Wack Wack Golf & Country Club vs. NLRC

A release and quitclaim voluntarily executed by responsible employees who fully understood its consequences, for credible and reasonable consideration, is valid and binding, and the employees cease to be employees of the employer; consequently, no illegal dismissal cause of action lies against that employer where the workers were hired and dismissed by an independent contractor.

Wack Wack Golf & Country Club is a golf and country club that employed Martina G. Cagasan as Personnel Officer and Carmencita F. Dominguez in its Administrative Department. Business Staffing and Management, Inc. (BSMI) is a corporation engaged as a Management Service Consultant undertaking and managing specialized and technical projects for a fee. The Wack Wack Golf Employees Union represented employees in the bargaining unit. The dispute concerns the legal consequences of a special separation package negotiated between Wack Wack and the Union and the subsequent management contract with BSMI.

Wack Wack Golf & Country Club operated a clubhouse and employed Martina G. Cagasan as Personnel Officer and Carmencita F. Dominguez in its Administrative Department. On November 29, 1996, a fire destroyed a large portion of the main clubhouse, including its kitchen. In view of the reconstruction of the whole clubhouse complex, Wack Wack filed a notice with the Department of Labor and Employment on April 14, 1997 that it was going to suspend the operations of the Food and Beverage (F&B) Department one month thereafter. Notices were sent to 54 employees out of a complement of 85 in the department, informing them that they need not report for work anymore after April 14, 1997 but that they would still be paid their salaries up to May 14, 1997, and that they would be informed once full operations in Wack Wack resume.

The Wack Wack Golf Employees Union branded the suspension as arbitrary, discriminatory, and constitutive of union-busting, and filed a notice of strike with the DOLE’s National Conciliation and Mediation Board. Meetings between Wack Wack officers and the Union, headed by its President Crisanto Baluyot, Sr., assisted by counsel Atty. Pedro T. De Quiroz, led to an amicable settlement. An Agreement was forged offering a special separation benefit/retirement package for interested Wack Wack employees, especially those in the F&B Department. The package was equivalent to one-and-one-half months salary for every year of service, regardless of the number of years of service, plus the cash equivalent of unused vacation and sick leave credits, proportionate 13th month pay, and other benefits, if any, computed without premium. The Agreement also made the package available to other bargaining-unit employees who may or may not be affected by future similar suspensions, recognized management’s sole prerogative to suspend part or all of its operations, provided that if a sufficient number of non-F&B employees applied within two months the Club might no longer formally notify the DOLE, and stated that qualified separated employees would be considered on a priority basis for employment by concessionaires and/or contractors, and even by the Club upon full resumption of operations, upon the Union’s recommendation.

Respondent Carmencita F. Dominguez, then working in the Administrative Department, was the first to avail of the special separation package. Computed at one-and-one-half months for every year of service, her separation pay amounted to ₱91,116.84, while economic benefits amounted to ₱6,327.53. On September 18, 1997, Dominguez signed a Release and Quitclaim in favor of Wack Wack. Respondent Martina B. Cagasan, Wack Wack’s Personnel Officer, likewise volunteered to avail of the separation package. On September 30, 1997, she received ₱469,495.66 as separation pay and other economic benefits amounting to ₱17,010.50, and signed a Release and Quitclaim on the same date. The last to avail was Crisanto Baluyot, Sr., who in a letter dated January 16, 1998 to Mr. Bienvenido Juan, Administrative Manager of Wack Wack, signified his willingness to avail of the early retirement package; he received ₱688,290.30 and signed a Release and Quitclaim on May 14, 1998. The applications for separation were similarly worded and registered the employees’ desire to be separated from the Club and receive the benefits under the package.

