Paulino Ungos III

Lawyer | Law Professor | Author

Tag: employer-employee relationship

  • The Law Prescribes the Parties’ Employment Relationship

    Rico and six other people alleged that they were engaged on different dates as fitness trainers by Fitness First Phil., Inc., a fitness company.

    Rico and his co-workers narrated that as fitness trainers, they sold and marketed the company’s physical health training programs and packages. With the company’s equipment, they also conducted actual training sessions for their clients and were paid fixed monthly salaries, 13th month pay, and commissions.

    However, the company later reclassified them as freelance trainers. Although it still paid their salaries, the company discontinued paying their other labor benefits, i.e., 13th month pay, overtime pay, holiday pay, and rest day pay.

    Furthermore, the company allowed them to work on their own time as long as they trained clients for at least 90 hours per month and Php80,000.00 worth of physical training packages. If Rico and his co-workers fail to meet the quota, the same translates to salary deduction, or worse, disciplinary action such that repeated failure to meet the quota may subject them to warning, suspension, and even termination of their engagement.

    Soon after, the company required Rico and his co-workers to register their alleged freelance business to comply with tax regulations. Should Rico and his co-workers refuse to comply, they were penalized with a 20% deduction in their commission and termination or non-renewal of their freelance agreement. Despite such penalties, Rico and his co-workers did not comply with the company’s requirements since they believed they were its employees.

    As a result, the company revoked its offer of higher commission. It also offered Rico and his co-workers the chance to revert to being instructors. Moreover, the company ignored Rico and his co-workers’ request to enjoy the benefits of being both an instructor and a freelance trainer.

    Believing this was an instance of constructive dismissal, Rico and his co-workers filed a complaint against the company for illegal dismissal, regularization, and other monetary claims.

    The company countered that Rico and his co-workers were independent contractors who were not required to observe fixed work hours. According to the company, Rico and his co-workers were required to observe relevant house rules in dealing with their clients, conduct 90 hours of training, and guarantee a minimum fixed monthly sale.

    The company added that its employment arrangement with Rico and his co-workers is distinguished from that of its fitness instructors, who were required to work nine hours a day, six days a week.

    The company explained that all trainers start as full-time fitness instructors. According to the company, a progressive commission scheme allows instructors who have obtained a certain skill and training to be promoted as freelance personal trainers to take advantage of the higher commissions and flexible working hours. It also mentioned that a freelance personal trainer though may revert to being an instructor by manifesting his or her decision to the human resource department.

    The company acknowledged that it required Rico and his co-workers to register their freelance business with an offer of higher commission in compliance with tax regulations and that only 62 of its freelance trainers complied with the requirement.

    Although the company revoked its offer of higher commission, it offered Rico and his co-workers the chance to revert to being instructors. However, the latter insisted on enjoying the benefits of both an instructor and a freelance trainer.

    In its Decision, the Office of the Labor Arbiter declared Rico and his co-workers as independent contractors and denied their claims.

    It held that the selection of Rico and his co-workers based on their expertise indicated their nature as independent contractors.

    It added that Rico and his co-workers voluntarily signed the freelance agreement, successively renewed it for years, and were paid on a commission basis. It also noted that Rico and his co-workers were responsible for paying and remitting their respective monthly contributions to the Social Security System without fail and timely filing the required income tax returns. Finally, it found that both parties may terminate the agreement with or without cause.

    It continued that even if the parties’ relationship were gauged under the power of control test, Rico and his co-workers would still be considered independent contractors. This was because, as freelance trainers, they were not required to report for work on a fixed schedule, and they controlled the time and manner they conducted physical training with their respective clients.

    The National Labor Relations Commission and the Court of Appeals agreed with the finding that Rico and his co-workers were not employees of the company.

    Rico and his co-workers elevated their case to the Supreme Court, insisting that they were regular employees of the company.

    Were Rico and his co-workers independent contractors?

    The Supreme Court ruled in the negative and declared Rico and his co-workers as employees of the company.

    The Supreme Court began by stating that there is no inflexible rule to determine if one is an employee or an independent contractor. According to the Court, the relationship must be characterized based on the circumstances of each case.

    The Court then discussed that a person’s employment status is not defined by what the parties say it should be. Rather, the employment relationship of parties is prescribed by law. When the employment status is in dispute, the employer bears the burden of proving that the person whose service it pays for is an independent contractor rather than a regular employee with or without fixed terms. The rule is that where a person who works for another performs his or her job more or less at his or her own pleasure, in the manner he or she sees fit, is not subject to definite hours or conditions of work, and is compensated according to the result of his or her efforts and not the amount thereof, no employer-employee relationship exists.

    An independent contractor, the Court expounded, carries on a distinct and independent business and undertakes to perform the job, work, or service on one’s own account and under one’s own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. Independent contractors consist of individuals with unique skills and talents that set them apart from ordinary employees and whose means and work methods are free from the employer’s control. Under this arrangement, there is no trilateral relationship but a bilateral relationship because a principal directly engages independent contractors. An independent contractor enjoys independence and freedom from the control and supervision of his or her principal as opposed to an employee who is subject to the employer’s power to control the means and methods by which the employee’s work is to be performed and accomplished.

    The Court went on to employ a two-tiered test to resolve the issue: the four-fold test and the economic dependence test.

    Under the four-fold test, to establish an employer-employee relationship, four factors must be proven:

    • employer’s selection and engagement of the employee;
    • payment of wages;
    • power to dismiss; and
    • power to control the employee’s conduct.

    Regarding the power of hiring, the Court found that the company initially engaged Rico and his co-workers as fitness consultants, and on different dates, they transitioned to become freelance personal trainers. However, the Court clarified that an engagement based on talents and skills does not necessarily prevent a person from achieving regular employment status, especially when he or she is repeatedly engaged as an independent contractor on a fixed term in an effort to circumvent security of tenure.

    On the payment of wages, the Court found that based on the Freelance Personal Trainer Agreement, Rico and his co-workers were paid on a commission basis. Again, the Court clarified that the Labor Code of the Philippines explicitly mentions commissions as one of the forms of paying wages, or anything paid as remuneration of earnings to employees.

    On the power to dismiss, the Court found that although the Freelance Personal Trainer Agreement mentioned that the parties may voluntarily terminate the same with or without cause, the power to dismiss actually rests with the company. For instance, the company held the power to dismiss the freelance personal trainer if it became manifest that the latter was unqualified or unfit to discharge his or her duties.

    The Court then remarked that the company’s power to terminate Rico and his co-workers is better understood concurrently with the company’s power of control.
    The Court stated that under the four-fold test, the right to control is the dominant factor in determining whether one is an employee or an independent contractor. The so-called control test is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control the end to be achieved and the manner and means to reach that end.

    In this regard, the Court held that Rico and his co-workers did not perform their tasks at their own pleasure and in the manner they saw fit. This was based on the following findings:

    First, as personal trainers, Rico and his co-workers performed tasks necessary and desirable to the company’s principal business of providing health programs/packages — to conduct physical training to its clients.

    Second, to ensure the quality of services, Rico and his co-workers were required to attend all educational training sessions and other such events pertaining to the company. In fact, the company kept track of the performance of Rico and his co-workers, and some of them were even lauded for their exemplary performance.

    Third, even if It assessed the company’s power of control vis-à-vis the Freelance Personal Trainer Agreement, it would reach the same conclusion because although the Agreement guaranteed that Rico and his co-workers shall be free of control in the marketing and conduct of the physical health training packages, the following portions of such Agreement negate the alleged absence of control on the part of the company.

