Valencia vs. Classique Vinyl Products Corporation

The existence of an employer-employee relationship is essentially a question of fact, and the Supreme Court will not review the factual findings of labor tribunals when affirmed by the CA, absent any recognized exception; the burden of proving the elements of employer-employee relationship — selection and engagement, payment of wages, power of dismissal, and power of control — rests upon the party asserting the affirmative of the issue.

Valencia sought employment with Classique Vinyl but was directed by its personnel office to proceed to CMS, a local manpower agency, to submit employment requirements. CMS had Valencia sign an employment contract and thereafter deployed him to Classique Vinyl as a contractual employee. CMS was duly registered with the Department of Trade and Industry and licensed by the Department of Labor and Employment as a private recruitment and placement agency. The dispute centered on whether Valencia was a regular employee of Classique Vinyl — making the latter liable for illegal dismissal and monetary claims — or a contractual employee of CMS deployed to Classique Vinyl on an intermittent basis.

On March 24, 2010, Valencia filed with the Labor Arbiter a complaint against Classique Vinyl and its owner Chang and/or CMS for underpayment of salary and overtime pay, non-payment of holiday pay, service incentive leave pay, and 13th month pay, regularization, moral and exemplary damages, and attorney's fees. When Valencia asked permission from Chang to attend the hearing in connection with the complaint on April 17, 2010, Chang allegedly scolded him and told him not to report for work anymore. Valencia thereafter amended his complaint to include illegal dismissal.

In his Sinumpaang Salaysay, Valencia alleged that he applied for work with Classique Vinyl but was told by its personnel office to proceed to CMS, a local manpower agency, and submit the requirements for employment. Upon submission, CMS had him sign an employment contract but no copy was given to him. He then proceeded to Classique Vinyl for interview and started working in June 2005 as a felitizer operator. Valencia claimed he worked 12 hours a day from Monday to Saturday, receiving ₱187.52 for the first eight hours and overtime pay of ₱117.20 for the next four hours. Five months later, he was made to serve as extruder operator without a corresponding salary increase. He was neither paid holiday pay, service incentive leave pay, nor 13th month pay. Premiums for Philhealth and Pag-IBIG Fund were not paid, and his SSS premium deductions were not properly remitted. He was also being deducted ₱100.00 and ₱60.00 a week for cash bond and agency fee, respectively. Valencia stated that his pay slips bore neither the name of Classique Vinyl nor of CMS, that all machinery he operated was owned by Classique Vinyl, and that his work was regularly supervised by Classique Vinyl. He worked for Classique Vinyl for four years until his dismissal and argued that by operation of law he had attained regular employee status, with Classique Vinyl as his true employer and CMS as a mere labor-only contractor.

Classique Vinyl denied having hired Valencia, pointing to CMS as the one that actually selected, engaged, and contracted out his services. It averred that CMS deployed Valencia to Classique Vinyl only when there was an urgent specific task or temporary work, and these occasions took place sometime in the years 2005, 2007, 2009, and 2010, each deployment lasting three to four months. Classique Vinyl contended that Valencia's performance was exclusively and directly supervised by CMS and that his wages and benefits were paid by the agency. It denied dismissing Valencia, averring that on April 16, 2010, while deployed with Classique Vinyl, Valencia went on a prolonged absence for reasons known only to him. Classique Vinyl likewise asserted that as an establishment regularly employing less than 10 workers, it was exempt from paying prescribed wage orders and other benefits under the Labor Code. It insisted that CMS was an independent contractor, being duly incorporated and registered with the SEC and DOLE, and possessing substantial capital or investment. CMS, for its part, denied any employer-employee relationship with Valencia, contending that after deployment it was Classique Vinyl that exercised full control and supervision over him, and that Valencia's wages were paid by Classique Vinyl only that CMS physically handed them to Valencia.

