35. TENG VS.

PAHAGAC CA via Rule 43 of the Rules of Court requires exhaustion of available

remedies as a condition precedent to a petition under that Rule.
G.R. No. 169704. November 17, 2010.* Same; Same; Exhaustion of Administrative Remedies; Reason for the
ALBERT TENG, doing business under the firm name ALBERT TENG Requirement that Administrative Remedies be Exhausted.—The requirement
FISH TRADING, and EMILIA TENG-CHUA, petitioners, vs. ALFREDO S. that administrative remedies be exhausted is based on the doctrine that in
PAHAGAC, EDDIE D. NIPA, ORLANDO P. LAYESE, HERNAN Y. providing for a remedy before an administrative agency, every opportunity
BADILLES and ROGER S. PAHAGAC, respondents. must be given to the agency to resolve the matter and to exhaust all
Labor Law; Voluntary Arbitrators; Article 262-A deleted the word opportunities for a resolution under the given remedy before bringing an
“unappealable” from Article 263.—Article 262-A deleted the action in, or resorting to, the courts of justice. Where Congress has not
word “unappealable” from Article 263. The deliberate selection of the clearly required exhaustion, sound judicial discretion governs, guided by
language in the amendatory act differing from that of the original act indicates congressional intent.
that the legislature intended a change in the law, and the court should Same; Same; Relief must first be obtained in an administrative
endeavor to give effect to such intent. We recognized the intent of the proceeding before a remedy will be supplied by the courts even though the
change of phraseology in Imperial Textile Mills, Inc. v. Sampang, 219 SCRA matter is within the proper jurisdiction of a court.—In this era of clogged court
651 (1993),  where we ruled that: It is true that the present rule [Art. 262-A] dockets, the need for specialized administrative agencies with the special
makes the voluntary arbitration award final and executory after ten calendar knowledge, experience and capability to hear and determine promptly
days from receipt of the copy of the award or decision by the disputes on technical matters or intricate questions of facts, subject to judicial
parties. Presumably, the decision may still be reconsidered by the review, is indispensable. In Industrial Enterprises, Inc. v. Court of Appeals,
Voluntary Arbitrator on the basis of a motion for reconsideration duly 184 SCRA 426 (1990), we ruled that relief must first be obtained in an
filed during that period. administrative proceeding before a remedy will be supplied by the courts
Same; Same; The Voluntary Arbitrator’s (VA’s) decision may still be even though the matter is within the proper jurisdiction of a court.
reconsidered on the basis of a motion for reconsideration seasonably filed Same; Employer-Employee Relationship; Generally, in a business
within 10 days from receipt thereof; Seasonable filing of a motion for establishment, identification cards (IDs) are issued to identify the holder as a
reconsideration is a mandatory requirement to forestall the finality of such bona fide employee of the issuing entity.—While Teng alleged that it was
decision.—In  Coca-Cola Bottlers Phil., Inc., Sales Force Union-PTGWO- the maestros who hired the respondent workers, it was his company that
Balais v. Coca-Cola Bottlers Philippines, Inc.,  464 SCRA 507 (2005), we issued to the respondent workers identifica-
likewise ruled that the VA’s decision may still be reconsidered on the 175
basis of a motion for reconsideration seasonably filed within 10 days VOL. 635, NOVEMBER 17, 2010 175
from receipt thereof. The seasonable filing of a motion Teng vs. Pahagac
for reconsideration is a mandatory requirement to forestall the finality tion cards (IDs) bearing their names as employees and Teng’s
of such decision. signature as the employer. Generally, in a business establishment, IDs are
_______________ issued to identify the holder as a bona fide employee of the issuing entity.
* THIRD DIVISION. Same; Same; The element of control—which we have ruled in a
174 number of cases to be a strong indicator of the existence of an employer-
174 SUPREME COURT REPORTS ANNOTATED employee relationship.—The element of control—which we have ruled in a
Teng vs. Pahagac number of cases to be a strong indicator of the existence of an employer-
Same; Same; A motion for reconsideration is the more appropriate employee relationship—is present in this case. Teng not only owned the
remedy in line with the doctrine of exhaustion of administrative remedies.— tools and equipment, he directed how the respondent workers were to
By allowing a 10-day period, the obvious intent of Congress in amending perform their job as checkers; they, in fact, acted as Teng’s eyes and ears in
Article 263 to Article 262-A is to provide an opportunity for the party every fishing expedition.