    One, upon engagement, Rico and his co-workers were bound to
    -diligently perform and assume their duties;
    -be assigned to any health club managed by the company;
    -observe company rules and regulations; and
    -attend company educational training sessions.

    Two, Rico and his co-workers were required to guarantee a set number of monthly sales and conduct a set block of time for physical training programs/packages.

    And three, the company reserved the right to unilaterally revise the Minimum Performance Standards even without notice.

    In addition, the Court further discussed that even if It applied the economic dependence test, the conclusion would be the same. The Court reiterated the following circumstances of the whole economic activity laid down in Francisco v. National Labor Relations Commission1G.R. No. 170087, 31 August 2006 in considering the determination of the relationship between employer and employee:

    • extent to which the services performed are an integral part of the employer’s business;
    • extent of the worker’s investment in equipment and facilities;
    • nature and degree of control exercised by the employer;
    • worker’s opportunity for profit and loss;
    • amount of initiative, skill, judgment[,] or foresight required for the success of the claimed independent enterprise;
    • permanency and duration of the relationship between the worker and the employer; and
    • degree of dependency of the worker upon the employer for his continued employment in that line of business.

    Here, the Court found that Rico and his co-workers acted as personal trainers, marketed physical health packages and were paid commissions for the sale of such packages. The Court also found that Rico and his co-workers were wholly dependent upon the company for their continued employment as they were prohibited from providing training outside the company. The exclusivity clause, said the Court, only strengthened the finding that Rico and his co-workers were regular employees of the company.

    Further reading:

    • Escauriaga v. Fitness First, Phil., Inc., G.R. No. 266552, 22 January 2024.

  • But They Agreed to be Engaged as Independent Contractors

    Chrisden and several other persons alleged that in February 2016, Lazada E-Services, Philippines, Inc. (Lazada), a business which claims to facilitate the sale of goods between its sellers and buyers, hired them to work as riders. As riders, Chrisden and his group were primarily tasked to pick up items from sellers and deliver them to Lazada’s warehouse. Each of them signed an Independent Contractor Agreement which states that they will be engaged for one year and paid a service fee. They were to use their privately-owned motorcycles in their trips.

    Chrisden and his group narrated that sometime in January 2017, a Lazada dispatcher told them that they have been removed from their usual routes and will no longer be given any schedules. Despite this development, they still went to the office and waited for three days to be given new tasks, but no work schedules came. They soon learned that their routes were already given to other riders.

    Aggrieved by the events, Chrisden and his group filed a complaint before the National Labor Relations Commission against Lazada for illegal dismissal, illegal deduction, money claims, with claims for moral and exemplary damages and attorney’s fees.

    Lazada denied that Chrisden and his group were its employees. It maintained that Chrisden and his group were independent contractors. Lazada concluded that Chrisden and his group cannot claim backwages, separation pay, and other benefits considering that they are not regular employees.

    The Office of the Labor Arbiter ruled that no employer-employee relationship existed between Lazada and Chrisden and the co-riders.

    The Office of the Labor Arbiter found that the respective Independent Contractor Agreements of Chrisden and his group clearly stated that no employer-employee relationship existed between them and Lazada. The said Office also determined that Chrisden and his group had control over the means and methods of their work since they provided their own vehicles and were free to choose the means of transport, delivery routes and working hours.

    The Office of the Labor Arbiter added that Lazada only required goods to be delivered promptly and in good condition. While the said Office acknowledged that Lazada gave out rules and regulations on the delivery of goods, it ruled that this did not amount to control over the means and methods by which Chrisden and his group accomplished their work.

    Thus, the Office of the Labor Arbiter dismissed the complaint for lack of jurisdiction.

    On appeal, the National Labor Relations Commission affirmed the Office of the Labor Arbiter’s ruling.

    Chrisden and his group filed a petition with the Court of Appeals, but their petition was dismissed outright.

    Chrisden and his group then elevated their case to the Supreme Court.

    Were Chrisden and his group regular employees of Lazada?

    The Supreme Court ruled in the affirmative.

    The Court reiterated the following established principles:

    Consistent with the constitutional recognition that labor is a primary social economic force, full protection to labor is a social policy enshrined in Article XIII, Section 3 of the Constitution. The provision guarantees the right of workers to security of tenure, among others. One’s employment is a property right which cannot be revoked without due process.

    Under Philippine laws, the nature of employment of a worker is prescribed by law, regardless of what the contract and the parties present it to be. Furthermore, employment contracts are not ordinary contracts because they are imbued with public interest.

    The applicable provisions of the law are deemed incorporated into the contract and the parties cannot exempt themselves from the coverage of labor laws simply by entering into contracts. Thus, regardless of the nomenclature and stipulations of the contract, the employment contract must be read consistent with the social policy of providing protection to labor.

    To determine the existence of an employer-employee relationship, the Court employs a two-tiered test:

    Under the four-fold test, to establish an employer-employee relationship, four factors must be proven:

    • the employer’s selection and engagement of the employee;
    • the payment of wages;
    • the power to dismiss; and
    • the power to control the employee’s conduct.

    The Court identifies the power of control is the most significant factor in the four-fold test.

    The right to control extends not only over the work done but over the means and methods by which the employee must accomplish the work. The power of control does not have to be actually exercised by the employer. It is sufficient that the employer has a right to wield the power.

    However, not all rules imposed upon the worker is an indication of control. When rules are intended to serve as general guidelines to accomplish the work, it is not an indicator of control.

    When the control test is insufficient, the economic realities of the employment are considered to get a comprehensive assessment of the true classification of the worker.

    The determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, such as:

    • the extent to which the services performed are an integral part of the employer’s business;
    • the extent of the worker’s investment in equipment and facilities;
    • the nature and degree of control exercised by the employer;
    • the worker’s opportunity for profit and loss;
    • the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise;
    • the permanency and duration of the relationship between the worker and the employer; and
    • the degree of dependency of the worker upon the employer for his continued employment in that line of business.

    Regarding classifications of employment, the Court referred to Article 295 of the Labor Code of the Philippines which provides four classifications, namely:

    • regular;
    • project;
    • seasonal; and
    • casual.

    Employees who perform activities which are necessary or desirable in the usual business of the employer may be regular, project, or seasonal employees. Of the three, project and seasonal employees are generally engaged to perform tasks which only lasts for a specific period and duration. Meanwhile, casual employees are those who perform work which are not usually necessary or desirable for the employer’s business.

    The Court explained that activities which are considered usually necessary or desirable in the employer’s business generally depends on the industry. There must be a reasonable connection between the work performed by the employee and the usual trade or business of the employer.

    The Court mentioned Brent School, Inc. v. Zamora as a case which recognized another employment classification referred to as fixed-term.

    Said the Court, fixed-term employment is an arrangement wherein an employee is hired for a specific period. In fixed-term employment, the work performed may also be necessary or desirable to the usual business of the employer. Fixed-term employments are recognized by law for projects with pre-determined completion or generally in a work where a fixed term is essential and natural appurtenance.

    The Court then discussed that in order for fixed-term employment to be valid, either of these circumstances must be proven:

    • The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or
    • It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter.

    These criteria presume that an employee, on account of special skills or market forces, is in a position to make demands upon the prospective employer. The parity of standing between the employer and employee indicates that the employee needs less protection than that of the ordinary worker. In determining whether the fixed-term employment is valid, the burden of proof lies with the employer to show that it deals with the employee in more or less equal terms. The recognition of fixed-term employment in Brent remains an exception rather than the general rule.

    In the present case, the Court declared that Chrisden and his group were regular employees of Lazada.

