Television and Production Exponents, Inc. and/or Antonio P. Tuviera vs. Roberto C. Servaña

A worker who is absorbed by a company and continuously employed for at least one year is a regular employee under Article 280 of the Labor Code, even if designated a talent or program employee; termination for an authorized cause without the required 30-day written notice to the employee and the Department of Labor and Employment is procedurally infirm but valid, rendering the employer liable for nominal damages. A corporate officer may not be held solidarily liable for the company’s labor obligations absent malice or bad faith.

TAPE is a domestic corporation engaged in the production of television programs, including the long-running variety program “Eat Bulaga!”; Antonio P. Tuviera is its president. Respondent Roberto C. Servaña rendered security services in connection with TAPE’s live productions, initially through a security agency and later, according to TAPE, as a talent or member of its support group. The dispute concerns whether that arrangement made respondent TAPE’s regular employee or an independent contractor/program employee, and it implicates the Labor Code’s provisions on regular employment, authorized-cause termination, and statutory due process.

Television and Production Exponents, Inc. (TAPE) is a domestic corporation engaged in the production of television programs, including the long-running variety program “Eat Bulaga!”; Antonio P. Tuviera is its president. Roberto C. Servaña served as a security guard for TAPE from March 1987 until he was terminated on 3 March 2000. He alleged that he was first connected with Agro-Commercial Security Agency but was later absorbed by TAPE as a regular company guard, and that he was detailed at Broadway Centrum in Quezon City where “Eat Bulaga!” regularly staged its productions.

On 2 March 2000, Servaña received a memorandum informing him of his impending dismissal on account of TAPE’s decision to contract the services of a professional security agency. At the time of his termination, he claimed a monthly salary of P6,000.00; the NLRC and Court of Appeals records referred to P5,444.44 as his last monthly compensation. He claimed that holiday pay, unpaid vacation and sick leave benefits, and other monetary considerations were withheld from him. He further contended that his dismissal was undertaken without due process and violated existing labor laws, aggravated by nonpayment of separation pay.

TAPE countered, in a motion to dismiss treated as its position paper, that the labor arbiter had no jurisdiction over the case in the absence of an employer-employee relationship. TAPE asserted that Servaña was initially employed as a security guard for Radio Philippines Network (RPN-9); that he was tasked to assist TAPE during its live productions, specifically to control the crowd; that when RPN-9 severed its relationship with the security agency, TAPE engaged his services as part of the support group and thus a talent, to provide security to production staff, stars, and guests of “Eat Bulaga!” and to control the audience during the one-and-a-half-hour noontime program; that it was agreed he would render services until TAPE engaged a professional security agency; that in 1995, when his contract with RPN-9 expired, he was retained as a talent and member of the support group until TAPE engaged a professional security agency; that he was not prevented from seeking other employment before or after attending his “Eat Bulaga!” functions; that in late 1999 TAPE started negotiations for the engagement of a professional security agency, Sun Shield Security Agency; and that on 2 March 2000, TAPE issued memoranda to all talents whose functions would be rendered redundant by the engagement of the security agency, informing them of management’s decision to terminate their services. TAPE averred that Servaña was an independent contractor falling under the talent group category and working under a special arrangement recognized in the industry. Servaña, for his part, insisted that he was a regular employee having been engaged to perform an activity necessary and desirable to TAPE’s business for thirteen years.

The Labor Arbiter found that Servaña’s work consisted of securing and maintaining order in the studio, which was necessary and desirable in TAPE’s usual business activity, and that the termination was due to redundancy. The NLRC found that Servaña did not observe working hours and worked for M-Zet TV Production, Inc. at the same time that he worked for TAPE. The Court of Appeals found that Servaña was selected and hired by TAPE, was paid P5,444.44 monthly, was required to report daily and observe definite work hours through bundy cards, and was issued an identification card.

• No Employer-Employee Relationship: Petitioner TAPE maintained that no employer-employee relationship existed between it and respondent; respondent was an independent contractor or talent/program employee, not a regular employee.
• Four-Fold Test Misapplied: TAPE argued that the Court of Appeals erred in applying the four-fold test; it never hired respondent, who instead offered his services as a talent.
• Memorandum Not Termination Letter: TAPE asserted that the 2 March 2000 Memorandum was for the discontinuance of the contract for security services, not a termination letter.
• Talent Fees Not Wages: TAPE argued that the talent fees given to respondent were the pre-agreed consideration for services rendered and should not be construed as wages.
• No Control: TAPE insisted that it had no control over respondent, who was free to employ his own means and methods in controlling and managing live audiences and ensuring the safety of TAPE’s stars and guests.
• Independent Contractor/Policy Instruction No. 40: TAPE denied exercising control and maintained that respondent was an independent contractor; it relied on Policy Instruction No. 40 to classify him as a program employee and equate him with an independent contractor.