On October 15, 1997, Wack Wack entered into a Management Contract with Business Staffing and Management, Inc. (BSMI), a corporation engaged as a Management Service Consultant undertaking and managing for a fee projects that are specialized and technical in character, such as marketing, promotions, merchandising, financial management, and operation management. BSMI was to provide management services for Wack Wack in golf operations management; management and maintenance of building facilities; management of food and beverage operation; management of materials and procurement functions; and administrative and support services. Pursuant to the Agreement, retired Wack Wack employees were given priority by BSMI in hiring because of their experience. On October 21, 1997, Cagasan and Dominguez filed their respective applications for employment with BSMI. They were eventually hired by BSMI to their former positions in Wack Wack as project employees and were issued probationary contracts. Wack Wack also engaged other contractors: Skills and Talent Employment Promotion, with 90 workers; Marvel Manpower Agency, with 19 employees; City Service Corporation, for janitorial services; and Microstar Business and Management Services, Inc., with 15 employees in the Finance and Accounting departments.

Due to these various management service contracts, BSMI undertook an organizational analysis and manpower evaluation to determine its efficacy and to streamline its operations. In the course of its assessment, BSMI saw that the positions of Cagasan and Dominguez were redundant. Cagasan’s tasks as personnel officer were likewise being taken care of by the different management service contractors, while Dominguez’s work as telephone operator was taken over by the personnel of the accounting department. Thus, in separate letters dated February 27, 1998, the services of Dominguez and Cagasan were terminated. With respect to Baluyot, he applied for the position of Chief Porter on May 12, 1998; the position was among those recommended to be abolished by BSMI, so he was offered the position of Caddie Master Aide with a starting salary of ₱5,500.00 a month, which he declined. Pending Wack Wack’s approval of the proposed abolition of the position of Chief Porter, Baluyot was temporarily accepted to the position with a monthly salary of ₱12,000.00. In July 1998, Baluyot decided not to accept the position of Caddie Master Aide; thus, BSMI continued with its plan to abolish the position of Chief Porter and Baluyot was dismissed from the service.

The three employees thereafter filed their respective complaints with the National Labor Relations Commission for illegal dismissal and damages against Wack Wack and BSMI. They averred that they were dismissed without cause and that they accepted the separation package upon the assurance that they would be given their former work and assignments once the F&B Department of Wack Wack resumed its operations. Wack Wack and BSMI alleged that the dismissals were made pursuant to a study and evaluation of the different jobs and positions and that the positions were found to be redundant. The Labor Arbiter found that the dismissal of Dominguez and Cagasan was for a valid and authorized cause, and dismissed their complaints, but found that Baluyot’s dismissal was illegal because the functions of Chief Porter and Caddie Master Aide were one and the same.

• Grave Abuse of Discretion — Reinstatement under the Agreement: Petitioner maintained that the NLRC committed grave abuse of discretion in holding that Cagasan and Dominguez regained their jobs or employment pursuant to the Agreement between Wack Wack and the Union.
• BSMI’s Status: Petitioner argued that the NLRC gravely abused its discretion in ruling that BSMI was not an independent contractor but a mere supplier of workers to Wack Wack.
• Liability for Reinstatement and Backwages: Petitioner asserted that the NLRC gravely abused its discretion in holding Wack Wack liable for reinstatement and backwages despite the absence of an employer-employee relationship between Wack Wack and Cagasan and Dominguez.
• Procedural Error and Substantial Justice: Petitioner pointed out that the CA dismissed its petition for failure to attach an affidavit of service and for insufficient verification/certification due to lack of proof of authority of its general manager, while the CA admitted BSMI’s separate petition filed one day late in the interest of substantial justice; petitioner urged relaxation of technical rules.
• No Cause of Action: Petitioner asserted that Cagasan and Dominguez were no longer employees of Wack Wack when they filed their complaints, so they had no cause of action for illegal dismissal and damages.

• Cagasan and Dominguez — Illegal Dismissal and Assurances: They averred that they were dismissed without cause and that they accepted the separation package upon the assurance that they would be given their former work and assignments once the F&B Department resumed operations.
• Cagasan and Dominguez — Agreement and Connivance: They anchored their claims on the Agreement between the Union and management, asserting that they were promised rehiring upon full resumption of Wack Wack operations and that Wack Wack and BSMI connived to render the Agreement useless.
• BSMI — No Guaranty of Perpetual Employment: BSMI argued that there was no guaranty of perpetual employment in favor of the complainants under the Agreement.
• BSMI — Validity of Redundancy: BSMI maintained that the termination of the complainants’ employment based on redundancy was legal and valid, and that the NLRC gravely abused its discretion in ruling otherwise.
• BSMI — Independent Contractor and Non-Liability: BSMI asserted that it was an independent contractor and that it, not Wack Wack, had an employer-employee relationship with the complainants; it shared Wack Wack’s view that the NLRC resolutions were tainted with legal infirmities.
• NLRC — Labor-Only Contractor: The NLRC posited that BSMI was merely a supplier of workers or a labor-only contractor, so Wack Wack remained the principal employer and was liable for reinstatement and backwages.