    According to the Court, Chrisden and his group satisfied the four-fold test.

    • First, Chrisden and his group were directly employed by Lazada as evidenced by the Independent Contractor Agreements they signed;
    • Second, as indicated in the said Agreement, Chrisden and his group received their salaries from Lazada. Chrisden and his group were paid by Lazada the amount of P1,200.00 for each day of service;
    • Third, Lazada had the power to dismiss Chrisden and his group. In their contract, Lazada can immediately terminate the Agreement for breach of its material provisions.; and
    • Fourth, Lazada had control over the means and methods of the performance of the work of Chrisden and his group, as explicitly mentioned in their Agreement and as reflected in the way the work of Chrisden and his group was carried out. Lazada required the accomplishment of a route sheet which kept track of the arrival, departure, and unloading time of the items. Chrisden and his group shouldered a penalty of P500.00 on top of an item’s actual value should it get lost. Chrisden and his group were also required to submit trip tickets and incident reports to Lazada.

    The Court added that even if it considered the foregoing factors as mere guidelines, the circumstances of the whole economic activity between Lazada and Chrisden and his group, nonetheless, confirmed the existence of an employer-employee relationship. Stated otherwise, the Court found that Chrisden and his group satisfied the economic dependence test.

    Although Lazada insisted that the delivery of items was only incidental to its business as it was mainly an online platform where sellers and buyers transact, the Court found that the delivery of items by Chrisden and his group was clearly integrated in the services it offered. The Court even noticed Lazada’s admission that it had different route managers to supervise the delivery of the products from the sellers to the buyers. But this only confirmed that Lazada had taken steps to facilitate not only the transaction of the seller and buyer in the online platform but also the delivery of the items.

    The Court also looked into the contention of Lazada that it could have left the delivery of the goods to the sellers and buyers. However, the Court disregarded said contention as this was not the business model it actually implemented.

    The Court further found that Chrisden and his group were required by Lazada to use their own motor vehicles and other equipment and supplies in the delivery of the items. Moreover, Chrisden and his group were found to have no control over their own profit or loss because they were paid a set daily wage. There were also found to have no control over their own time and they could not offer their service to other companies as Lazada could demand their presence from time to time.

    For the Court, Chrisden and his group were economically dependent on Lazada for their livelihood and their continued engagement in its line of business.

    At this point, the Court rejected Lazada’s assertion that the Independent Contractor Agreements of Chrisden and his group explicitly stipulated that the absence of an employer-employee relationship between them. According to the Court, the protection of the law afforded to labor precedes over the nomenclature and stipulations of the Contract. The Independent Contractor Agreements of Chrisden and his group signed was not as ordinary as Lazada purported it to be. Thus, it was patently erroneous for the labor tribunals to reject an employer-employee relationship simply because the Independent Contractor Agreements stipulated the non-existence of the employment relation.

    The Court then rebuffed Lazada’s contention that Chrisden and his group were independent contractors.

    The Court set forth the following relevant principles:

    An independent contractor is defined as one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under one’s own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof.

    Laws and jurisprudence recognize two types of contractors:

    • legitimate job contractors under Article 106 of the Labor Code of the Philippines; and
    • independent contractors who possess unique skills and talent and whose contracts are governed by the Civil Code of the Philippines.

    The Court stressed that when the status of the employment is in dispute, the employer bears the burden to prove that the workers are independent contractors rather than regular employees.

    In the present case, the Court ruled that Lazada failed to establish that Chrisden and his group fell under any of the categories of independent contractors, based on the following findings:

    • First, Chrisden and his group were not hired by a contractor or subcontractor as both parties’ submitted that they were directly engaged by Lazada; and
    • Second, the work performed by Chrisden and his group did not require a special skill or talent. Picking up and delivering goods from warehouse to buyers did not call for a specific expertise. There was also no showing that Chrisden and his group were hired due to their unique ability or competency.

    Finally, the Court could not consider Chrisden and his group as regular employees with a fixed-term employment. The Court stated that fixed-term employment as enunciated in Brent presupposes an employee who is more or less on equal footing with an employer. It applies only in exceptional cases where the employee has bargaining power on account of a special skill or the market force.

    In the present case, the Court found that Lazada neither demonstrated nor argued this and had even failed to allege as to how the terms and conditions of their contracts were agreed upon.

    Having been declared regular employees of Lazada, the Court accordingly ordered the reinstatement of Chrisden and his group, as well as the payment of their backwages.

    Further reading:

    • Ditiangkin, et al. v. Lazada, et al., G.R. No. 246892, September 21, 2022.

  • He Is Not Our Employee

    Gerome alleged that he was hired by JTA Packing Corporation (JTA) on December 26, 2014 as an all-around driver.

    He narrated that on September 5, 2016, an officer of JTA maltreated him, prevented him from leaving the company premises, and threatened his life. Gerome no longer reported to work.

    Believing that his continued employment became impossible, unbearable, and unlikely, Gerome filed a complaint for illegal dismissal against his employer on January 30, 2017.

    JTA contended that Gerome was not its employee, as established by the following documents which never included Gerome’s name:

    • copies of its alpha list of employees as filed with the Bureau of Internal Revenue (BIR) for the years 2014-2016;
    • payroll monthly reports and 13th month pay it paid for the years 2015-2016;
    • reports on Social Security System (SSS) contributions of its employees remitted for the years 2015-2016;
    • PhilHealth remittance reports on contributions of its employees in 2016; and
    • Pag-IBIG fund membership and registration/remittance forms indicating the names of its employees and their contributions for the period of 2015-2016.

    On June 28, 2017, the Office of the Labor Arbiter rendered a Decision which declared the existence of an employer-employee relationship between Gerome and JTA. It then ruled that Gerome was constructively dismissed because his continued employment with JTA was rendered impossible due to fear after the September 5, 2016 incident of maltreatment and detention.

    On appeal, the National Labor Relations Commission reversed and set aside the Decision of the Office of the Labor Arbiter. It dismissed the complaint for lack of employer-employee relationship between Gerome and JTA.

    One reason was that the pay slips submitted by Gerome failed to reveal who issued the same. The Commission also discovered discrepancies on the dates of their issue in that the pay slips dated back as early as March 2014 contrary to Gerome’s claim that he was hired in December of the same year.

    The other reason was that JTA’s documentary evidence showed that Gerome was not among its employees.

    The Court of Appeals affirmed the ruling of the National Labor Relations Commission, in view of Gerome’s failure to substantiate his claim that he is an employee of JTA.

    Gerome elevated his case to the Supreme Court.

    Was Gerome an employee of JTA?

    The Supreme Court ruled in the negative.

    The Court reiterated the settled rule that allegations in the complaint must be duly proven by competent evidence and that the burden of proof is on the party making the allegation. In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. In this regard, the “four-fold test” determines the existence of an employer-employee relationship, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the employee’s conduct.

    In the present case, the Court stressed that since it was Gerome who was claiming to be an employee of JTA, he had the burden of proving the existence of an employer-employee relationship. The Court found that Gerome failed to discharge this burden.

    Gerome did not present any employment contract or company identification card to prove Gerome’s employment with JTA. According to the Court, in a business establishment, an identification card is usually provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it.

    The pay slips presented by Gerome bore no indication that the amount he allegedly received came from JTA. The Court pointed out that the pay slips submitted by Gerome even showed that he had been receiving compensation as early as February 2014, when he had claimed that he was hired by JTA months later, or on December 26, 2014. The Court said that this wide gap between February 2014 and December 2014 was not a trivial inconsistency.