adversely affected by the VA’s decision to seek recourse via a motion for Same; Same; Labor-only Contracting; As a policy, the Labor Code
reconsideration or a petition for review under Rule 43 of the Rules of Court prohibits labor-only contracting.—Teng cannot hide behind his argument that
filed with the CA. Indeed, a motion for reconsideration is the more the respondent workers were hired by the maestros. To consider the
appropriate remedy in line with the doctrine of exhaustion of administrative respondent workers as employees of the maestros would mean that Teng
remedies. For this reason, an appeal from administrative agencies to the committed impermissible labor-only contracting. As a policy, the Labor Code
prohibits labor-only contracting: ART. 106. Contractor or Subcontractor—x x

Page 1 of 7
x The Secretary of Labor and Employment may, by appropriate regulations, the September 1, 2005 resolution 3 of the Court of Appeals (CA) in CA-G.R.
restrict or prohibit the contracting-out of labor. x x x x. SP
Same; Same; Same; Incidents obtaining confirm in the existence of a _______________
labor-only contracting which is prohibited in our jurisdiction, as it is 1 Under Rule 45 of the Rules of Court; Rollo, pp. 9-37.
considered to be the employer’s attempt to evade obligations afforded by law 2 Penned by Associate Justice Arturo G. Tayag, and concurred in by
to employees.—In the present case, the maestros did not have any Associate Justice Estela M. Perlas-Bernabe and Associate Justice Edgardo
substantial capital or investment. Teng admitted that he solely provided the A. Camello; id., at pp. 41-51.
capital and equipment, while the maestros supplied the workers. The power 3 Id., at pp. 52-53.
of control over the respondent workers was lodged not with the maestros but 177
with Teng. As checkers, the respondent workers’ main tasks were to count VOL. 635, NOVEMBER 17, 2010 177
and classify the fish caught and report them to Teng. They performed tasks Teng vs. Pahagac
that were necessary and desirable in Teng’s fishing business. Taken No. 78783. The CA reversed the decision of the Voluntary Arbitrator (VA),
together, these incidents confirm the existence of a labor-only contracting National Conciliation and Mediation Board (NCMB), Region IX, Zamboanga
which is prohibited in our jurisdiction, as it is considered to be the employer’s City, and declared that there exists an employer-employee relationship
attempt to evade obligations afforded by law to employees. between Teng and respondents Hernan Badilles, Orlando Layese, Eddie
Same; Termination of Employment; The dismissal of an employee, Nipa, Alfredo Pahagac, and Roger Pahagac (collectively,  respondent
which the employer must validate, has a two-fold requirement: workers). It also found that Teng illegally dismissed the respondent workers
176 from their employment.
176 SUPREME COURT REPORTS ANNOTATED Background Facts
Teng vs. Pahagac Albert Teng Fish Trading is engaged in deep sea fishing and, for this
one is substantive, the other is procedural.—The dismissal of an purpose, owns boats (basnig), equipment, and other fishing paraphernalia.
employee, which the employer must validate, has a twofold requirement: one As owner of the business, Teng claims that he customarily enters into joint
is substantive, the other is procedural. Not only must the dismissal be for a venture agreements with master fishermen (maestros) who are skilled and
just or an authorized cause, as provided by law; the rudimentary are experts in deep sea fishing; they take charge of the management of each
requirements of due process—the opportunity to be heard and to defend fishing venture, including the hiring of the members of its complement. He
oneself—must be observed as well. The employer has the burden of proving avers that the maestros hired the respondent workers as checkers to
that the dismissal was for a just cause; failure to show this, as in the present determine the volume of the fish caught in every fishing voyage. 4
case, would necessarily mean that the dismissal was unjustified and, On February 20, 2003, the respondent workers filed a complaint for illegal
therefore, illegal. dismissal against Albert Teng Fish Trading, Teng, and Chua before the
Same; Same; Unsubstantiated suspicion is not a just cause to NCMB, Region Branch No. IX, Zamboanga City.