• Regular Employment: Respondent insisted that he was a regular employee, having been engaged to perform an activity necessary and desirable to TAPE’s business for thirteen years.
• Absorption by TAPE: He alleged that he was first connected with Agro-Commercial Security Agency but was later absorbed by TAPE as a regular company guard.
• Illegal Dismissal and Due Process: He contended that his dismissal was undertaken without due process and violated existing labor laws, aggravated by nonpayment of separation pay.
• Unpaid Benefits: He claimed that holiday pay, unpaid vacation and sick leave benefits, and other monetary considerations were withheld from him.
• Nature and Length of Service: In his petition before the Court of Appeals, he asserted that he was a regular employee considering the nature and length of service rendered.

• Employer-Employee Relationship: Whether an employer-employee relationship exists between TAPE and respondent.
• Regular Employment: Whether respondent is a regular employee under Article 280 of the Labor Code.
• Independent Contractor/Program Employee: Whether respondent is an independent contractor or program employee rather than a regular employee.
• Validity of Termination: Whether respondent’s termination was valid on the ground of redundancy.
• Statutory Due Process: Whether TAPE complied with the statutory due process requirements for termination due to an authorized cause.
• Liability of Tuviera: Whether petitioner Antonio P. Tuviera may be held solidarily liable with TAPE for nominal damages.

• Employer-Employee Relationship: Yes. The four-fold test was satisfied: TAPE selected and engaged respondent, paid him fixed monthly compensation, had the power to dismiss him, and controlled his work through bundy cards and definite work hours.
• Regular Employment: Yes. Respondent was continuously employed for five years and performed work necessary or desirable to TAPE’s business; under Article 280, an employee who has rendered at least one year of service is regular with respect to the activity in which employed.
• Independent Contractor/Program Employee: No. TAPE failed to prove that respondent was an independent contractor or that it complied with Policy Instruction No. 40’s requirements for program employees.
• Validity of Termination: Yes. Termination due to redundancy is an authorized cause under Article 283 of the Labor Code.
• Statutory Due Process: No. TAPE failed to serve written notice on respondent and the Department of Labor and Employment at least one month before the intended date of termination; the dismissal is upheld but TAPE is liable for nominal damages.
• Liability of Tuviera: No. Absent any showing that Tuviera acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE.