    Furthermore, there were no deductions from Gerome’s supposed salary such as withholding tax, SSS, PhilHealth or Pag-IBIG Fund contributions which were usual deductions from employees’ salaries.

    On the other hand, the following voluminous documentary evidence submitted by JTA, which were duly signed by its authorized representative and stamp received by the concerned government agencies, indubitably showed that Gerome was not among its employees:

    • the alpha list of employees submitted to the Bureau of Internal Revenue for the years during which Gerome claims to have been employed by JTA;
    • the payroll monthly reports; and
    • the remittances made by JTA of its employees’ monthly contributions to the SSS, PhilHealth and Pag-IBIG Fund.

    As to the power of control, the Court acknowledged that the purported driver’s itineraries presented by Gerome prescribed the manner by which his work as a driver is to be carried out. However, the Court found that the said driver’s itineraries were not signed by JTA’s authorized personnel and contained discrepancies on JTA’s name and address. For the Court, the driver’s itineraries were insufficient to establish the element of control.

    The Court accordingly denied Gerome’s petition for lack of merit.

    Further reading:

    • Ginta-Ason v. J.T.A. Packaging Corp., G.R. No. 244206, March 16, 2022.

  • Just a Lessor; Not an Employer

    Albina and several persons alleged that Abelardo, Quirino, and Lucia employed them for various years, as lady keeper, waitress, receptionist, dispatcher, bus boy, DJ, entertainer, cook, and cashier in the latter’s restaurant.

    Albina and her group narrated that in June 2006, restaurant management began harassing them after they formed a union. Albina and her group further stated that on June 30, 2006, Lucia informed them of the termination of their employment since the restaurant will be closing due to bankruptcy.

    Aggrieved by the development, Albina and her group filed a complaint for unfair labor practice, illegal dismissal, and money claims against Abelardo, Quirino, and Lucia before the Office of the Labor Arbiter. Albina and her group asserted therein that the restaurant was financially stable and that the claim of serious business losses was merely a ruse to terminate their employment.

    On the other hand, Abelardo denied the existence of an employment relationship with Albina and her group. Abelardo argued that he was not the owner of the restaurant since he was merely the lessor of the building where the said restaurant operated.

    As supporting evidence, Abelardo submitted contracts of lease and tax returns showing that he earned income from rentals. Abelardo likewise presented the restaurant’s certificate of registration of business name, mayor’s permit, and certificate of registration with the Bureau of Internal Revenue which were all issued in Lucia’s name.

    The Office of the Labor Arbiter found that the presented contracts of lease were inconclusive to disavow any employment relationship between Abelardo and Albina and her group. Said Office ruled that Albina and her group were illegally dismissed from employment. Abelardo, Lucia, and Quirino were held solidarily liable to pay the awards in the total amount of Three Million Six Hundred Eighty Three Thousand Three Hundred Ninety Four Pesos and Forty Five Centavos (Php3,683,394.45). Record showed that the Decision of the Office of the Labor Arbiter was received by Abelardo on March 23, 2007.

    On March 30, 2007, or seven days after receiving the Office of the Labor Arbiter’s Decision, Abelardo filed his appeal with the National Labor Relations Commission. He posted a cash bond of Five Hundred Thousand Pesos (Php500,000.00). Abelardo also moved to reduce the bond.

    On April 2, 2007, or the last day within which to file his appeal, Abelardo posted a surety bond in the amount of Three Million One Hundred Thousand Pesos (Php3,100,000.00).

    Thereafter, Abelardo moved to substitute the cash bond earlier posted in the amount of Five Hundred Thousand Pesos (Php500,000.00) with a surety bond of the same amount. The National Labor Relations Commission granted the motion and ordered Abelardo to post the surety bond. Abelardo complied with the order.

    Later, the National Labor Relations Commission exonerated Abelardo from liability as it found no substantial evidence of employment relationship with Albina and her group.

    Albina and her group elevated the case to the Court of Appeals and asserted that the National Labor Relations Commission committed grave abuse of discretion in giving due course to Abelardo’s appeal despite his failure to post a bond equivalent to the monetary award.

    The Court of Appeals granted the petition. It ruled that Abelardo failed to perfect his Appeal to the National Labor Relations Commission, and it reinstated the decision of the Office of the Labor Arbiter. According to the Court of Appeals, only the amount of Five Hundred Thousand Pesos (Php500,000.00) was posted as bond when Abelardo filed his appeal. The Court of Appeals added that Abelardo’s Motion to Reduce Bond was deemed denied since the same was not acted upon by the National Labor Relations Commission and since no meritorious ground supported the same.

    For the Court of Appeals, the full amount of the appeal bond should have been posted by Abelardo when he filed his appeal. For failure to comply with the mandatory and jurisdictional appeal bond requirement and in the absence of substantial proof to the contrary, the Court of Appeals ruled that Abelardo’s appeal was never perfected and that the National Labor Relations Commission did not acquire jurisdiction over the case.

    Abelardo filed his petition with the Supreme Court and pointed out the following:

    • He posted a cash bond of Five Hundred Thousand Pesos (Php500,000.00) on March 30, 2007, within the period to file an Appeal;
    • Such cash bond was subsequently substituted by a surety bond of the same amount; and
    • He then posted a surety bond in the amount of Three Million One Hundred Thousand Pesos (Php3,100,000.00).

    Abelardo also insisted that Albina and her group failed to establish their employment relationship with him. Abelardo stressed that Albina and her group even alleged in their position paper that it was Lucia who dismissed them.

    In their comment, Albina and her group retorted with three points:

    • There was no evidence that Abelardo posted the appeal bond within the reglementary period;
    • The indemnity agreement between Abelardo and the bonding company did not provide the effectivity period and the amount of premium paid; and
    • Through the affidavit of the restaurant’s former manager, it was shown that Abelardo had the final authority in the hiring of employees and their work assignments.

    Was Abelardo’s appeal perfected?

    The Supreme Court ruled in the affirmative.

    The Court reiterated the principle that the right to appeal is a mere statutory privilege exercised only in the manner and in accordance with the requirements of the law.

    With regard to appeals to the National Labor Relations Commission from decisions, awards, or orders of the Office of the Labor Arbiter, the Supreme Court pointed to Article 229 of the Labor Code of the Philippines, which provides that in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.

    The Supreme Court also referred to Section 6 of Rule VI of the 2005 Revised Rules of Procedure of the NLRC, which was effective at the time Abelardo questioned the Office of the Labor Arbiter’s Decision. Relevant portion of the provision states:

    No motion to reduce bond shall be entertained except on meritorious grounds, and only upon the posting of a bond in a reasonable amount in relation to the monetary award.

    The mere filing of a motion to reduce bond without complying with the requisites in the preceding paragraphs shall not stop the running of the period to perfect an appeal.

    The Supreme Court explained that the purpose of the posting of cash or surety bond is to assure the employees that they will receive the monetary award granted them if they finally prevail in the case. The bond also serves to discourage employers from using the appeal to delay, or even evade, their obligation to satisfy the judgment. Notably, the Court added, the posting of appeal bond is not only mandatory but jurisdictional as well. Non-compliance with the bond requirement is fatal and has the effect of rendering the judgment final and executory.

    The Supreme Court clarified that in exceptional cases, however, the bond requirement may be relaxed, provided that:

    • There is substantial compliance with the rules;
    • Surrounding facts and circumstances constitute meritorious grounds to reduce the bond;
    • A liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits; or
    • The appellants, at the very least, exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.

    The Supreme Court continued that the reduction of the bond is not warranted when:

    • No meritorious ground is shown to justify the same;
    • The appellant absolutely failed to comply with the requirement of posting a bond, even if partial; or
    • When circumstances show the employer’s unwillingness to ensure the satisfaction of its workers’ valid claims.