terminate one’s employment under Article 282 of the Labor Code.—The The respondent workers alleged that Teng hired them, without any written
respondent worker’s allegation that Teng summarily dismissed them on employment contract, to serve as his “eyes and ears” aboard the fishing
suspicion that they were not reporting to him the correct volume of the fish boats; to classify the fish caught by bañera; to report to Teng via radio
caught in each fishing voyage was never denied by Teng. Unsubstantiated communication the classes and volume of each catch; to receive instructions
suspicion is not a just cause to terminate one’s employment under Article from him as to where and when to unload the catch; to prepare the list of the
282 of the Labor Code. To allow an employer to dismiss an employee based provisions requested by the maestro and the mechanic for his approval; and,
on mere allegations and generalities would place the employee at the mercy to procure the items as approved by him. 5 They also claimed that they
of his employer, and would emasculate the right to security of tenure. received regu-
PETITION for review on certiorari of the decision and resolution of the Court _______________
of Appeals. 4 Id., at p. 14.
   The facts are stated in the opinion of the Court. 5 Id., at p. 188.
  Teresita Gandionco Oledan  for petitioners. 178
BRION, J.: 178 SUPREME COURT REPORTS ANNOTATED
Before this Court is a Petition for Review on Certiorari1 filed by petitioners Teng vs. Pahagac
Albert Teng Fish Trading, its owner Albert Teng, and its manager Emilia lar monthly salaries, 13th month pay, Christmas bonus, and incentives in the
Teng-Chua, to reverse and set aside the September 21, 2004 decision 2 and form of shares in the total volume of fish caught.

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 They asserted that sometime in September 2002, Teng expressed  his On July 21, 2003, the respondent-workers elevated the case to the CA.
doubts on the correct volume of fish caught in every fishing voyage. 6 In In its decision of September 21, 2004, the CA reversed the VA’s decision
December 2002, Teng informed them that their services had been after finding sufficient evidence showing the existence of employer-employee
terminated.7 relationship:
In his defense, Teng maintained that he did not have any hand in hiring “WHEREFORE, premises considered, the petition is granted. The
the respondent workers; the maestros, rather than he, invited them to join the questioned decision of the Voluntary Arbitrator dated May 30, 2003 is
venture. According to him, his role was clearly limited to the provision of the hereby REVERSED and SET ASIDE by ordering private respondent to pay
necessary capital, tools and equipment, consisting of basnig, gears, fuel, separation pay with backwages and other monetary benefits. For this
food, and other supplies.8 purpose, the case is REMANDED to the Voluntary Arbitrator for the
The VA rendered a decision9 in Teng’s favor and declared that no computation of petitioner’s backwages and other monetary benefits. No
employer-employee relationship existed between Teng and the respondent pronouncement as to costs.
workers. The dispositive portion of the VA’s May 30, 2003 decision reads: SO ORDERED.”15
“WHEREFORE, premises considered, judgment is hereby rendered Teng moved to reconsider the CA’s decision, but the CA denied the
dismissing the instant complaint for lack of merit. motion in its resolution of September 1, 2005.16 He,
It follows also, that all other claims are likewise dismissed for lack of _______________
merit.”10 13 Id., at p. 70.
The respondent workers received the VA’s decision on June 12, 14 Ibid.
2003.11 They filed a motion for reconsideration, which was denied in an 15 Id., at p. 50.
order dated June 27, 2003 and which they received on July 8, 2003.12 The 16 Id., at pp. 52-53.