The Labor Arbiter found that CMS was a legitimate private recruitment and placement agency, as evidenced by its Certificate of Business Name Registration from the DTI and its license from DOLE. The employment contracts between CMS and Valencia supported Classique Vinyl's assertion that Valencia was hired intermittently for fixed periods rather than continuously. The Labor Arbiter found no substantial evidence that Valencia was actually dismissed by Classique Vinyl and dismissed the complaint for lack of merit. On appeal, the NLRC applied the four-fold test and declared CMS as Valencia's employer, noting that Valencia applied with CMS, signed an employment contract with it, received wages from it, and was subject to its rules and regulations. The NLRC affirmed the Labor Arbiter's dismissal of the complaint. The CA denied Valencia's petition for certiorari and his motion for reconsideration, affirming the NLRC's ruling.

• Validity of Employment Contract: Petitioner argued that the employment contract deserves scant consideration since it was improperly filled up, with many portions left without entries, and was not notarized.
• Labor-Only Contracting Presumption: Petitioner maintained that the burden of proving CMS is a legitimate job contractor lies with respondents, and since neither Classique Vinyl nor CMS presented proof that CMS has substantial capital, CMS is presumed to be a mere labor-only contractor and Classique Vinyl, as principal, is Valencia's true employer.
• Illegal Dismissal: Petitioner argued that respondents failed to establish just or authorized cause for his dismissal, rendering the dismissal illegal.
• Monetary Claims: Petitioner invoked the principle that he who pleads payment has the burden of proving it; since respondents failed to present evidence of payment of labor standards benefits, he is entitled to recover them, with respondents held jointly and severally liable.
• Damages and Attorney's Fees: Petitioner contended that respondents should be assessed moral and exemplary damages for circumventing pertinent labor laws by preventing him from attaining regular employment status, and that he is entitled to attorney's fees for having been compelled to engage the services of counsel.

• Question of Fact: Respondents Classique Vinyl and Chang pointed out that the issues raised involve questions of fact not within the ambit of a petition for review on certiorari, and that findings of fact of labor tribunals when affirmed by the CA are generally binding on the Supreme Court.
• No Employer-Employee Relationship: Classique Vinyl denied hiring Valencia, asserting that CMS selected, engaged, and contracted out Valencia's services, deployed him only intermittently for three to four months in specific years, exclusively supervised his performance, and paid his wages and benefits.
• Legitimate Contractor: Classique Vinyl insisted that CMS is an independent contractor duly incorporated and registered with the SEC and DOLE, possessing substantial capital or investment in connection with the work performed.
• Small Establishment Exemption: Classique Vinyl averred that it regularly employs less than 10 workers and is therefore exempt from paying prescribed wage orders and other benefits under the Labor Code.
• No Dismissal: Classique Vinyl denied dismissing Valencia, averring that he went on a prolonged absence from work on April 16, 2010 for reasons known only to him.
• CMS's Position: CMS denied any employer-employee relationship with Valencia, contending that after deployment, Classique Vinyl exercised full control and supervision over him, and that Valencia's wages were paid by Classique Vinyl, with CMS merely physically handing them to Valencia.

• Employer-Employee Relationship: Whether an employer-employee relationship existed between Valencia and Classique Vinyl.
• Labor-Only Contracting: Whether CMS is a labor-only contractor such that Classique Vinyl, as principal, should be deemed Valencia's true employer.
• Illegal Dismissal: Whether Valencia was illegally dismissed by Classique Vinyl.
• Monetary Claims: Whether Valencia is entitled to his monetary claims, moral and exemplary damages, and attorney's fees.

• Employer-Employee Relationship: No. The existence of an employer-employee relationship is essentially a question of fact, and the Court is not a trier of facts; the uniform findings of the Labor Arbiter, NLRC, and CA are binding and conclusive, none of the recognized exceptions applying.
• Labor-Only Contracting: No. CMS's registration with the DTI and its license from DOLE as a private recruitment and placement agency prevented the legal presumption of it being a mere labor-only contractor from arising.
• Illegal Dismissal: Moot. The Court found no necessity to dwell on this issue, the absence of an employer-employee relationship between Valencia and Classique Vinyl having been established.
• Monetary Claims: Moot. The Court found no necessity to dwell on this issue for the same reason, and Valencia's money claims had been debunked by the labor tribunals and the CA even as against CMS.