• Employer-Employee Relationship: The existence of an employer-employee relationship is ultimately a question of fact, and generally only questions of law are entertained in appeals by certiorari to the Supreme Court. The Court nevertheless reviewed the factual findings because the findings of the Court of Appeals and Labor Arbiter conflicted with those of the NLRC. Jurisprudence recites the four-fold test: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) the employer’s power to control the employee with respect to the means and method by which the work is to be accomplished. The most important factor is the control test: there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end. TAPE hired Servaña: when the security agency’s contract with RPN-9 expired in 1995, TAPE absorbed him or retained him as a talent. Servaña presented his identification card to prove he was a TAPE employee; an identification card in a business establishment mainly identifies the holder as a bona fide employee of the firm that issues it. TAPE paid him a fixed monthly amount of P5,444.44, which, however designated, constituted wages under the Labor Code. The 2 March 2000 Memorandum informing him of the discontinuance of his service proved TAPE’s power to dismiss. Control was manifested by the bundy cards: Servaña was required to report daily and observe definite work hours. TAPE’s certification from M-Zet Productions stated that Servaña reported for work on Thursdays from 1992 to 1995, when he was still with RPN-9, and TAPE admitted absorbing him in late 1995. All four elements were therefore present.
• Regular Employment: TAPE failed to establish that Servaña was an independent contractor. A legitimate job contractor or subcontractor must possess substantial capital or investment, carry on a distinct and independent business, undertake the job, work, or service on its own account and under its own responsibility according to its own manner and method, and be free from the control and direction of the principal in all matters connected with the performance of the work except as to the results. TAPE showed none of these conditions; it did not present a written contract specifying the performance of a specified piece of work, the nature and extent of the work, and the term and duration of the relationship. TAPE also relied on Policy Instruction No. 40, which defines program employees and requires a written contract specifying the nature of the work, rates of pay, and the programs in which the employee will work, with the contract registered with the Broadcast Media Council within three days from consummation. TAPE failed to adduce evidence of compliance; it did not present its contract with Servaña and did not comply with the registration requirement. Even if Servaña were a program employee, classifying him as an independent contractor was misplaced because a program employee is an employee, while an independent contractor is not. More importantly, Servaña had been continuously under TAPE’s employ from 1995 until his termination in March 2000, a span of five years. Regardless of whether his work was necessary or desirable to TAPE’s usual business, he was still considered a regular employee under Article 280 of the Labor Code, which provides that any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed. As a regular employee, he could not be terminated except for just cause or when authorized by law.
• Independent Contractor/Program Employee: TAPE’s claim that Servaña was an independent contractor failed for lack of proof of the requisites under Department Order No. 10 (1997): substantial capital or investment, a distinct and independent business, performance of the work on its own account and responsibility according to its own manner and method, and freedom from the principal’s control except as to results. Its alternative reliance on Policy Instruction No. 40 also failed because TAPE did not prove compliance with the written-contract and registration requirements for program employees. The Court of Appeals correctly observed that TAPE’s theories conflicted: an independent contractor is not an employee, while a talent or program employee is an employee. Thus, even granting arguendo that Servaña was a program employee, he could not be deemed an independent contractor.
• Validity of Termination: The 2 March 2000 Memorandum showed that Servaña’s termination was due to redundancy. Article 283 of the Labor Code allows an employer to terminate employment due to redundancy, among other authorized causes, by serving a written notice on the workers and the Ministry of Labor and Employment at least one month before the intended date. In case of redundancy, the affected worker is entitled to separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher. The Labor Arbiter found that Servaña was terminated upon management’s option to professionalize security services in its operations, and the Court of Appeals upheld the finding that the termination was for an authorized cause, redundancy. The termination was therefore valid as to cause.
• Statutory Due Process: Although the termination was for an authorized cause, TAPE failed to prove that it complied with the service of written notice to the Department of Labor and Employment at least one month prior to the intended date of retrenchment. Notice was served on Servaña through the 2 March 2000 Memorandum, but the effectivity of his dismissal was fifteen days from the start of the agency’s takeover on 3 March 2000; his services were severed less than the one-month requirement of the law. Under prevailing jurisprudence, termination for an authorized cause requires payment of separation pay. Procedurally, if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notice 30 days prior to the effectivity of the separation. Where the dismissal is for an authorized cause but due process was not observed, the dismissal should be upheld; the procedural infirmity cannot be cured but should not invalidate the dismissal. The employer, however, is liable for non-compliance with the procedural requirements of due process. The Court of Appeals fixed the nominal damages at P10,000.00, taking into account the circumstances, and the Supreme Court found no reversible error in that award.
• Liability of Tuviera: With respect to Tuviera, president of TAPE, absent any showing that he acted with malice or bad faith in terminating Servaña, he cannot be held solidarily liable with TAPE. The Court of Appeals’ ruling holding him jointly and severally liable was therefore modified, and he was absolved from liability.

• Four-Fold Test — In determining the existence of an employer-employee relationship, jurisprudence considers: (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 with respect to the means and method by which the work is to be accomplished. The most important factor is the control test. In this case, all four elements were present: TAPE hired or absorbed respondent, paid him fixed monthly compensation, issued the memorandum of termination, and required him to report daily and observe definite work hours through bundy cards.
• Control Test — There is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end. The Court found control from respondent’s bundy cards and required work hours during the noontime program, rejecting TAPE’s claim that it had no control over how respondent managed audiences and ensured safety.
• Regular Employment under Article 280 — An employment is deemed regular where the employee has been engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, except for fixed-project or seasonal employment. Even if the work is not necessary or desirable, any employee who has rendered at least one year of service, whether continuous or broken, is considered a regular employee with respect to the activity in which he is employed. Respondent’s continuous service from 1995 to 2000 made him regular.
• Independent Contractorship — A legitimate job contractor or subcontractor must possess substantial capital or investment, carry on a distinct and independent business, undertake the work on its own account and responsibility according to its own manner and method, and be free from the principal’s control and direction in all matters except as to results. TAPE failed to prove any of these requisites, and its lack of a written contract and noncompliance with registration requirements defeated its claim.
• Program Employee under Policy Instruction No. 40 — Program employees are those whose skills, talents, or services are engaged for a particular or specific program or undertaking, who are not required to observe normal working hours, and who may enter into employment contracts with other persons, stations, advertising agencies, or sponsoring companies. Their engagement must be under a written contract specifying the nature of work, rates of pay, and programs, and the contract must be registered with the Broadcast Media Council within three days from consummation. TAPE failed to prove compliance, and even if respondent were a program employee, he could not be classified as an independent contractor.
• Wages — Wages are remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered. The fixed monthly amount TAPE paid respondent, though called talent fees, constituted wages.
• Termination for Authorized Cause and Statutory Due Process — Under Article 283 of the Labor Code, an employer may terminate employment due to redundancy by serving written notice on the workers and the Department of Labor and Employment at least one month before the intended date; separation pay is required. If the dismissal is for an authorized cause but due process was not observed, the dismissal is upheld, but the employer is liable for nominal damages. TAPE’s notice was less than one month, so the dismissal remained valid but TAPE was liable for P10,000.00 nominal damages.
• Solidary Liability of Corporate Officers — A corporate president may not be held solidarily liable for the company’s labor obligations absent a showing that he acted with malice or bad faith in terminating the employee. Tuviera was absolved because no such showing was made.
• Employer-Employee Relationship as a Question of Fact — The existence of an employer-employee relationship is ultimately a question of fact, and generally only questions of law are entertained in appeals by certiorari to the Supreme Court. An exception exists when the findings of the Court of Appeals and Labor Arbiter conflict with those of the NLRC, as in this case.