VA reasoned out that Section 6, Rule VII of the 1989 Procedural Guidelines 180
in the Conduct of Voluntary Arbitration Proceedings (1989 Proc- 180 SUPREME COURT REPORTS ANNOTATED
_______________ Teng vs. Pahagac
6  Id., at p. 43. thereafter, filed the present Petition for Review on Certiorari  under Rule
7  Ibid. 45 of the Rules of Court, claiming that:
8  Id., at p. 14. a. the VA’s decision is not subject to a motion for reconsideration; and
9  Id., at pp. 60-69. b. no employer-employee relationship existed between Teng and the
10 Id., at p. 69. respondent workers.
11 Id., at p. 72. Teng contends that the VA’s decision is not subject to a motion for
12 Ibid. reconsideration in the absence of any specific provision allowing this
179 recourse under Article 262-A of the Labor Code. 17 He cites the 1989
VOL. 635, NOVEMBER 17, 2010 179 Procedural Guidelines, which, as the VA declared, does not provide the
Teng vs. Pahagac remedy of a motion for reconsideration. 18 He claims that after the lapse of 10
edural Guidelines) does not provide the remedy of a motion for days from its receipt, the VA’s decision becomes final and executory unless
reconsideration to the party adversely affected by the VA’s order or an appeal is taken.19 He argues that when the respondent workers received
decision.13 The order states: the VA’s decision on June 12, 2003, 20 they had 10 days, or until June 22,
“Under Executive Order No. 126, as amended by Executive Order No. 2003, to file an appeal. As the respondent workers opted instead to move for
251, and in order to implement Article 260-262 (b) of the Labor Code, as reconsideration, the 10-day period to appeal continued to run; thus, the VA’s
amended by R.A. No. 6715, otherwise known as the Procedural Guidelines decision had already become final and executory by the time they assailed it
in the Conduct of Voluntary Arbitration Proceedings, inter alia: before the CA on July 21, 2003.21
An award or the Decision of the Voluntary Arbitrators becomes  Teng further insists that the VA was correct in ruling that there was no
final and executory after ten (10) calendar days from receipt of copies employer-employee relationship between him and the respondent workers.
of the award or decision by the parties (Sec. 6, Rule VII). What he entered into was a joint venture agreement with the maestros,
Moreover, the above-mentioned guidelines do not provide the where Teng’s role was only to provide basnig, gears, nets, and other tools
remedy of a motion for reconsideration to the party adversely affected and equipment for every fishing voyage.22
by the order or decision of voluntary arbitrators.”14 _______________
17 Id., at pp. 17-18.

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 18 Id., at pp. 70-71. reconsidered by the Voluntary Arbitrator on the basis of a motion for
19 Id., at p. 18. reconsideration duly filed during that period.”26
20 Id., at p. 72. In Coca-Cola Bottlers Phil., Inc., Sales Force Union-PTGWO-Balais v.
21 Id., at p. 19. Coca-Cola Bottlers Philippines, Inc.,27 we likewise ruled that the VA’s
22 Id., at p. 21. decision may still be reconsidered on the basis of a motion for
181 reconsideration seasonably filed within 10 days from receipt
VOL. 635, NOVEMBER 17, 2010 181 thereof.28 The seasonable filing of a motion for reconsideration is a
Teng vs. Pahagac mandatory requirement to forestall the finality of such decision. 29 We
The Court’s Ruling further cited the 1989 Procedural Guidelines which implemented Article 262-
We resolve to deny the petition for lack of merit. A, viz.:30
Article 262-A of the Labor Code “[U]nder Section 6, Rule VII of the same guidelines implementing Article
does not prohibit the filing of a 262-A of the Labor Code, this Decision, as a matter of course, would become
motion for reconsideration. final and executory after ten (10) calendar days from receipt of copies of the
On March 21, 1989, Republic Act No. 6715 23 took effect, amending, decision by the parties x x x unless, in the meantime, a motion for
among others, Article 263 of the Labor Code which was originally worded as: reconsideration or a petition for review to the Court of Appeals under
“Art. 263 x x x Voluntary arbitration awards or decisions shall be final, Rule 43 of the Rules of Court is filed within the same 10-day period.”31
unappealable, and executory.” These rulings fully establish that the absence of a categorical language in
As amended, Article 263 is now Article 262-A, which states: Article 262-A does not preclude the filing of a motion for reconsideration of
“Art. 262-A. x x x [T]he award or decision x x x shall contain the facts the VA’s decision within the 10-
and the law on which it is based. It shall be final and executory after ten _______________
(10) calendar days from receipt of the copy of the award or decision by 25 G.R. No. 94960, March 8, 1993, 219 SCRA 651.