    In the present case, the Supreme Court ruled that the Court of Appeals erred in dismissing Abelardo’s Appeal for non-perfection. The Supreme Court found that Abelardo received on March 23, 2007 the Office of the Labor Arbiter’s Decision and that he had until April 2, 2007 (or the tenth [10th] day from his receipt of such Decision) to file an appeal. On March 30, 2007, Abelardo appealed and moved to reduce the bond. At the same time, Abelardo deposited a cashier’s check in the amount of Five Hundred Thousand Pesos (Php500,000.00) in favor of Albina and her group. On April 2, 2007 (or the last day of the period to appeal) Abelardo posted a surety bond in the amount of Three Million One Hundred Thousand Pesos (Php3,100,000.00). Subsequently, with the approval of the National Labor Relations Commission, Abelardo replaced the Five Hundred Thousand Peso (Php500,000.00) check deposit with a surety bond of the same amount. For the Supreme Court, Abelardo posted a total of Three Million Six Hundred Thousand Pesos (Php3,600,000.00) within the reglementary period, which substantially covered the total monetary award of Three Million Six Hundred Eighty Three Thousand Three Hundred Ninety Four Pesos and Forty Five Centavos (Php3,683,394.45). The Supreme Court considered such amount as substantial compliance and the same demonstrated Abelardo’s willingness to abide with the rules on perfection of appeals.

    The Supreme Court found no merit to the assertions of Albina and her group regarding the failure of the indemnity agreement to indicate the effectivity period and the amount of premium paid. This is because such aspects do not affect the validity of the surety bond and since the Rules of Procedure of the National Labor Relations Commission does not require such formalities with respect to the contents of the indemnity agreement. The Court stressed that in any case, the rules are explicit that a cash or surety bond shall be valid and effective from the date of deposit or posting, until the case is finally decided, resolved or terminated, or the award satisfied. This condition shall be deemed incorporated in the terms and conditions of the surety bond and shall be binding on the appellants and the bonding company.

    The Supreme Court accordingly ruled that the Court of Appeals should have considered the merits of the case given that the labor adjudication system rests on the norm that rules of technicality must yield to the broader interest of substantial justice.

    In this regard, while the Supreme Court remarked that it could have remanded the case to the Court of Appeals for proper disposition on the merits, the Supreme Court deemed it more appropriate and practical to resolve the question of the existence of the employment relationship in order to avoid further delay.

    Did an employer-employee relationship exist between Abelardo and Albina and her group?

    For this issue, the Supreme Court ruled in the negative.

    The Supreme Court enumerated the four-fold test of employment relationship, namely:

    • Selection and engagement of the employee or the power to hire;
    • Payment of wages;
    • Power to dismiss; and
    • Power to control the employee.

    Applying such test, the Supreme Court declared that Abelardo was not the employer of Albina and her group. This was based on the following findings:

    First, there was no substantial evidence that Abelardo participated in the selection of the restaurant employees. Although the Supreme Court noted the affidavit of the restaurant’s former manager which was presented by Albina and her group, it ruled that the same was not substantial proof absent supporting evidence such as pre-employment records, appointment letters or engagement contracts indicating Abelardo’s involvement in the recruitment process.

    Second, Albina and her group did not present any payslip showing that they directly received their premiums and salaries from Abelardo.

    Third, as to the power to dismiss, Albina and her group admitted that it was Lucia who terminated their services. There was no evidence that Abelardo wielded such authority.

    Fourth, concerning the power of control, there was no proof that Abelardo issued orders and instructions to Albina and her group, or that he supervised and monitored the proper performance of their work.

    On the other hand, the Supreme Court found that Abelardo substantiated his claim that he was a mere lessor of the restaurant. Abelardo submitted contracts of lease and tax returns showing that he earned income solely from building rentals. Abelardo likewise presented the certificate of registration of business name, mayor’s permit, and certificate of registration with the Bureau of Internal Revenue which were all issued in Lucia’s name. The Supreme Court considered such certifications as executed in the performance of official duty of the government agencies concerned and can be relied upon as evidence of the facts stated therein. Furthermore, such documents enjoy the presumption of regularity unless the contrary is proved. The Supreme Court thus ruled that Albina and her group’s idle implication that Abelardo used these documents as subterfuge to evade liability deserved scant consideration.

    In sum, the Court reiterated that the quantum of proof in labor cases is substantial evidence or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The burden of proof rests upon the party who asserts the affirmative of an issue. In the present case, the Supreme Court found that Albina and her group utterly failed to establish with substantial evidence their supposed employment relationship with Abelardo. The Supreme Court concluded that their case for illegal dismissal cannot prosper absent employment relationship between the parties.

    The Supreme Court thus granted Abelardo’s petition and reinstated the Decision of the National Labor Relations Commission.

    Further reading:

    • Salazar v. Simbajon, G.R. No. 202374, June 30, 2021.

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  • The Foreign Company Is a Major Stockholder of the Local Company

    Lea Jane and Stephanie alleged that they were hired on March 3, 2008 and April 5, 2008, respectively, by CyberOne Proprietary Limited Company (CyberOne AU), an Australian company, as part-time home-based remote Customer Service Representatives. They state that they became full time and permanent employees of CyberOne AU and were eventually promoted as its supervisors.

    Lea Jane and Stephanie narrated the following events:

    Sometime in October 2009, Maciej, the Chief Executive Officer (CEO) of CyberOne AU, asked them, together with a certain Benjamin, to become dummy directors and/or incorporators of CyberOne PH. When Lea Jane and Stephanie agreed, they were promoted as Managers and were given increases in their salaries. The salary increases were made to appear as paid for by CyberOne PH.

    However, in the payroll for November 16 to 30, 2010, Maciej reduced the salaries of Lea Jane and Stephanie from P50,000.00 to P36,000.00, of which P26,000.00 was paid by CyberOne AU while the remaining P10,000.00 was paid by CyberOne PH. Aside from the decrease in their salaries, Lea Jane and Stephanie were only given P20,000.00 each as 13th month pay for the year 2010.

    Sometime in March 2011, Maciej made Lea Jane and Stephanie choose one from three options:

    • to take an indefinite furlough and be placed in a manpower pool to be recalled in case there is an available position;
    • to stay with CyberOne AU but with an entry level position as home-based Customer Service Representative; or
    • to tender their irrevocable resignation.

    Lea Jane and Stephanie mentioned that they were constrained to pick the first option in order to save their jobs. In April 2011, Lea Jane and Stephanie received P13,000.00 each as their last salary.

    Hence, Lea Jane and Stephanie filed a case against CyberOne PH and CyberOne AU for illegal dismissal. They likewise claimed for non-payment or underpayment of their salaries and 13th month pay; moral and exemplary damages; and attorney’s fees.

    On the other hand, CyberOne PH denied the existence of an employer-employee relationship between it and Lea Jane and Stephanie. CyberOne PH insisted that Lea Jane and Stephanie were its incorporators or directors and not its regular employees. It also claimed that Lea Jane and Stephanie were employees of CyberOne AU, over which the Office of the Labor Arbiter had no jurisdiction because it is a foreign corporation not doing business in the Philippines.

