Teng vs. Pahagac

A motion for reconsideration of a Voluntary Arbitrator's decision is not prohibited under Article 262-A of the Labor Code, the deletion of the word "unappealable" from the original Article 263 signifying legislative intent to allow such recourse within the 10-day reglementary period.

Albert Teng Fish Trading is a deep sea fishing business owned by Albert Teng, with Emilia Teng-Chua serving as its manager. Teng claimed he customarily entered into joint venture agreements with master fishermen (maestros)—skilled experts in deep sea fishing—who managed each fishing venture, including the hiring of crew members. The respondent workers—Hernan Badilles, Orlando Layese, Eddie Nipa, Alfredo Pahagac, and Roger Pahagac—were engaged as checkers aboard the fishing boats. The dispute centers on whether the respondent workers were Teng's employees or merely participants in a joint venture arrangement with the maestros, and whether the Voluntary Arbitrator's decision dismissing their complaint had become final and executory.

Albert Teng Fish Trading is a business engaged in deep sea fishing, owning boats (basnig), equipment, and other fishing paraphernalia. Albert Teng owned the business, with Emilia Teng-Chua serving as its manager. Teng claimed that he customarily entered into joint venture agreements with master fishermen (maestros)—skilled experts in deep sea fishing—who took charge of managing each fishing venture, including the hiring of crew members. According to Teng, the maestros hired the respondent workers—Hernan Badilles, Orlando Layese, Eddie Nipa, Alfredo Pahagac, and Roger Pahagac—as checkers to determine the volume of fish caught in every fishing voyage. Teng maintained that his role was limited to providing the necessary capital, tools, and equipment, consisting of basnig, gears, fuel, food, and other supplies.

The respondent workers, for their part, alleged that Teng directly hired them without any written employment contract to serve as his "eyes and ears" aboard the fishing boats. Their tasks included classifying the fish caught by bañera, reporting to Teng via radio communication the classes and volume of each catch, receiving instructions from him as to where and when to unload the catch, preparing the list of provisions requested by the maestro and the mechanic for Teng's approval, and procuring the approved items. They claimed to have received regular monthly salaries, 13th month pay, Christmas bonus, and incentives in the form of shares in the total volume of fish caught. The worksheet showed that the respondent workers received uniform amounts within a given year, which amounts annually increased until the termination of their employment in 2002. For 13 years, they received wages on a regular basis at the ratio of one bañera for every 30 bañera of fish caught, in addition to their shares in the fish caught. Teng's company also issued identification cards to the respondent workers bearing their names as employees and Teng's signature as the employer.

Sometime in September 2002, Teng expressed doubts about the correct volume of fish caught in every fishing voyage. In December 2002, Teng informed the respondent workers that their services had been terminated. The respondent workers alleged that Teng summarily dismissed them on suspicion that they were not reporting the correct volume of fish caught—a fact Teng never denied. On February 20, 2003, the respondent workers filed a complaint for illegal dismissal before the NCMB, Region IX, Zamboanga City.

The Voluntary Arbitrator rendered a decision on May 30, 2003, dismissing the complaint and declaring that no employer-employee relationship existed between Teng and the respondent workers. The respondent workers received the decision on June 12, 2003, and filed a motion for reconsideration, which the VA denied on June 27, 2003, on the ground that the 1989 Procedural Guidelines do not provide the remedy of a motion for reconsideration. The respondent workers received the denial on July 8, 2003, and elevated the case to the Court of Appeals on July 21, 2003. The CA reversed the VA's decision on September 21, 2004, finding sufficient evidence of an employer-employee relationship and declaring the dismissal illegal. Teng's motion for reconsideration was denied by the CA on September 1, 2005.

• Finality of VA Decision: Petitioner contended that the VA's decision is not subject to a motion for reconsideration in the absence of any specific provision allowing this recourse under Article 262-A of the Labor Code, citing the 1989 Procedural Guidelines which do not provide for such remedy. Petitioner argued that after the lapse of 10 days from receipt, the VA's decision becomes final and executory unless an appeal is taken, and since the respondent workers opted to move for reconsideration instead of appealing, the 10-day period continued to run and the decision had already become final by the time they elevated the case to the CA on July 21, 2003.
• No Employer-Employee Relationship: Petitioner maintained that no employer-employee relationship existed between him and the respondent workers, as what he entered into were joint venture agreements with the maestros, where his role was only to provide basnig, gears, nets, and other tools and equipment for every fishing voyage.

• Motion for Reconsideration of VA Decision: Whether a motion for reconsideration of a Voluntary Arbitrator's decision is prohibited under Article 262-A of the Labor Code and the 1989 Procedural Guidelines.
• Employer-Employee Relationship: Whether an employer-employee relationship existed between Teng and the respondent workers.