the parties.” 26 Id., at p. 654.
Notably, Article 262-A deleted the word “unappealable” from Article 263. 27 G.R. No. 155651, July 28, 2005, 464 SCRA 507, 516.
The deliberate selection of the language in the amendatory act differing from 28 Ibid.
that of the original act indicates that the legislature intended a change in the 29 Ibid.
law, and the court should endeavor to give effect to such intent. 24 30 Id., at p. 513.
_______________ 31 Id., at pp. 515-516.
23 An Act To Extend Protection To Labor, Strengthen The Constitutional 183
Rights Of Workers To Self-Organization, Collective Bargaining And Peaceful VOL. 635, NOVEMBER 17, 2010 183
Concerted Activities, Foster Industrial Peace And Harmony, Promote The Teng vs. Pahagac
Preferential Use Of Voluntary Modes Of Settling Labor Disputes And day period. Teng’s allegation that the VA’s decision had become final and
Reorganize The National Labor Relations Commission, Amending For These executory by the time the respondent workers filed an appeal with the CA
Purposes Certain Provisions Of Presidential Decree No. 442, As Amended, thus fails. We consequently rule that the respondent workers seasonably
Otherwise Known As The Labor Code Of The Philippines, Appropriating filed a motion for reconsideration of the VA’s judgment, and the VA erred in
Funds Therefor and For Other Purposes. denying the motion because no motion for reconsideration is allowed.
24 Agpalo, Statutory Construction (2006 ed.), p. 390, citing Sarcos v. The Court notes that despite our interpretation that Article 262-A does not
Castillo, 26 SCRA 853 (1969); Portillo v. Salvani, 54 Phil. 543 (1930). preclude the filing of a motion for reconsideration of the VA’s decision, a
182 contrary provision can be found in Section 7, Rule XIX of the Department of
182 SUPREME COURT REPORTS ANNOTATED Labor’s Department Order (DO) No. 40, series of 2003:32
Teng vs. Pahagac Rule XIX
We recognized the intent of the change of phraseology in Imperial Textile “Section 7. Finality of Award/Decision.—The decision, order,
Mills, Inc. v. Sampang,25 where we ruled that: resolution or award of the voluntary arbitrator or panel of voluntary arbitrators
“It is true that the present rule [Art. 262-A] makes the voluntary arbitration shall be final and executory after ten (10) calendar days from receipt of the
award final and executory after ten calendar days from receipt of the copy of copy of the award or decision by the parties and it shall not be subject of a
the award or decision by the parties. Presumably, the decision may still be motion for reconsideration.”

Page 4 of 7
 Presumably on the basis of DO 40-03, the 1989 Procedural Guidelines 36 De Leon, De Leon, Jr., Administrative Law: Text and Cases (2005
was revised in 2005 (2005 Procedural Guidelines),33 whose pertinent ed.), p. 360.