    The Office of the Labor Arbiter held that Lea Jane and Stephanie were not employees of CyberOne PH as the latter did not exercise control over them. Said Office did not find evidence showing that CyberOne PH and CyberOne AU were one and the same entity, thus it upheld the presumption that the companies had personalities separate and distinct from one another. The Office of the Labor Arbiter ruled that Lea Jane and Stephanie were merely shareholders or directors of CyberOne PH and not its regular employees. Finally, the Office of the Labor Arbiter found that since CyberOne AU was a foreign corporation not doing business in the Philippines, then it had no jurisdiction over it. Hence, the Office of the Labor Arbiter dismissed the complaint of Lea Jane and Stephanie.

    The National Labor Relations Commission reversed and set aside the ruling of the Office of the Labor Arbiter.

    The Commission ruled that Lea Jane and Stephanie were employees of CyberOne AU and CyberOne PH since their role as nominal shareholders of CyberOne PH did not preclude them from being employees of CyberOne PH. Moreover, the Commission noted that CyberOne PH paid Lea Jane and Stephanie their monthly salary and allowance, but such company was unable to present any proof that Lea Jane and Stephanie were paid their director’s fee. The Commission also noted that CyberOne AU previously paid the salaries of Lea Jane and Stephanie including allowances.

    In addition, the Commission noted that the Furlough Notifications issued by CyberOne AU to Lea Jane and Stephanie were, in fact, notices of dismissal. Lea Jane and Stephanie were informed that CyberOne AU was unable to provide them with work but that it may engage their services again in the future. The Commission declared that Lea Jane and Stephanie were dismissed from employment without valid cause and due process.

    Lastly, due to its perceived participation of CyberOne AU in the management, supervision or control of CyberOne PH, the Commission ruled that CyberOne AU was doing business in the Philippines. Thus, the Commission applied the doctrine of piercing the corporate veil.

    The Court of Appeals reversed the findings of the National Labor Relations Commission and ruled that no employer-employee relationship existed between Lea Jane and Stephanie, on the one hand, and CyberOne PH, on the other.

    The Court of Appeals then held that the National Labor Relations Commission misapplied the doctrine of piercing the corporate veil and concluded that CyberOne AU and CyberOne PH were two distinct and separate entities.

    Lea Jane and Stephanie elevated their case to the Supreme Court.

    Were Lea Jane and Stephanie employees of CyberOne PH and CyberOne AU?

    The Supreme Court ruled that Lea Jane and Stephanie were employees of CyberOne AU, and not of CyberOne PH.

    First, record showed that Lea Jane and Stephanie were hired as home-based Customer Service Representatives of CyberOne AU, a corporation organized and existing under the laws of Australia and that they were notified by CyberOne AU of their dismissal through Furlough Notifications.

    Second, although the Court found that jurisdiction was acquired over CyberOne PH for having been validly served with summons, jurisdiction over CyberOne AU, a foreign corporation, was not acquired as there was no valid service of summons to it in accordance with the Rules of Court and there was no showing that it voluntarily appeared in court. For the Supreme Court, no judgment could be issued against CyberOne AU, if any, and such judgment would only bind CyberOne PH.

    And third, the Court found no reason to apply the doctrine of piercing the corporate veil.

    Jurisprudence teaches that the doctrine of piercing the corporate veil applies only in three basic instances, namely:

    • when the separate distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation;
    • in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or
    • is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

    In the present case, CyberOne AU was not shown to have conducted business in the Philippines through its local subsidiary CyberOne PH. Neither was CyberOne AU shown to have appointed and authorized CyberOne PH to act in its behalf in the Philippines. The Court thus classified CyberOne AU instead as a non-resident corporation not doing business in the Philippines.

    Moreover, the Court noticed Lea Jane and Stephanie’s failure to prove that CyberOne AU, acting as the Managing Director of both corporations, had absolute control over CyberOne PH. The Court added that even granting that CyberOne AU exercised a certain degree of control over the finances, policies and practices of CyberOne PH, such control did not necessarily warrant piercing the veil of corporate fiction since there was not a single proof that CyberOne PH was formed to defraud Lea Jane and Stephanie or that CyberOne PH was guilty of bad faith or fraud.

    Significantly, the Court did not find any evidence proving that CyberOne PH was organized for the purpose of defeating public convenience or evading an existing obligation. The Court stated that Lea Jane and Stephanie even failed to allege any fraudulent acts committed by CyberOne PH in order to justify a wrong, protect a fraud, or defend a crime. The Court also stated that the mere fact that CyberOne PH’s major stockholder was CyberOne AU did not prove that CyberOne PH was organized and controlled and its affairs conducted in a manner that made it merely an instrumentality, agency, conduit or adjunct of CyberOne AU.

    The Court emphasized that in order to disregard the separate corporate personality of a corporation, the wrongdoing must be clearly and convincingly established.

    As mentioned, the Court declared that Lea Jane and Stephanie were not employees of CyberOne PH.

    The Court used the four-fold test in determining the existence of an employer-employee relationship. It stated that the test involves an inquiry into:

    • the selection and engagement of the employee;
    • the payment of wages;
    • the power of dismissal; and
    • the employer’s power to control the employee with respect to the means and method by which the work is to be accomplished.

    In the present case, the Court noted the allegation of Lea Jane and Stephanie that they were requested by CyberOne AU to become stockholders and directors of CyberOne PH and that they were hired as employees of CyberOne PH as shown by their pay slips. However, the Court ruled that other than the pay slips, no other evidence was submitted to prove their employment by CyberOne PH. Lea Jane and Stephanie failed to present any evidence, such as employment contracts or job offers, that they rendered services to CyberOne PH as employees thereof.

    As to the power of dismissal, the Court found that Lea Jane and Stephanie submitted letters of resignation as directors of CyberOne PH and not as employees thereof. Said the Court, this fact negated their contention that they were dismissed by CyberOne PH as its employees.

    Lastly, the Court found no evidence that CyberOne PH exercised the power of control over Lea Jane and Stephanie on the manner by which they performed their work. The Court highlighted that Lea Jane and Stephanie merely relied on their allegations without specifying the terms of their employment, as well as their functions and duties as employees of CyberOne PH.

    Were Lea Jane and Stephanie illegally dismissed from employment?

    The Court ruled in the negative. As record established the fact that Lea Jane and Stephanie were not employees of CyberOne PH, the Court found no need to delve into the issues of illegal dismissal and entitlement to their claims. The Court concluded that there was no dismissal to speak of.

    Further reading:

    • Gesolgon v. CyberOne PH., Inc., G.R. No. 210741, October 14, 2020.

  • Existence of the Right to Control the Manner of Doing the Work

    P alleged that he was employed sometime in October 1996, as a fitter/welder by O, Inc., a corporation engaged in the business of ship building. As a fitter/welder, P assembled, welded, fitted, installed, and repaired certain barge components. P presented a copy of his O, Inc. company Identification Card (ID), Certificate of Employment (COE) dated 5 February 2001, and time keeper report.

    P stated that sometime in 2003, O, Inc. changed its corporate name to S, Inc., maintained the same line of business, and retained in its employ P and other O, Inc. employees.

    P further stated that sometime in May 2006, he was assigned to Lamao, Limay, Bataan to do a welding job on one of S, Inc.’s barges. On 11 May 2006, an explosion occurred which caused P to sustain third degree burns on certain parts of his body. P was then hospitalized from 11 May until 6 June 2006 and had received financial assistance from S, Inc. for the duration of his confinement.

    P alleged that S, Inc. verbally dismissed him from service effective 1 May 2008 due to lack of work, which was why he filed a complaint for illegal dismissal against S, Inc.

    S, Inc. denied that it engaged P as its regular employee. In support of its claim that no employer-employee relationship existed between them, S, Inc. pointed out that it was only incorporated sometime in November 2002, several years after O, Inc. engaged P as its fitter/welder in 1996. Furthermore, S, Inc. maintained that it was a separate and distinct entity from O, Inc. and that no such change of corporate name as claimed by P.