• Motion for Reconsideration of VA Decision: No, the motion for reconsideration is not prohibited. Article 262-A of the Labor Code, which deleted the word "unappealable" from the original Article 263, indicates legislative intent to allow a motion for reconsideration within the 10-day reglementary period.
• Employer-Employee Relationship: Yes. An employer-employee relationship existed between Teng and the respondent workers, the element of control being present and the maestros being labor-only contractors without substantial capital or investment, rendering Teng the direct employer.

• Motion for Reconsideration of VA Decision: The Court examined the textual evolution from Article 263 to Article 262-A of the Labor Code. The original Article 263 stated that voluntary arbitration awards "shall be final, unappealable, and executory." Republic Act No. 6715 amended this provision into Article 262-A, which states that the award or decision "shall be final and executory after ten (10) calendar days from receipt." The deliberate deletion of the word "unappealable" indicated legislative intent to allow recourse via motion for reconsideration or petition for review under Rule 43. The Court had previously recognized this intent in Imperial Textile Mills, Inc. vs. Sampang and Coca-Cola Bottlers Phil., Inc., Sales Force Union-PTGWO-Balais vs. Coca-Cola Bottlers Philippines, Inc., ruling that the VA's decision may still be reconsidered on the basis of a motion for reconsideration seasonably filed within 10 days from receipt, and that the seasonable filing thereof is a mandatory requirement to forestall finality. The 1989 Procedural Guidelines themselves, in Section 6, Rule VII, contemplated that the decision would become final unless a motion for reconsideration or petition for review was filed within the 10-day period. The Court further noted that Section 7, Rule XIX of DO No. 40-03 and Section 7 of the 2005 Procedural Guidelines, which expressly prohibited motions for reconsideration, exceeded the Department of Labor's rule-making authority by going against the legislative intent behind Article 262-A. These rules denied the VA the opportunity to correct errors and compelled premature judicial intervention, contrary to the doctrine of exhaustion of administrative remedies. Since the respondent workers seasonably filed their motion for reconsideration within the 10-day period, the VA's decision had not become final, and the CA properly took cognizance of the case.

• Employer-Employee Relationship: The Court found sufficient evidence establishing an employer-employee relationship. First, Teng's company issued identification cards to the respondent workers bearing their names as employees and Teng's signature as employer—IDs being generally issued to identify the holder as a bona fide employee. Second, for 13 years, the respondent workers received regular wages on a uniform basis that annually increased, which was inconsistent with Teng's claim that these were mere commissions, as it would mean the fish caught throughout the year was uniform and increased in number each year. Third, and most importantly, the element of control was present: Teng not only owned the tools and equipment but directed how the respondent workers were to perform their job as checkers, who acted as his "eyes and ears" in every fishing expedition. The Court further held that even if the maestros hired the respondent workers, the maestros were labor-only contractors under Article 106 of the Labor Code and DO No. 18-02, as they lacked substantial capital or investment and the workers performed activities directly related to Teng's main business. Teng admitted he solely provided the capital and equipment, while the maestros merely supplied the workers. The power of control was lodged with Teng, not the maestros. A finding of labor-only contracting is equivalent to a finding that an employer-employee relationship exists between the principal and the workers. As regular employees, the respondent workers were entitled to all benefits appurtenant to regular employment. The dismissal was declared illegal because Teng failed to prove a just cause under Article 282 of the Labor Code; unsubstantiated suspicion that the workers were not reporting the correct volume of fish caught is not a just cause for termination. The employer bears the burden of proving the validity of the dismissal, and failure to discharge this burden necessarily means the dismissal was illegal.

• Control Test — The element of control is the most critical indicator of the existence of an employer-employee relationship. An employer-employee relationship exists where the person for whom the services are performed retains the right to control not only the end to be achieved but also the means and methods by which it is accomplished. The Court applied this test by finding that Teng directed how the respondent workers were to perform their job as checkers and that they acted as his "eyes and ears" in every fishing expedition.

• Labor-Only Contracting — Under Article 106 of the Labor Code and DO No. 18-02, labor-only contracting exists where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job for a principal, and either (i) the contractor does not have substantial capital or investment and the workers perform activities directly related to the principal's main business, or (ii) the contractor does not exercise the right to control over the performance of the work. In such cases, the contractor is considered merely an agent of the employer, who is responsible to the workers as if directly employed. The Court found the maestros to be labor-only contractors, making Teng the direct employer of the respondent workers.

• Exhaustion of Administrative Remedies — Relief must first be obtained in an administrative proceeding before a remedy will be supplied by the courts. Every opportunity must be given to the administrative agency to resolve the matter and exhaust all opportunities for resolution before resorting to the courts. The Court applied this doctrine to hold that a motion for reconsideration of a VA's decision is the more appropriate remedy, consistent with the legislative intent behind Article 262-A, and that administrative rules prohibiting such motions went against this doctrine.

• Burden of Proof in Illegal Dismissal — The employer bears the burden of proving that the dismissal was for a just or authorized cause. Failure to discharge this burden necessarily means the dismissal was unjustified and illegal. Unsubstantiated suspicion is not a just cause for termination under Article 282 of the Labor Code.