provisions provide that: 185
Rule VII – VOL. 635, NOVEMBER 17, 2010 185
   DECISIONS Teng vs. Pahagac
“Section 6. Finality of Decisions.—The decision of the Voluntary The requirement that administrative remedies be exhausted is based on
Arbitrator shall be final and executory after ten (10) calendar days from the doctrine that in providing for a remedy before an administrative agency,
receipt of the copy of the decision by the parties. every opportunity must be given to the agency to resolve the matter and to
Section 7. Motions for Reconsideration.—The decision of the exhaust all opportunities for a resolution under the given remedy before
Voluntary Arbitrator is not subject of a Motion for Reconsideration.” bringing an action in, or resorting to, the courts of justice. 37 Where Congress
_______________ has not clearly required exhaustion, sound judicial discretion
32 Took effect on March 15, 2003. governs,38 guided by congressional intent.39
33 Signed by the Secretary of Labor on March 15, 2005. By disallowing reconsideration of the VA’s decision, Section 7, Rule XIX
184 of DO 40-03 and Section 7 of the 2005 Procedural Guidelines went directly
184 SUPREME COURT REPORTS ANNOTATED against the legislative intent behind Article 262-A of the Labor Code. These
Teng vs. Pahagac rules deny the VA the chance to correct himself 40 and compel the courts of
We are surprised that neither the VA nor Teng cited DO 40-03 and the justice to prematurely intervene with the action of an administrative agency
2005 Procedural Guidelines as authorities for their cause, considering that entrusted with the adjudication of controversies coming under its special
these were the governing rules while the case was pending and these knowledge, training and specific field of expertise. In this era of clogged court
directly and fully supported their theory. Had they done so, their reliance on dockets, the need for specialized administrative agencies with the special
the provisions would have nevertheless been unavailing for reasons we shall knowledge, experience and capability to hear and determine promptly
now discuss. disputes on technical matters or intricate questions of facts, subject to judicial
In the exercise of its power to promulgate implementing rules and review, is indispensable.41 In Industrial Enterprises, Inc. v. Court of
regulations, an implementing agency, such as the Department of Labor, 34 is Appeals,42 we ruled that relief must first be obtained in an administrative
restricted from going beyond the terms of the law it seeks to implement; it proceeding before a remedy will be supplied by the courts even though the
should neither modify nor improve the law. The agency formulating the rules matter is within the proper jurisdiction of a court. 43
and guidelines cannot exceed the statutory authority granted to it by the _______________
legislature.35 37 Id., at p. 357.
By allowing a 10-day period, the obvious intent of Congress in amending 38 2 Am Jur 2d, § 506, 492.
Article 263 to Article 262-A is to provide an opportunity for the party 39 Ibid.
adversely affected by the VA’s decision to seek recourse via a motion for 40 Agpalo, Administrative Law (2005 ed.), p. 178.
reconsideration or a petition for review under Rule 43 of the Rules of Court 41 Padua, et al. v. Ranada, et al., G.R. Nos. 141949 and 151108,
filed with the CA. Indeed, a motion for reconsideration is the more October 14, 2002, 390 SCRA 663.
appropriate remedy in line with the doctrine of exhaustion of administrative 42 G.R. No. 88550, April 18, 1990, 184 SCRA 426.
remedies. For this reason, an appeal from administrative agencies to the 43 Ibid.
CA via Rule 43 of the Rules of Court requires exhaustion of available 186
remedies36 as a condition precedent to a petition under that Rule. 186 SUPREME COURT REPORTS ANNOTATED
_______________ Teng vs. Pahagac
34 Labor Code, Article 5. Rules and regulations.—The Department of There exists an employer-employee
Labor and other government agencies charged with the administration and relationship between Teng and the
enforcement of this Code or any of its parts shall promulgate the necessary respondent workers.
implementing rules and regulations. Such rules and regulations shall become We agree with the CA’s finding that sufficient evidence exists indicating
effective fifteen (15) days after announcement of their adoption in the existence of an employer-employee relationship between Teng and the
newspapers of general circulation. respondent workers.