• Employer-Employee Relationship: The issue of whether an employer-employee relationship existed is essentially a question of fact, and the Court is not a trier of facts. Factual findings of labor tribunals, when affirmed by the CA, are generally binding and conclusive. While there are recognized exceptions — such as when the conclusion is grounded on speculation, when the inference is manifestly mistaken, when there is grave abuse of discretion, when the judgment is based on a misapprehension of facts, when findings are conflicting, when the CA went beyond the issues, when CA findings are contrary to the trial court's, when findings are conclusions without citation of specific evidence, when the facts in the petition are not disputed, and when CA findings are premised on the supposed absence of evidence and contradicted by the record — none of these exceptions applies. Even on the merits, the Court was not inclined to depart from the uniform findings of the three lower tribunals. The burden of proof in labor cases rests upon the party asserting the affirmative of an issue, and the quantum of proof required is substantial evidence. Since Valencia claimed to be an employee of Classique Vinyl, it was incumbent upon him to prove the four-fold test elements: (1) selection and engagement, (2) payment of wages, (3) power of dismissal, and (4) power of control. Valencia failed to present competent evidence. His own allegations militated against his claim: he admitted that his application was received and processed by CMS, which had him sign an employment contract that is actually a contract between him and CMS. His pay slips did not bear Classique Vinyl's name. His claim that his work was supervised by Classique Vinyl was a self-serving assertion. The employment contract he signed with CMS categorically granted CMS both the power of control and the power of dismissal. The lack of notarization of the employment contract did not adversely affect its veracity, since Valencia did not deny having signed it.

• Labor-Only Contracting: Generally, the presumption is that a contractor is a labor-only contractor unless it overcomes the burden of proving that it has substantial capital, investment, tools, and the like. Here, Classique Vinyl presented CMS's Certificate of Registration with the DTI and its license as a private recruitment and placement agency from DOLE. While these documents are not conclusive evidence of CMS's status as a legitimate contractor, the fact of registration prevented the legal presumption of CMS being a mere labor-only contractor from arising. In any event, even in labor-only contracting — where the statute creates an employer-employee relationship to prevent circumvention of labor laws, making the principal employer solidarily liable with the labor-only contractor — the facts of this case failed to establish any circumvention of labor laws that would call for the creation of an employer-employee relationship between Classique Vinyl and Valencia. Valencia's money claims had been debunked by the labor tribunals and the CA even as against CMS, and the Court was not inclined to disturb those findings.

• Illegal Dismissal: Given the determination that no employer-employee relationship existed between Valencia and Classique Vinyl, the Court found no necessity to dwell on whether Valencia was illegally dismissed by Classique Vinyl, as that issue hinged on the existence of such relationship.

• Monetary Claims: For the same reason, the Court found no necessity to address whether Classique Vinyl was liable for Valencia's monetary claims. Moreover, Valencia's money claims had been debunked by the labor tribunals and the CA even as against CMS, and the Court was not inclined to disturb those findings.

• Four-Fold Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by the presence of four elements: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. The burden of proving these elements rests upon the party asserting the affirmative of the issue, and the quantum of proof required in labor cases is substantial evidence. In this case, Valencia failed to present competent evidence of any of these elements as against Classique Vinyl; his own allegations — that CMS processed his application, had him sign an employment contract, and the contract granted CMS the power of control and dismissal — negated the existence of such elements as against Classique Vinyl.

• Presumption of Labor-Only Contracting and Effect of Registration — Generally, a contractor is presumed to be a labor-only contractor unless it overcomes the burden of proving that it has substantial capital, investment, tools, and the like. However, the fact of a contractor's registration with the DTI and its license from DOLE as a private recruitment and placement agency, while not conclusive evidence of legitimate contractor status, prevents the legal presumption of it being a mere labor-only contractor from arising. In this case, CMS's Certificate of Registration with the DTI and its DOLE license sufficed to prevent the labor-only contracting presumption from arising.

• Binding Nature of Factual Findings in Labor Cases — The Supreme Court is not a trier of facts and will not review the factual findings of lower tribunals, as these are generally binding and conclusive, especially when affirmed by the CA. Recognized exceptions exist — including when findings are grounded on speculation, when the inference is manifestly mistaken, when there is grave abuse of discretion, when the judgment is based on a misapprehension of facts, when findings are conflicting, when the CA went beyond the issues, when CA findings are contrary to the trial court's, when findings are conclusions without citation of specific evidence, when the facts in the petition are undisputed, and when CA findings are premised on supposed absence of evidence and contradicted by the record — but none applied here.

