., Inc. vs. NLRC, G.R. No. 120466, May 17, 1999, 307 SCRA 131 — Followed. Cited for the rule that the power of the employer to control the work of the employee, or the control test, is considered the most significant determinant of the existence of an employer-employee relationship.
• Agabon vs. NLRC, G.R. No. 158693, November 17, 2004 — Followed. Cited for the rule that the constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers.
• Serrano vs. NLRC, 380 Phil. 416 (2000) — Followed. Cited for the rule that the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer.
• Javier vs. Fly Ace Corporation, G.R. No. 192558, February 15, 2012 — Followed. Cited for the rule that whoever claims entitlement to the benefits provided by law should establish his or her right thereto.
• Loon, et al. vs. Power Master, Inc., G.R. No. 189404, December 11, 2013 — Followed. Cited for the rule that the burden of proving entitlement to overtime pay and premium pay for holidays and rest days lies with the employee because these are not incurred in the normal course of business.
• Basay vs. Hacienda Consolacion, G.R. No. 175532, April 19, 2010, 618 SCRA 422 — Followed. Cited for the rule that a person who alleges a fact has the onus of proving it and the proof should be clear, positive, and convincing.
• Centro Project Manpower Services Corporation vs. Naluis, G.R. No. 160123, June 17, 2015 — Followed. Cited for the rule that mere allegation, without more, is not evidence and is not equivalent to proof.
• Legend Hotel (Manila) vs. Realuyo, G.R. No. 153511, July 18, 2012, 677 SCRA 10 — Followed. Cited for the rule that although no particular form of evidence is required to prove the existence of an employer-employee relationship, a finding that the relationship exists must nonetheless rest on substantial evidence.
• Tenaza, et al. vs. R. Villegas Taxi Transport, G.R. No. 192998, April 2, 2014 — Followed. Cited for the rule that in labor cases, the quantum of proof necessary is substantial evidence.
• Magsaysay Maritime Services and Princess Cruise Lines, Ltd. vs. Laurel, G.R. No. 195518, March 20, 2013, 694 SCRA 225 — Followed. Cited for the rule that findings of fact of quasi-judicial agencies are accorded great respect, even finality, and that only errors of law are generally reviewed in petitions for review on certiorari.
• Sarapat vs. Salanga, G.R. No. 154110, November 23, 2007, 538 SCRA 324 — Followed. Cited for the rule that the essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of.
• Montemayor vs. Bundalian, et al., G.R. No. 140335, July 1, 2003, 405 SCRA 264 — Followed. Cited for the rule that as long as the parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met.

• Article 128, Labor Code of the Philippines (as amended by Republic Act No. 7730, June 2, 1994) — Grants the Secretary of Labor and Employment or duly authorized representatives visitorial and enforcement powers, including access to employer's records and premises, the right to question any employee, and the power to issue compliance orders to give effect to labor standards provisions. The proviso "in cases where the relationship of employer-employee still exists" was construed as a limitation on the DOLE's power, requiring the existence of an employer-employee relationship as a statutory prerequisite to the exercise of such power.
• Article VIII, Section 14, 1987 Constitution — Provides that no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based, and that no petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the legal basis therefor. The Court applied this provision to quasi-judicial bodies such as the DOLE, holding that the assailed Orders failed to comply with this constitutional directive.
• Articles 129 and 217, Labor Code of the Philippines — Referenced in Article 128(b) as provisions from which the Secretary of Labor's visitorial and enforcement power operates notwithstanding. Cited in the text of Article 128(b) as reproduced in the decision.

Peralta, J.; Perez, J.; and Reyes, J., concurred in the decision. Jardeleza, J., was on leave.