• Procedural Dismissal and Substantial Compliance: Whether the CA erred in dismissing Wack Wack’s petition for certiorari for failure to attach an affidavit of service and for insufficient verification/certification against forum shopping due to lack of proof of authority of the general manager.
• Validity of Quitclaims and Separation Package: Whether Cagasan and Dominguez ceased to be employees of Wack Wack after voluntarily availing of the special separation package and signing release and quitclaims.
• Guaranty of Employment under the Agreement: Whether the Agreement between Wack Wack and the Union assured Cagasan and Dominguez continuous employment or reinstatement in Wack Wack.
• Status of BSMI: Whether BSMI is an independent contractor or a labor-only contractor.
• Employer-Employee Relationship and Liability: Whether Wack Wack is liable for reinstatement and backwages of Cagasan and Dominguez absent an employer-employee relationship.

• Procedural Dismissal and Substantial Compliance: Yes, the CA erred. The general manager was authorized to sign the verification/certification, and the subsequent submission of proof of authority constituted substantial compliance; procedural rules may be relaxed in the interest of substantial justice.
• Validity of Quitclaims and Separation Package: Yes, they ceased to be employees. The quitclaims were voluntarily executed with full understanding and for credible and reasonable consideration, making them valid and binding.
• Guaranty of Employment under the Agreement: No. The Agreement did not assure continuous employment; it only gave qualified separated employees priority in hiring by concessionaires or contractors such as BSMI.
• Status of BSMI: BSMI is an independent contractor. It carried on an independent business, had substantial capital, and was recognized as an independent contractor; the employer-employee relationship existed between BSMI and the respondents.
• Employer-Employee Relationship and Liability: No. There being no employer-employee relationship between Wack Wack and Cagasan and Dominguez, they had no cause of action for illegal dismissal and damages against Wack Wack, and Wack Wack could not be ordered to reinstate them or pay backwages.