35 Philippine Apparel Workers Union v. National Labor Relations While Teng alleged that it was the maestros who hired the respondent
Commission,  No. L-50320, July 31, 1981, 106 SCRA 444. workers, it was his company that issued to the respondent workers

Page 5 of 7
identification cards (IDs) bearing their names as employees and Teng’s xxxx
signature as the employer. Generally, in a business establishment, IDs are There is “labor-only” contracting where the person supplying workers
issued to identify the holder as a bona fide employee of the issuing entity. to an employer does not have substantial capital or investment in the
For the 13 years that the respondent workers worked for Teng, they form of tools, equipment, machineries, work premises, among others,
received wages on a regular basis, in addition to their shares in the fish and the workers recruited and
caught.44 The worksheet showed that the respondent workers received _______________
uniform amounts within a given year, which amounts annually increased until           1994                  1,000.00
the termination of their employment in 2002.45 Teng’s claim that the           1996                  1,400.00
_______________ 1998 until dismissed                  1,700.00
44 At the ratio of one bañera for every 30 bañera of fish caught, id., at pp. 3. Orlando P. Layese, who was originally hired as second
42-43. patron in 1989-1995 with share in [the] catch, was
45 Id., at pp. 42-43, the monthly salaries of the respondent workers from subsequently appointed as checker sometime in February
1989-1998: 1996 with a fixed monthly wage rate as follows:
1. Alfredo S. Pahagac and Eddie D. Nipa         YEAR MONTHLY WAGE RATE
       YEAR MONTHLY WAGE RATE         1989-1995                  [on commission basis]
       1989 P 300.00         1996                  P 1,500.00
       1989                             500.00         1998 until                  P 1,700.00
       1992                             700.00 dismissed
       1994                          1,000.00  
      1996                          1,400.00 188
      1998 until dismissed                          1,700.00 188 SUPREME COURT REPORTS ANNOTATED
    Teng vs. Pahagac
2. Hernan Y. Badilles and Roger S. Pahagac placed by such persons are performing activities which are directly
       YEAR  MONTHLY WAGE RATE related to the principal business of such employer. In such cases, the
       1990                          P 500.00 person or intermediary shall be considered merely as an agent of the
       1992                              700.00 employer who shall be responsible to the workers in the same manner and
   extent as if the latter were directly employed by him.”
187 Section 5 of the DO No. 18-02, 46 which implements Article 106 of the
VOL. 635, NOVEMBER 17, 2010 187 Labor Code, provides:
Teng vs. Pahagac “Section 5. Prohibition against labor-only contracting.—Labor-only
amounts received by the respondent workers are mere commissions is contracting is hereby declared prohibited. For this purpose, labor-only
incredulous, as it would mean that the fish caught throughout the year is contracting shall refer to an arrangement where the contractor or
uniform and increases in number each year. subcontractor merely recruits, supplies or places workers to perform a job,
More importantly, the element of control—which we have ruled in a work or service for a principal, and any of the following elements are present:
number of cases to be a strong indicator of the existence of an employer- (i) The contractor or subcontractor does not have substantial
employee relationship—is present in this case. Teng not only owned the capital or investment which relates to the job, work or service to
tools and equipment, he directed how the respondent workers were to be performed and the employees recruited, supplied or placed
perform their job as checkers; they, in fact, acted as Teng’s eyes and ears in by such contractor or subcontractor are performing activities
every fishing expedition. which are directly related to the main business of the principal;
Teng cannot hide behind his argument that the respondent workers were or
hired by the maestros. To consider the respondent workers as employees of (ii) The contractor does not exercise the right to control over the
the maestros would mean that Teng committed impermissible labor-only performance of the work of the contractual employee.”