• "Notably, Article 262-A deleted the word 'unappealable' from Article 263. The deliberate selection of the language in the amendatory act differing from that of the original act indicates that the legislature intended a change in the law, and the court should endeavor to give effect to such intent." — This passage articulates the ratio decidendi on the first issue, applying the principle of statutory construction to the amendment of Article 263 into Article 262-A.

• "By disallowing reconsideration of the VA's decision, Section 7, Rule XIX of DO 40-03 and Section 7 of the 2005 Procedural Guidelines went directly against the legislative intent behind Article 262-A of the Labor Code. These rules deny the VA the chance to correct himself and compel the courts of justice to prematurely intervene with the action of an administrative agency entrusted with the adjudication of controversies coming under its special knowledge, training and specific field of expertise." — This passage explains why the administrative rules prohibiting motions for reconsideration are invalid, grounding the ruling in the doctrine of exhaustion of administrative remedies and the limits of agency rule-making authority.

• "To consider the respondent workers as employees of the maestros would mean that Teng committed impermissible labor-only contracting." — This marks the pivotal shift in the Court's analysis from the control test to the labor-only contracting framework, establishing the equivalence between a finding of labor-only contracting and a finding of direct employer-employee relationship.

• "Unsubstantiated suspicion is not a just cause to terminate one's employment under Article 282 of the Labor Code. To allow an employer to dismiss an employee based on mere allegations and generalities would place the employee at the mercy of his employer, and would emasculate the right to security of tenure." — This defines the controlling principle on the illegality of the dismissal, anchoring the ruling on security of tenure and the employer's burden of proof.

• Imperial Textile Mills, Inc. vs. Sampang, G.R. No. 94960, March 8, 1993, 219 SCRA 651 — Controlling precedent followed. The Court recognized that under Article 262-A, a VA's decision may still be reconsidered on the basis of a motion for reconsideration duly filed during the 10-day period.

• Coca-Cola Bottlers Phil., Inc., Sales Force Union-PTGWO-Balais vs. Coca-Cola Bottlers Philippines, Inc., G.R. No. 155651, July 28, 2005, 464 SCRA 507 — Followed. The Court ruled that the VA's decision may still be reconsidered on the basis of a motion for reconsideration seasonably filed within 10 days from receipt, and that the seasonable filing of a motion for reconsideration is a mandatory requirement to forestall finality.

• Industrial Enterprises, Inc. vs. Court of Appeals, G.R. No. 88550, April 18, 1990, 184 SCRA 426 — Cited for the doctrine that relief must first be obtained in an administrative proceeding before a remedy will be supplied by the courts.

• Philippine Apparel Workers Union vs. NLRC, No. L-50320, July 31, 1981, 106 SCRA 444 — Cited for the principle that an implementing agency is restricted from going beyond the terms of the law it seeks to implement and cannot exceed the statutory authority granted by the legislature.

• Pascua, et al. vs. NLRC, et al., G.R. No. 123518, March 13, 1998, 287 SCRA 554 — Cited for the twofold requirement in dismissal cases: substantive (just or authorized cause) and procedural (due process — the opportunity to be heard and to defend oneself).

• Article 262-A, Labor Code — Provides that the award or decision of a Voluntary Arbitrator shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties. The Court interpreted the deletion of the word "unappealable" from the original Article 263 as legislative intent to allow motions for reconsideration within the 10-day period.

• Article 106, Labor Code — Defines labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment and the workers are performing activities directly related to the principal business. The Court applied this provision to find that the maestros were labor-only contractors, making Teng the direct employer of the respondent workers.

• Article 282, Labor Code — Enumerates the just causes for termination by employer: serious misconduct, gross neglect, fraud, commission of a crime, and analogous causes. The Court held that unsubstantiated suspicion does not fall under any of these just causes.

• Section 6, Rule VII, 1989 Procedural Guidelines — Provides that the decision of the Voluntary Arbitrator becomes final and executory after ten (10) calendar days from receipt. The Court interpreted this as contemplating the filing of a motion for reconsideration or petition for review within the same period to forestall finality.

• Section 7, Rule XIX, DO No. 40-03 and Section 7, 2005 Procedural Guidelines — Both provide that the VA's decision is not subject to a motion for reconsideration. The Court held these provisions invalid as they exceeded the Department of Labor's rule-making authority by going against the legislative intent behind Article 262-A.

• Section 5, DO No. 18-02 — Implements Article 106 of the Labor Code by prohibiting labor-only contracting and defining its elements. The Court applied this to find the maestros were labor-only contractors lacking substantial capital and exercising no control over the workers.

Conchita Carpio Morales, Lucas P. Bersamin, Martin S. Villarama, Jr., and Maria Lourdes P. A. Sereno concurred. No separate concurring opinions were noted.