• Procedural Dismissal and Substantial Compliance: The CA dismissed Wack Wack’s certiorari for failure to attach an affidavit of service under Section 11, Rule 13, 1997 Rules, and because the verification/certification was signed by the general manager without proof of authority. Under Novelty Philippines, Inc. vs. Court of Appeals, the general manager is authorized to sue on behalf of the corporation and sign the verification/certification, being in the best position to know corporate affairs. The subsequent submission of the requisite proof of authority constituted substantial compliance. Rules of procedure are meant to promote, not frustrate, substantial justice; while swift unclogging of dockets is laudable, it must not be at the expense of substantial justice. The CA therefore committed reversible error. Although remand to the CA would be ordinary recourse, the records were before the Court, and the merits constituted special or compelling reasons to resolve the case to ensure harmony in rulings and expediency.
• Validity of Quitclaims and Separation Package: The respondents availed of the special separation package offered by Wack Wack after negotiations between Wack Wack and the Union to avert labor unrest due to closure. Although priority was given to F&B employees, the package was also offered to other employees who wished to avail due to reconstruction. Cagasan and Dominguez did not belong to F&B but voluntarily applied using similarly worded applications expressing desire to be separated and receive benefits. They signed release and quitclaims after receiving money benefits. They were not unlettered persons needing special protection; they held responsible positions and presumably understood the documents. There was no showing of deceit or coercion. They received hefty separation pay, indicating valuable consideration. Under Periquet vs. NLRC, not all waivers and quitclaims are invalid; if voluntarily entered into and reasonable, they are binding and may not be disowned simply because of a change of mind. Only waivers wangled from unsuspecting or gullible persons or unconscionable settlements are annulled. Thus, the quitclaims were valid and binding compromise agreements. When they voluntarily signed and accepted the package, they ceased to be employees of Wack Wack.
• Guaranty of Employment under the Agreement: The Agreement did not contain any assurance of continuous employment in Wack Wack. It provided that qualified employees separated under the package would be considered on a priority basis for employment by concessionaires and/or contractors, and even by the Club upon full resumption of operations, upon recommendation of the Union. It also allowed the Club to persuade an applicant to remain or be assigned to another position. These provisions gave priority, not a guarantee of reemployment or reinstatement. Therefore, no guaranty of continuous employment existed.
• Status of BSMI: The NLRC ruled that BSMI was a mere supplier of workers or labor-only contractor, making Wack Wack the principal employer. The Supreme Court disagreed. An independent contractor is one who undertakes job contracting: (a) carries on an independent business and undertakes contract work on own account under own responsibility according to own manner and method, free from control and direction of employer/principal in all matters connected with performance except as to results; and (b) has substantial capital or investment in tools, equipment, machineries, work premises and other materials necessary in conduct of business. Jurisprudence lists factors: whether contractor carries on independent business; nature and extent of work; skill required; term and duration; right to assign performance; control and supervision; employer’s power over hiring, firing, payment of contractor’s workers; control of premises; duty to supply premises, tools, appliances, materials and labor; mode, manner and terms of payment. Indubitable evidence showed BSMI was an independent contractor engaged in management of projects, business operations, functions, jobs and other business ventures, with sufficient capital and resources. It provided management services to various industrial and commercial establishments; its Articles of Incorporation proved sufficient capitalization. In December 1993, Labor Secretary Bienvenido Laguesma recognized BSMI as an independent contractor in the Byron-Jackson case. As a legitimate job contractor, there was no doubt an employer-employee relationship between BSMI and the workers. BSMI admitted employing the respondents, giving retired employees priority due to work experience and smooth transition. Respondents signed applications accepting probationary employment with BSMI. These contracts were valid. After study/evaluation, BSMI terminated them for redundancy. The right to hire and fire is an element of employer-employee relationship, which existed between respondents and BSMI, not Wack Wack.
• Employer-Employee Relationship and Liability: Because no employer-employee relationship existed between Wack Wack and Cagasan and Dominguez, the latter had no cause of action for illegal dismissal and damages against Wack Wack. Consequently, Wack Wack could not be validly ordered to reinstate them or pay their claims for backwages. The NLRC’s ruling that Wack Wack was liable was wrong.

• Substantial Compliance with Procedural Rules — The general manager of a corporation is authorized to sue on its behalf and to sign the verification and certification against forum shopping; the subsequent submission of proof of authority constitutes substantial compliance with procedural rules. Procedural rules may be relaxed in the interest of substantial justice, and the swift unclogging of court dockets must not be achieved at the expense of substantial justice. Applied: the CA erred in dismissing Wack Wack’s petition for failure to attach an affidavit of service and lack of proof of authority.
• Valid Quitclaims and Waivers — Not all waivers and quitclaims are invalid as against public policy. If voluntarily entered into and representing a reasonable settlement, they are binding and may not be disowned simply because of a change of mind. Only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms are unconscionable on their face, will the law annul the transaction. Applied: Cagasan and Dominguez, responsible employees, voluntarily signed quitclaims and received hefty separation pay; no deceit or coercion; valid.
• No Guaranty of Employment from Separation Package — A special separation package that gives qualified separated employees priority in hiring by concessionaires or contractors does not assure continuous employment with the principal employer. Applied: the Agreement only gave priority; respondents ceased to be Wack Wack employees.
• Independent Contractor vs. Labor-Only Contractor — An independent contractor undertakes job contracting, carrying on an independent business and undertaking the contract work on his own account and responsibility, free from the principal’s control except as to results, and has substantial capital or investment. Factors include whether the contractor carries on an independent business; nature and extent of work; skill required; term and duration; right to assign performance; control and supervision; power over hiring, firing, and payment of workers; control of premises; duty to supply premises, tools, appliances, materials, and labor; and mode, manner, and terms of payment. Applied: BSMI was an independent contractor; employer-employee relationship existed between BSMI and respondents.
• Employer-Employee Relationship and Right to Hire and Fire — The right to hire and fire is an element of the employer-employee relationship. Applied: BSMI hired respondents as probationary employees and terminated them for redundancy; no employer-employee relationship with Wack Wack.

