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.