    S, Inc. alleged that, at best, P was only a helper brought in by its regular employees on certain occasions when repairs were needed to be done on its barges. It stressed that it did not engage P on a regular basis as his work on the barges was merely temporary or occasional. It further stated that P was free to seek employment elsewhere at any given time.

    Was P an employee of S, Inc.?

    In Parayday v. Shogun Shipping Co., Inc.,1G.R. No. 204555, July 6, 2020. the Supreme Court declared that an employer-employee relationship existed between P and S, Inc.

    Initially, the Court did not give credence to the ID and COE presented by P, for the said documents were issued by O, Inc. and not by S, Inc. The Court also did not consider the time keeper report presented by P because their genuineness and due execution were unverifiable.

    Nonetheless, the Court found that S, Inc. failed to categorically deny the following circumstances:

    • Sometime in May 2006, it permitted P to work on repairs on one of its barges. It was also found that S, Inc. did not also deny that P worked for it until he was supposedly verbally dismissed from employment on 1 May 2008. Notably, S, Inc. even admitted that P was called in to do repairs on its barges.
    • P was duly compensated for his work done on the barges. S, Inc. even categorically admitted that it provided him financial assistance when he was hospitalized from 11 May until 6 June 2006. It also did not disprove P’s allegation that it continued to pay his salaries after he was discharged from the hospital on 7 June 2006.
    • P was verbally dismissed on 1 May 2008. The Court noted S, Inc.’s allegation that P only did repair work whenever the same was available. The Court viewed that it was S, Inc. that determined the cessation of P’s services.

    According to the Court, the Rules of Court2Under Rule 8, Section 11., which supplements the NLRC Rules of Procedure, provides that allegations which are not specifically denied are deemed admitted.

    As regards S, Inc.’s power of control over P, the Court emphasized that the control test calls merely for the existence of the right to control the manner of doing the work and not the actual exercise of the right.3Dy Keh Beng v. International Labor and Marine Union of the Philippines, G.R. No. L-32245, May 25, 1979, 179 PHIL 131-139. The Court added that an employer’s power of control, particularly over personnel working under the employer, is deemed inferred, more so when said personnel are working at the employer’s establishment.

    In the present case, the Court found that P worked on the barges alongside regular employees of S, Inc. and that S, Inc. did not deny that he was taking orders from its engineers as to the required specifications on how the barges of Shogun Ships should be repaired. For the Court, it could thus logically infer that S, Inc., to some degree, exercised control or had the right to control the work of P.

    P was an employee of S, Inc.

    Further reading:

    • Parayday v. Shogun Shipping Co., Inc., G.R. No. 204555, July 6, 2020.

  • IDs, Uniforms, and Vague Affidavits

    Arnulfo alleged that in 1994 he was hired as a butcher by Ernesto (the proprietor of Kalookan Slaughterhouse) and was made to work the entire week, from 6:30 P.M. to 7:30 A.M. with a daily wage of P700.00, that later became P500.00.

    Arnulfo narrated that on July 21, 2014, he suffered from a headache and was unable to report for duty. The next day, Ernesto informed him that he could no longer report for work due to his old age.

    Aggrieved by these developments, Arnulfo filed a complaint for illegal dismissal against Ernesto.

    Ernesto, on the other hand, asserted that Arnulfo was an independent butcher engaged by his Operation Supervisor, Cirilo, and he was paid based on the number of hogs he butchered. Ernesto added that Arnulfo was only called into the slaughterhouse when customers brought hogs to be slaughtered.

    In arguing against Arnulfo’s claim of illegal dismissal, Ernesto contended that he imposed policies on the entry to the premises of Kalookan Slaughterhouse, which applied to employees, dealers, independent butchers, hog and meat dealers, and trainees. In this regard, Noelberto (one of Ernesto’s employees) stated that Arnulfo violated said policies and then misconstrued the disallowance to enter the slaughterhouse as an act of dismissal.

    Although the Office of the Labor Arbiter found that Arnulfo was hired by Ernesto himself, the National Labor Relations Commission and the Court of Appeals, however, ruled that Arnulfo was engaged by Cirilo (Ernesto’s Operation Supervisor) and he was Cirilo’s own employee.

    Was Arnulfo an employee of Ernesto?

    The Supreme Court ruled in the affirmative.

    The Court reiterated the settled rule that to determine the existence of an employer-employee relationship, four elements generally need to be considered, namely: (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 Court stated that these elements or indicators comprise the so-called ‘four-fold’ test of employment relationship.

    In the present case, it was found that the butchering services rendered by Arnulfo at the Kalookan Slaughterhouse was undisputed.

    However, Arnulfo was also found to have presented the following pieces of evidence:
    (1) an identification card and three gate passes stating that he was a butcher at the Kalookan Slaughterhouse;
    (2) log sheets for three days showing that he reported for work; and
    (3) a trip ticket showing that Arnulfo was the captain of a group of personnel that went to Bataan.

    The Court also considered Ernesto’s admission (by way of Noelberto’s statement) that uniforms were given to all employees, including Arnulfo.

    The Court reiterated its ruling in Masonic Contractor, Inc. v. Madjos1G.R. No. 185094, November 25, 2009 in that it is common practice for companies to provide identification cards to individuals not only as a security measure, but more importantly to identify the bearers thereof as bona fide employees of the firm or institution that issued them. The provision of company-issued identification cards and uniforms, said the Court, indubitably constitutes substantial evidence sufficient to support the existence of the employment relation.

    For the Court, the totality of Arnulfo’s evidence and the admissions of Ernesto led it to conclude that Arnulfo was Ernesto’s employee.

    On the other hand, the Court looked into Ernesto’s claims that Cirilo was the employer of Arnulfo and the person who paid the latter’s wages. However, the Court found no evidence supporting said claims. The Court even stated that Cirilo was not shown to (1) possess substantial capital and investment to have an independent business; (2) be Arnulfo’s employer; and (3) pay his salaries. Other than Cirilo’s Sinumpaang Salaysay, no document was presented to show that he paid Arnulfo’s salaries.

    Moreover, the Court stated when Ernesto denied that Arnulfo was his employee but alleged that the latter rendered services as Cirilo’s employee, Ernesto effectively admitted the substantial fact that Arnulfo has been rendering butchering services for several years. The Court considered such denial as negative pregnants2denials pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied which acknowledged that Ernesto indeed employed Arnulfo.

    The Court stressed that while Cirilo claimed to be Arnulfo’s employer, he also admitted that he never exercised any control over the means and methods by which Arnulfo rendered butchering services. Said the Court, if Cirilo was Arnulfo’s employer, he should have had control over Arnulfo’s means and methods for doing his job. As the Sinumpaang Salaysay of Cirilo reads, he only monitored whether the butchers finished their work.

    However, record revealed that Noelberto (Ernesto’s employee), was the one who actually exercised control in that he reprimanded Arnulfo (1) for his failure to properly store his butchering knives; (2) for coming to Kalookan Slaughterhouse with dirty clothes; (3) for reporting for work drunk; and (4) for not having an I.D. before going to the slaughterhouse.

    The Court concluded that all the foregoing circumstances established that Ernesto (through Cirilo) engaged Arnulfo, paid for his salaries, and in effect had the power to dismiss him. Further, Ernesto (through Noelberto) exercised control over Arnulfo’s conduct.

    To the mind of the Court, Ernesto was Arnulfo’s employer.

    Was Arnulfo illegally dismissed from employment?