• Effect of Lack of Notarization on a Signed Contract — The lack of notarization of an employment contract does not adversely affect its veracity and effectiveness when the signatory does not deny having signed the same. In this case, Valencia did not deny signing the employment contract with CMS, so its lack of notarization was not a ground to disregard it.

• "The Court is not a trier of facts and will not review the factual findings of the lower tribunals as these are generally binding and conclusive." — This passage states the controlling rule on the binding nature of factual findings of labor tribunals when affirmed by the CA, the procedural ground on which the petition was denied.

• "the burden to prove the elements of an employer-employee relationship, viz.: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control, lies upon Valencia." — This passage articulates the four-fold test and allocates the burden of proof to the party asserting the existence of an employer-employee relationship, a foundational principle in labor law adjudication.

• "such fact of registration of CMS prevented the legal presumption of it being a mere labor-only contractor from arising." — This passage defines the evidentiary effect of a contractor's government registration on the presumption of labor-only contracting, clarifying that while registration is not conclusive proof of legitimate contractor status, it suffices to prevent the statutory presumption from arising.

• Legend Hotel (Manila) vs. Realuyo, 691 Phil. n6, 236 (2012) — Cited for the proposition that the issue of whether an employer-employee relationship existed is essentially a question of fact.
• Cavite Apparel, Incorporated vs. Marquez, 703 Phil. 46, 53 (2013) — Cited for the rule that the Court is not a trier of facts and that factual findings of lower tribunals are generally binding and conclusive.
• Pascual vs. Burgos, G.R. No. 171722, January 11, 2016, 778 SCRA 189, 205-206 — Cited for the enumerated exceptions to the general rule that factual findings of labor tribunals affirmed by the CA are binding.
• Tenazas vs. R. Villegas Taxi Transport, G.R. No. 192998, April 2, 2014, 720 SCRA 467, 480-481 — Cited for the substantial evidence standard in labor cases and the rule that the burden of proof rests upon the party asserting the affirmative of an issue; also cited for the proposition that any competent and relevant evidence may be admitted to prove the employer-employee relationship.
• Javier vs. Fly Ace Corporation, 682 Phil. 359, 372 (2012) — Cited for the rule that the claimant needs to show by substantial evidence that he was indeed an employee of the company against which he claims illegal dismissal.
• Gelos vs. Court of Appeals, 284-A Phil. 114, 120 (1992) — Cited for the proposition that the lack of notarization of an employment contract does not adversely affect its veracity and effectiveness when the signatory does not deny having signed it.
• Vinoya vs. National Labor Relations Commission, 381 Phil. 460, 480 (2000) — Cited for the Court's judicial notice of the practice of employers coursing wages through a purported contractor to evade liabilities under the Labor Code; distinguished in this case because the circumstances did not warrant applying that principle.
• Garden of Memories Park and Life Plan, Inc. vs. National Labor Relations Commission, 681 Phil. 299, 311 (2012) — Cited for the presumption that a contractor is a labor-only contractor unless it proves it has substantial capital, investment, tools, and the like.
• Babas vs. Lorenzo Shipping Corporation, 653 Phil. 421, 433 (2010) — Cited for the proposition that registration of a contractor prevents the legal presumption of it being a mere labor-only contractor from arising.
• 7K Corporation vs. National Labor Relations Commission, 537 Phil. 664, 680-681 (2006) — Cited for the doctrine that in labor-only contracting, the statute creates an employer-employee relationship to prevent circumvention of labor laws, making the principal employer solidarily liable with the labor-only contractor.
• Pangilinan vs. General Milling Corporation, G.R. No. 149329, July 12, 2004 — Cited by the Labor Arbiter for the rule that there is nothing essentially contradictory between a definite period of employment and the nature of the employee's duties, even where the duties are usually necessary or desirable in the employer's usual business.

Chief Justice Maria Lourdes P.A. Sereno (Chairperson), Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Estela M. Perlas-Bernabe, and Associate Justice Alfredo Benjamin S. Caguioa.