contracting. As a policy, the Labor Code prohibits labor-only contracting: In the present case, the maestros did not have any substantial capital or
“ART. 106. Contractor or Subcontractor.—x x x The Secretary of Labor and investment. Teng admitted that he solely provided the capital and equipment,
Employment may, by appropriate regulations, restrict or prohibit the while the maestros supplied the workers. The power of control over the
contracting-out of labor. respondent workers was lodged not with the maestros but with Teng. As

Page 6 of 7
checkers, the respondent workers’ main tasks were to count and classify the 190
fish caught and report them to Teng. They performed tasks that were 190 SUPREME COURT REPORTS ANNOTATED
necessary and desirable in Teng’s fishing business. Taken together, these Teng vs. Pahagac
incidents confirm the existence of a labor-only contracting which is prohibited employee based on mere allegations and generalities would place the
in our jurisdiction, as it is considered to be the employer’s attempt to evade employee at the mercy of his employer, and would emasculate the right to
obligations afforded by law to employees. security of tenure.51 For his failure to comply with the Labor Code’s
_______________ substantive requirement on termination of employment, we declare that Teng
46 Effective March 16, 2002. illegally dismissed the respondent workers.
189 WHEREFORE, we DENY the petition and AFFIRM the September 21,
VOL. 635, NOVEMBER 17, 2010 189 2004 decision and the September 1, 2005 resolution of the Court of Appeals
Teng vs. Pahagac in CA-G.R. SP No. 78783. Costs against the petitioners.
Accordingly, we hold that employer-employee ties exist between Teng SO ORDERED.
and the respondent workers. A finding that the maestros are labor-only Carpio-Morales (Chairperson), Bersamin, Villarama, Jr.  and Sereno,
contractors is equivalent to a finding that an employer-employee relationship JJ., concur.
exists between Teng and the respondent workers. As regular employees, the Petition denied, judgment and resolution affirmed.
respondent workers are entitled to all the benefits and rights appurtenant to Note.—An employee cannot be legally dismissed on the basis of the
regular employment. uncorroborated and self-serving testimonies of the employer’s employees.
The dismissal of an employee, which the employer must validate, has a (San Miguel Corporation vs. National Labor Relations Commission, 551
twofold requirement: one is substantive, the other is procedural. 47 Not only SCRA 410 [2008])
must the dismissal be for a just or an authorized cause, as provided by law; ——o0o—— 
the rudimentary requirements of due process—the opportunity to be heard _______________
and to defend oneself—must be observed as well. 48 The employer has the (b) Gross and habitual neglect by the employee of
burden of proving that the dismissal was for a just cause; failure to show this,    his duties;
as in the present case, would necessarily mean that the dismissal was  (c) Fraud or willful breach by the employee of the
unjustified and, therefore, illegal.49    trust reposed in him by his employer or duly
The respondent worker’s allegation that Teng summarily dismissed them    authorized representative;
on suspicion that they were not reporting to him the correct volume of the fish  (d) Commission of a crime or offense by the
caught in each fishing voyage was never denied by Teng. Unsubstantiated     employee against the person of his employer or
suspicion is not a just cause to terminate one’s employment under Article    any immediate member of his family or his duly
28250 of the Labor Code. To allow an employer to dismiss an    authorized representatives; and
_______________  (e) Other causes analogous to the foregoing.
47 Pascua, et al. v. National Labor Relations Commission, et al., G.R. 51 Supra note 47, citing, Sanyo Travel Corp., et al. v. National Labor
No. 123518, March 13, 1998, 287 SCRA 554. Relations Commission, 280 SCRA 129 (1997);  and JGB and Associates,
48 Ibid., citing Jamer, et al. v. National Labor Relations Commission, et Inc. v. National Labor Relations Commission, et al., 254 SCRA 457 (1996).
al., 278 SCRA 632 (1997). © Copyright 2020 Central Book Supply, Inc. All rights reserved.
49 Ibid., citing, Metro Transit Organization, Inc. v. National Labor
Relations Commission, et al., 263 SCRA 313 (1996); Mapalo v. National
Labor Relations Commission, et al., 233 SCRA 266 (1994); Philippine
Manpower Services, Inc., et al. v. National Labor Relations Commission, et
al., 224 SCRA 691 (1993).
50 Art. 282. Termination by Employer.—An employer may terminate an
employment for any of the following causes:
 (a)  Serious misconduct or willful disobedience by
     the employee of the lawful orders of his  
     employer or representative in connection with
     his work;

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