    The Court found that Arnulfo was illegally dismissed from employment. This was because Ernesto failed to specifically deny that on July 22, 2014, Arnulfo was informed that he could no longer report for work.

    According to the Court, Noelberto only alleged that he merely barred Arnulfo from entering the slaughterhouse in several instances because of his failure to wear his I.D. and uniform but he failed to state that this was done on July 22, 2014.

    The Court ruled that Noelberto’s silence on this matter was deemed as an admission by Ernesto that Arnulfo was indeed dismissed on July 22, 2014.3Section 11, Rule 8 of the Rules of Court provides: SECTION 11. Allegations Not Specifically Denied Deemed Admitted. — Material averments in a pleading asserting a claim or claims, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied.

    Having been illegally dismissed, the Court affirmed the Office of the Labor Arbiter’s awards of separation pay and backwages.

    Further reading:

    • Fernandez v. Kalookan Slaughterhouse, Inc., G.R. No. 225075, June 19, 2019.

  • Med-Arbiter’s Ruling on the Existence or Non-existence of Employer-employee Relationship

    On 1 July 2007, complainants formed a union and registered it with the Department of Labor and Employment (DOLE). On 24 August 2007, the union filed a petition for certification election before the DOLE.

    In September 2007, complainants were terminated from their employment on the ground of cessation of business operations by the contractor-growers of Hijo Resources Corporation (HRC). On 19 September 2007, complainants, represented by the union, filed a case for unfair labor practices, illegal dismissal, and illegal deductions with a prayer for damages and attorney’s fees before the National Labor Relations Commission (NLRC).

    On 19 November 2007, the DOLE Med-Arbiter issued an Order dismissing the union’s petition for certification election because no employer-employee relationship existed between the complainants and HRC. Complainants did not appeal the Med Arbiter’s Order but pursued the illegal dismissal case they filed.

    Is the Labor Arbiter in the illegal dismissal case bound by the ruling of the Med-Arbiter regarding the existence or non-existence of employer-employee relationship between the parties in the certification election case?

    No.

    The Supreme Court applied Sandoval Shipyards, Inc. v. Pepito 1G.R. No. 143428, June 25, 2001, 412 PHIL 148-157, which cited Manila Golf & Country Club, Inc. v. Intermediate Appellate Court 2G.R. No. 64948, September 27, 1994, 307 PHIL 219-230, and reiterated the nature of a certification proceeding.

    A decision in a certification election case regarding the existence of an employer-employee relationship does not foreclose all further dispute between the parties as to the existence or non-existence of such relationship.

    It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites must concur:

    (1) there must be a final judgment or order;

    (2) said judgment or order must be on the merits;

    (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and

    (4) there must be between the two cases identity of parties, identity of subject matter and identity of cause of action.

    Clearly implicit in these requisites is that the action or proceedings in which is issued the ‘prior Judgment’ that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious, ‘one having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding . . . of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it.’ and a certification case is not such a proceeding x x x

    A certification proceeding is not a ‘litigation’ in the sense in which this term is commonly understood, but a mere investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by the employees. (Emphasis, mine.)

    Further reading:

    • Hijo Resources Corp. v. Mejares, G.R. No. 208986, January 13, 2016.

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  • Prove That An Employer-Employee Relationship Exists

    If you find yourself in a situation where the other party denies having an employer-employee relationship with you, make sure that you prove the following:

    • it had the power to select you to be an employee;
    • it paid your wages;
    • it had the power to dismiss you; and
    • it exercised control of the methods and results by which the your work is accomplished.

    In one case, the Supreme Court did not grant the claims of the complainants because they were not able to prove the existence of the mentioned elements. It said:


    “It must be recalled that when Belleza was the canteen concessionaire from 1993 to 1996, herein petitioners Daisog and Dimalanta were and continuously working thereat. When Catalan took over the management thereof in May 1997 they also continued their employment thereat.

    “However, when private respondent Ma. Theresa Ayuson took over the canteen management on April 29, 1999, she offered to Daisog and Dimalanta to continue working under her new management but the latter refused and they did not accept the separation pay being offered to them.

    “Based on the foregoing factual backdrop, it could be deduced that petitioners Daisog and Dimalanta’s employers if at all were Belleza and Catalan and not herein private respondent Ma. Theresa Ayuson.

    “However, Belleza and Catalan could not be held liable since they were not impleaded to the complaint. Neither was there evidence which directly established that petitioners Daisog and Dimalanta were employees of private respondent Cainta Coliseum which is managed by co-private respondent Ken K.C. Yu. Likewise, the record is bereft of any evidence which showed that private respondents Cainta Coliseum and/or Ken K.C. Yu and Maria Theresa Ayuson were the one who hired petitioners Daisog and Dimalanta; neither did it prove that private respondents have the power to control the conduct of petitioners. As also found out by public respondent which read:


    “‘Contrary to the allegation of complainants, the alleged payrolls do not bear the name of respondent Kenneth Yu, their alleged employer. Respondents denied that there was a signature of Kenneth Yu on the supposed payrolls. What is established in the records is that complainants are employees of canteen concessionaires operating in the respondent coliseum.’ x x x

    x x x

    “Admittedly petitioners Daisog and Dimalanta miserably failed to show by convincing evidence that there exists an employer-employee relationship between them and private respondents.”

    (Emphasis, mine.)

    Further reading:

    • Carmelita V. Dimalanta and Arturo C. Daisog v. Caita Coliseum, Inc. Ken K.C. Yu, Owner/President/General Manager, and Maria Theresa Ayuson as responsible officers, and National Labor Relations Commission, G.R. No. 161058, July 30, 2014.

  • Not Every Form of Control is Indicative of Employer-Employee Relationship

    If a real estate agent’s performance is subject to company rules, regulations, code of ethics, and periodic evaluation, does this mean that it has passed the control test for determining the existence of employer-employee relationship?

    The Supreme Court in a case said no. “Not every form of control is indicative of employer-employee relationship. A person who performs work for another and is subjected to its rules, regulations, and code of ethics does not necessarily become an employee.”

    In this case, it was found that the said rules, regulations, code of ethics, and periodic evaluation were found to not involve any control over the means and methods by which the real estate agent was to perform his job. In other words, the real estate company’s acts of:

    • Fixing prices;
    • Imposing requirements on prospective buyers;
    • Laying down the terms and conditions of the sale, including the mode of payment, which the independent contractors must follow;
    • Allocating inventories among its independent contractors;
    • Determining who has priority in selling the same;
    • Granting commission or allowance based on predetermined criteria; and
    • Regularly monitoring the result of their marketing and sales efforts

    do not pertain to the means and methods of how the said real estate agent was to perform and accomplish his task of soliciting sales. Neither do they dictate upon him the details of how he would solicit sales or the manner as to how he would transact business with prospective clients.

    Furthermore, it was likewise found that the said agent did not even cite specific rules, regulations or codes of ethics that supposedly imposed control on his means and methods of soliciting sales and dealing with prospective clients. Except for soliciting sales, the real estate company did not assign other tasks to him. He had full control over the means and methods of accomplishing his tasks as he can “solicit sales at any time and by any manner which deem appropriate and necessary.” He performed his tasks on his own account free from the control and direction of real estate company in all matters connected therewith, except as to the results thereof.

    The Court in declaring the absence of employer-employee relationship between them concluded: “As long as the level of control does not interfere with the means and methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not amount to the labor law concept of control that is indicative of employer-employee relationship.”

    Further reading:

    • Royale Homes Marketing Corporation v. Fidel P. Alcantara, G.R. No. 195190, July 28, 2014.