PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. AND JENS PETER HENRICHSEN, PETITIONERS, VS. KLAUS K. SCHONFELD, RESPONDENT.

Pacific Consultants International Asia versus Schonfeld

The Case

This is a labor case about who the real employer is. Klaus Schonfeld, a Canadian consultant, sued Pacific Consultants International Asia and its president Jens Peter Henrichsen for illegal dismissal and money claims. The petitioners insist that Schonfeld was hired and dismissed by a Japanese parent corporation, and that he was merely "seconded" to the Philippine subsidiary. The case matters because it settles two questions every labor lawyer must know: how the four-fold test identifies the employer when a foreign worker is deployed to a Philippine company, and whether an arbitration clause naming a foreign forum can oust the Labor Arbiter of jurisdiction.

Procedural History

Schonfeld filed a complaint for illegal dismissal and money claims with the Labor Arbiter. The Labor Arbiter granted the petitioners' Motion to Dismiss, holding that the January 7, 1998 contract with the Japanese corporation controlled and that the London arbitration clause bound the parties. On appeal, the National Labor Relations Commission affirmed the Labor Arbiter in full. Schonfeld then filed a petition for certiorari under Rule 65 with the Court of Appeals, which reversed and set aside the National Labor Relations Commission resolutions and remanded the case to the Labor Arbiter for disposition on the merits. The Court of Appeals denied the petitioners' motion for reconsideration. The petitioners then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Schonfeld, a Canadian citizen residing in British Columbia, was a consultant in environmental engineering and water supply and sanitation. Pacicon Philippines, Inc. was a Philippine corporation engaged in providing specialty and technical services, and was a wholly owned subsidiary of Pacific Consultants International of Japan. Henrichsen was president of the Philippine corporation and a director of the Japanese parent, and was based in Tokyo.

In October 1997, the Japanese parent engaged Schonfeld as Sector Manager of the Philippine company's Water and Sanitation Department, with his salary paid partly by each corporation. On January 7, 1998, Henrichsen sent him a letter of employment from Tokyo, which Schonfeld signed and returned with annotations. Section 21 of the appended General Conditions of Employment provided that disputes that could not be settled amicably were to be finally settled by the Court of Arbitration in London. Schonfeld later presented a second letter of employment dated January 9, 1998, this time from Pacicon Philippines, Inc. and signed by Henrichsen as its president.

Schonfeld arrived in the Philippines, assumed his post, and was granted an Alien Employment Permit by the Department of Labor and Employment, which named Pacicon Philippines, Inc. as his employer. He received compensation from the Philippine company for several periods, was reimbursed for work expenses, reported for work in Manila, and took instructions from Henrichsen. On May 5, 1999, Henrichsen informed him that his employment would be terminated effective August 4, 1999 because the water and sanitation sector had not prospered. Henrichsen later asked him by electronic mail to stay on, and he continued working until the end of business hours on October 1, 1999. After the company partially settled some claims, Schonfeld filed his complaint in December 2000.

Issues

• Whether or not an employer-employee relationship existed between Schonfeld and Pacicon Philippines, Inc., despite his having been hired abroad by a foreign corporation and merely seconded to the Philippine subsidiary.
• Whether or not the Labor Arbiter had jurisdiction over the complaint, despite the stipulation that disputes shall be finally settled by the Court of Arbitration in London.

Applicable Provisions

Section 21 of the General Conditions of Employment, the arbitration clause invoked by the petitioners, provides:

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question arising between the Employee and the Company which is in consequence of or connected with his employment with the Company and which can not be settled amicably, is to be finally settled, binding to both parties through written submissions, by the Court of Arbitration in London.

The Court construed this clause as a permissive, not exclusive, stipulation of venue, so it did not deprive the Labor Arbiter of jurisdiction.

Section 9 of Batas Pambansa Blg. 129, as amended, defines the appellate jurisdiction of the Court of Appeals and provides:

The Court of Appeals shall exercise original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction.

This provision empowered the Court of Appeals to pass upon the evidence when necessary to resolve factual issues in the certiorari petition.

Ruling

On the first issue, the Court held that Schonfeld was an employee of Pacicon Philippines, Inc. The Court of Appeals correctly applied the four-fold test of selection and engagement, payment of wages, power of dismissal, and power of control. The Labor Arbiter and the National Labor Relations Commission inexplicably ignored the documentary evidence, focusing only on the January 7, 1998 letter and the arbitration clause. The Court stressed that the Philippine company itself applied for the Alien Employment Permit and represented to the Department of Labor and Employment that Schonfeld was its employee, appending his employment contract to the application. The Court also noted that Henrichsen, as president of the Philippine company, directed Schonfeld's work and issued the termination letter.

On the second issue, the Court held that the Labor Arbiter had jurisdiction. The Court of Appeals ruled that even under the January 7, 1998 contract, the parties were not precluded from bringing a case in other venues, since nothing in the stipulation made the London forum exclusive. The Court also affirmed that the Court of Appeals is not proscribed from reviewing the evidence in a certiorari petition, and that factual findings of labor tribunals cannot be given finality where the evidence was misappreciated.

Doctrine

First, the employer is determined by the four-fold test: the selection and engagement of the employee, the payment of wages, the power of dismissal, and the power of control over the employee's conduct. Where a foreign corporation seconds a worker to a Philippine subsidiary, the subsidiary may be the true employer if it exercises these powers, and its own representations to the Department of Labor and Employment, such as an application for an Alien Employment Permit naming itself as employer, are strong evidence of that relationship.

Second, a stipulation submitting disputes to a foreign arbitral body does not oust the Labor Arbiter of jurisdiction unless the clause clearly makes that forum exclusive. The clause here merely stated that disputes "are to be finally settled" in London, without language of exclusivity, so the Labor Arbiter retained jurisdiction.

Third, the Court of Appeals may review the evidence in a certiorari petition when necessary to resolve factual issues, and the factual findings of the Labor Arbiter and the National Labor Relations Commission will not be respected when they misappreciate the evidence.

Disposition

The Supreme Court denied the petition for lack of merit, upheld the Court of Appeals decision, and left the case remanded to the Labor Arbiter for disposition on the merits, with Schonfeld prevailing on the jurisdictional questions.

Remember This

Memorize this line: a secondment does not erase the employer, and an arbitration clause that does not say "exclusive" does not oust the Labor Arbiter. Examiners use this case to test the four-fold test in foreign-worker scenarios and the validity of foreign arbitration stipulations in labor disputes.