​South Cotabato Communications Corporation vs. Hon. Sto. Tomas, June 15, 2016

​South Cotabato Communications Corporation v. Hon. Sto. Tomas, June 15, 2016
 
Facts:
On January 19, 2004, the DOLE Region XII conducted a Complaint Inspection of DXCP’s Radio Station, owned by South Cotabato Communications Corp (SCCC). Such inspection found various violations of labor standards i.e. underpayment of wages and 13th month pay; nonpayment of 5-day service incentive leave, rest day premium pay, and holiday premium pay; and non-remittance of SS contributions. DOLE then issued a Notice of Inspection Result to SCCC to correct said violations within 5 days.
 
Due to SCCC’s failure to comply with such a directive, DOLE scheduled a summary investigation on March 3, 2004 which SCCC, unfortunately, failed to appear in without explanation. Another hearing was scheduled on April 1, 2004, but SCCC failed to again appear due to the unavailability of their counsel. A secretary of the counsel requested to move the hearing again on April 1, 2004, but the DOLE denied such request.
 
On May 20, 2004, the Regional Director of DOLE Region XII issued an Order directing SCCC to pay its “employees” Php759,752 due to the violation of labor standards alleged therein. SCCC appealed to the SOLE, raising two grounds: (1) denial of due process and (2) lack of factual and legal basis of the assailed Order. The SOLE affirmed the Regional Director’s findings. This was affirmed by the CA.
 
SCCC comes before the Supreme Court contending that: (1) SCCC was denied due process because they were prevented from presenting evidence to prove that herein respondents are not their employees when the Regional Director submitted the case for resolution, (2) the Regional Director’s Order was wanting of factual and legal basis because there was no categorical finding of the existence of an Employer-Employee Relationship between the parties – an element which is a prerequisite for the DOLE’s exercise of jurisdiction.
 
In its comment, DOLE proffered that the “results of the interviews conducted in the premises of DXCP in the course of its inspection constitute substantial evidence that served as basis for the monetary awards to herein respondents.”

Issue: 
1) Whether or not there was a denial of procedural due process. No.
 
2) Whether or not the lack of factual and legal basis that effectively negates the exercise of jurisdiction by the DOLE. Yes.
 
 Held:

No, there was no denial of procedural due process in this case.
 
Due process in administrative proceedings refers to an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of. In this case, SCCC was notified of the summary investigations conducted on March 3, 2004 and April 1, 2004, both of which they failed to attend.  It was incumbent upon SCCC to make time for the summary investigations. Clearly, their own negligence did them in.
 
Yes, there was a lack of factual and legal basis for the DOLE Regional Director’s Order. An employer-employee relationship was not sufficiently established. Such is a prerequisite for the DOLE to establish over the case.
 
Before the DOLE may exercise its powers under Article 128 of the Labor Code, two important questions must first be resolved.
(1) Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of?
(2) Are there violations of the Labor Code or of any labor law?
 
The existence of an employer-employee relationship is a limitation on the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive branch of the government.
 
The DOLE must have the power to determine whether or not an employer-employee relationship exists, and from there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
 
The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to follow, the same guide the courts themselves use. The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employer's power to control the employee's conduct. The use of this test is not solely limited to the NLRC.
 
Like the NLRC, the DOLE has the authority to rule on the existence of an employer-employee relationship between the parties, considering that the existence of an employer-employee relationship is a condition sine qua non for the exercise of its visitorial power. Nevertheless, it must be emphasized that without an employer-employee relationship, or if one has already been terminated, the Secretary of Labor is without jurisdiction to determine if violations of labor standards provision had in fact been committed, and to direct employers to comply with their alleged violations of labor standards.
 
The Orders of the Regional Director and the Secretary of Labor do not contain the factual basis necessary to establish the jurisdiction of the DOLE and to justify the monetary awards to the respondents.
 
In promulgating its May 2004 Order, the Regional Director merely noted the discovery of violations of labor standards provisions in the course of inspection of the DXCP premises. No such categorical determination was made on the existence of an employer-employee relationship. In a word, the Regional Director had presumed, not demonstrated, the existence of the relationship. Of particular note is the DOLE'S failure to show that SCCC, thus, exercised control over herein respondents' conduct in the workplace.
 
The Regional Director and SOLE relied solely on the respondents’ allegation of employment to justify the existence of an EER. Mere allegations fall below the quantum of proof necessary to establish an EER since they can easily be concocted and manufactured.
 
In a similar vein, the DOLE’s use of the straight computation method in awarding the sum of P759,752 to respondents, without reference to any other evidence other than the interviews conducted during the inspection, is highly telling that the DOLE acted arbitrarily. It is implausible for all 9 respondents to be entitled to uniform amounts of Service Incentive Leave (SIL) pay, holiday pay premium, and rest day premium pay for three (3) years since entitlement to said benefits would largely depend on the actual rest days and holidays worked and amount of remaining leave credits in a year.
 
SCCC may have failed to refute the allegation that respondents were employees of DXCP. Nevertheless, it was incumbent upon the respondents to prove their allegation that they were, indeed, under SCCC's employ and that the latter violated their labor rights. Without an express finding of EER, the DOLE cannot assume to have jurisdiction to resolve the complaints of herein respondents as jurisdiction in that instance lies with the NLRC.
 
Petition is GRANTED