• “The most important factor involves the control test. Under the control test, there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.” — This states the controlling test for determining the existence of an employer-employee relationship.
• “Regardless of whether or not respondent had been performing work that is necessary or desirable to the usual business of TAPE, respondent is still considered a regular employee under Article 280 of the Labor Code which provides:” — This anchors the regular-employment ruling on the one-year service rule under Article 280.
• “Where the dismissal is for an authorized cause but due process was not observed, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be liable for non-compliance with procedural requirements of due process.” — This states the consequence of a procedural due process violation in an authorized-cause termination.
• “However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE.” — This states the rule on the solidary liability of corporate officers in labor cases.

• Molina vs. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498 — Cited for the exception to the rule that only questions of law are entertained in appeals by certiorari: the Court may review factual findings when the findings of the Court of Appeals and Labor Arbiter conflict with those of the NLRC.
• Dumpit-Murillo vs. Court of Appeals, G.R. No. 164652, 8 June 2007, 524 SCRA 290 — Cited for the four-fold test in determining employer-employee relationship; the decision also cites Manila Water Company, Inc. vs. Pena, Coca-Cola Bottlers vs. Climaco, and Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame vs. Burlingame Corporation for the same test.
• Leonardo vs. Court of Appeals, G.R. No. 152459, 15 June 2006 — Cited for the control test, under which the employer’s right to control the manner and means of work establishes an employer-employee relationship.
• Villamaria vs. Court of Appeals, G.R. No. 165881, 19 April 2006 — Cited for the rule that an identification card issued by a business establishment mainly identifies the holder as a bona fide employee of the firm.
• Kay Products, Inc. vs. Court of Appeals, G.R. No. 162472, 28 July 2005, 464 SCRA 544 — Cited for the rule that a corporate officer may not be held solidarily liable for the company’s labor obligations absent malice or bad faith.

• Article 280, Labor Code — Defines regular and casual employment. It provides that an employment is regular where the employee performs activities usually necessary or desirable in the usual business or trade of the employer, except fixed-project or seasonal work; and that any employee who has rendered at least one year of service, whether continuous or broken, is considered a regular employee with respect to the activity in which employed. Applied: respondent’s five-year continuous service made him regular.
• Article 283, Labor Code — Authorizes termination due to redundancy, among other causes, by serving written notice on the workers and the Department of Labor and Employment at least one month before the intended date; requires separation pay. Applied: termination for redundancy was valid, but the notice was less than one month, so TAPE was liable for nominal damages.
• Article 279, Labor Code — Cited for the rule that a regular employee cannot be terminated except for just cause or when authorized by law. Applied: respondent, as a regular employee, could only be terminated for just or authorized cause.
• Policy Instruction No. 40, Department of Labor — Defines program employees and requires their engagement to be under a written contract specifying the nature of work, rates of pay, and programs, with the contract registered with the Broadcast Media Council within three days from consummation. Applied: TAPE failed to prove compliance, so its classification of respondent as a program employee/independent contractor failed.
• Department Order No. 10 (1997), Department of Labor and Employment — States the requisites of a legitimate job contractor or subcontractor: substantial capital or investment, distinct and independent business, performance of work on its own account and responsibility according to its own manner and method, and freedom from the principal’s control except as to results. Applied: TAPE failed to establish these requisites.

Leonardo A. Quisumbing (Chairperson), Antonio T. Carpio, Conchita Carpio Morales, and Presbitero J. Velasco, Jr. concurred.