• "Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. …" — This passage states the ratio on the validity of quitclaims, defining when waivers are binding and when they may be annulled.
• "When the respondents voluntarily signed their quitclaims and accepted the separation package offered by the petitioner, they, thenceforth, already ceased to be employees of the petitioner. Nowhere does it appear in the Agreement that the petitioner assured the respondents of continuous employment in Wack Wack. Qualified employees were given priority in being hired by its concessionaires and/or contractors such as BSMI when it entered into a management contract with the petitioner." — This passage decides that the separation package and quitclaims terminated the employment relationship and that the Agreement gave only priority in hiring, not a guaranty of continuous employment.
• "An independent contractor is one who undertakes 'job contracting,' i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises and other materials which are necessary in the conduct of the business." — This passage provides the canonical definition of an independent contractor applied to BSMI.
• "There being no employer-employee relationship between the petitioner and respondents Cagasan and Dominguez, the latter have no cause of action for illegal dismissal and damages against the petitioner. Consequently, the petitioner cannot be validly ordered to reinstate the respondents and pay them their claims for backwages." — This passage states the dispositive legal conclusion on Wack Wack’s non-liability.

• Novelty Philippines, Inc. vs. Court of Appeals, G.R. No. 146125, 17 September 2003, 411 SCRA 211 — Cited for the authority of a general manager to sue on behalf of the corporation and sign the verification/certification against forum shopping, and for substantial compliance through subsequent submission of proof of authority.
• Jaro vs. Court of Appeals, G.R. No. 127536, 19 February 2002, 377 SCRA 282 — Cited for the rule that subsequent and substantial compliance may call for relaxation of procedural rules in the interest of justice.
• General Milling Corporation vs. NLRC, G.R. No. 153199, 17 December 2002, 394 SCRA 207 — Cited for the principle that rules of procedure must not be applied at the expense of substantial justice.
• Magsalin vs. National Organization of Working Men, G.R. No. 148492, 9 May 2003, 403 SCRA 199 — Cited for the validity of a waiver or quitclaim voluntarily executed with full understanding and for credible and reasonable consideration.
• Samaniego vs. NLRC, G.R. No. 93059, 3 June 1991, 198 SCRA 111 — Cited for the rule that quitclaims amount to valid and binding compromise agreements.
• Periquet vs. NLRC, G.R. No. 91298, 22 June 1990, 186 SCRA 724 — Cited for the doctrine that not all waivers and quitclaims are invalid and that voluntary, reasonable settlements are binding.
• New Golden City Builders & Development Corporation vs. Court of Appeals, G.R. No. 154715, 11 December 2003, 418 SCRA 411 — Cited for the factors considered in determining the existence of an independent contractor relationship.
• In re Petition for Certification Election Among the Regular Rank-and-File Employees Workers of Byron-Jackson (BJ) Services International Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services Employees Chapter — Cited as the Labor Secretary’s recognition of BSMI as an independent contractor.
• Coca Cola Bottlers Phils, Inc. vs. NLRC, G.R. No. 120466, 17 May 1999, 307 SCRA 131 — Cited for the rule that a legitimate job contractor has an employer-employee relationship with the workers it employs.
• Tan vs. Lagrama, G.R. No. 151228, 15 August 2002, 387 SCRA 393 — Cited for the rule that the right to hire and fire is an element of the employer-employee relationship.

• Section 11, Rule 13, 1997 Rules of Civil Procedure — Requires an affidavit of service. The CA dismissed Wack Wack’s petition for failure to attach it. The Supreme Court held that the subsequent submission of proof of authority and the general manager’s authority constituted substantial compliance, and procedural rules may be relaxed in the interest of substantial justice.

Puno (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.