Perpetual Help v Faburada

[G.R. No. 121948. October 8, 2001]

Employer-Employee Relationship

Facts:

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private respondents, filed a
complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI), petitioner, with the Arbitration Branch, Department of
Labor and Employment (DOLE), Dumaguete City, for illegal dismissal, premium pay on holidays and rest days, separation pay,
wage differential, moral damages, and attorneys fees.
Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no employer-employee
relationship between them as private respondents are all members and co-owners of the cooperative. Furthermore, private
respondents have not exhausted the remedies provided in the cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of R.A. No. 6939,
otherwise known as the Cooperative Development Authority Law which took effect on March 26, 1990, requires conciliation or
mediation within the cooperative before a resort to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that the case is impressed with
employer-employee relationship and that the law on cooperatives is subservient to the Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally dismissed, thus
respondent is directed to pay Complainants backwages computed from the time they were illegally dismissed up to the actual
reinstatement but subject to the three year backwages rule (this rule was established based on Justice Teehankees concurring and
dissenting opinion of the Mercury Drug Co., Inc., et al. v. Court of Industrial Relations, et al,1974, which he said as "realistic, reasonable and mutually
*, separation pay for one month for every year of service since reinstatement is
beneficial solution" mode of computing backwages )
evidently not feasible anymore, to pay complainants 13th month pay, wage differentials and Ten Percent (10%) attorneys fees
from the aggregate monetary award. However, complainant Benedicto Faburada shall only be awarded what are due him in
proportion to the nine and a half months that he had served the respondent, he being a part-time employee.

On appeal[1], the NLRC affirmed the Labor Arbiter's decision.

* Normally, the trial of the case and resolution of the appeal should be given preference and terminated within a period of three years (one year for trial and
decision in the industrial court and two years for briefs, etc., and decision in this Court)

Issues:

1. Whether or not there is an employer-employee relationship between the parties;

2. Whether or not private respondents are regular employees;
3. Whether or not Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) would apply in PHCCIs favour.

Held:

1. YES, there is an employer-employee relationship between the parties.

In determining the existence of an employer-employee relationship, the following elements are considered:
(1) the selection and engagement of the worker or the power to hire;
(2) the power to dismiss;
(3) the payment of wages by whatever means; and
(4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration.
No particular form of proof is required to prove the existence of an employer-employee relationship. Any competent and
relevant evidence may show the relationship.[2]
In the case at bar, the above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its
Manager, hired private respondents to work for it. They worked regularly on regular working hours, were assigned specific
duties, were paid regular wages and made to accomplish daily time records just like any other regular employee. They worked
under the supervision of the cooperative manager. But unfortunately, they were dismissed.
That an employer-employee exists between the parties is shown by the averments of private respondents in their respective
affidavits, carefully considered by respondent NLRC in affirming the Labor Arbiter's decision, thus:

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Benedicto Faburada -Regular part-time Computer programmer/ operator. Worked with the Cooperative since June 1, 1988
up to December 29, 1989. Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and every Saturday from
8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3 ) hours during Sundays. Monthly salary: P1,000.00 -from
June to December 1988; P1,350.00 - from January to June 1989; and P1,500.00 from July to December 1989.

Sisinita Vilar -Clerk. Worked with the Cooperative since December 1, 1987 up to December 29, 1989. Work schedule:
Regular working hours. Monthly salary: P500.00 - from December 1, 1987 to December 31, 1988;P1,000.00 - from January 1,
1989 to June 30, 1989; and P1,150.00 - from July 1, 1989 to December 31, 1989.

Imelda C. Tamayo - Clerk. Worked with the Cooperative since October 19, 1987 up to December 29, 1989. Work schedule:
Monday to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday - 8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for
one Sunday each month - for at least three (3) hours. Monthly salary: P60.00 - from October to November 1987; P250.00 for
December 1987; P500.00 - from January to December 1988

Harold D. Catipay - Clerk. Worked with the Cooperative since March 3 to December 29, 1989. Work schedule: - Monday to
Friday - 8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday - 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m.; and one Sunday each
month - for at least three (3) hours. Monthly salary: P900.00 - from March to June 1989;

All of them were given a memorandum of termination on January 2, 1990, effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the same being supported by
substantial evidence, that quantum of evidence required in quasi-judicial proceedings, like this one.

2. YES, private respondents are regular employees of Perpetual Help.

Article 280 of the Labor Code provides for three kinds of employees:
(1) regular employees or those who have been engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer;
(2) project employees or those whose employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season; and
(3) casual employees or those who are neither regular nor project employees. [3]
The employees who are deemed regular are:
(a) those who have been engaged to perform activities which are usually necessary or desirable in the usual trade or
business of the employer; and
(b) those casual employees who have rendered at least one (1) year of service, whether such service is continuous or
broken, with respect to the activity in which they are employed. [4]
In the case at bar, it cannot be denid, private respondents were rendering services necessary to the day-to-day
operations of petitioner PHCCI. This fact alone qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto Faburada, for one and
a half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo, for two (2) years and two (2) months. That
Benedicto Faburada worked only on a part-time basis, does not mean that he is not a regular employee.
Ones regularity of employment is not determined by the number of hours one works but by the nature and by the length of
time one has been in that particular job. [5] Petitioner's contention that private respondents are mere volunteer workers, not
regular employees, must necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of Labor and
Employment (173 SCRA 697, 703 (1989) is misplaced. The issue in this case is whether or not the employees-members of a
cooperative can organize themselves for purposes of collective bargaining, not whether or not the members can be
employees. Petitioner missed the point.
As regular employees or workers, private respondents are entitled to security of tenure. Thus, their services may be
terminated only for a valid cause, with observance of due process.
The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor Code and the
authorized causes under Articles 283 and 284 of the same Code.
The just causes are:
(1) serious misconduct or willful disobedience of lawful orders in connection with the employees work;
(2) gross or habitual neglect of duties;
(3) fraud or willful breach of trust;

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 (4) commission of a crime or an offense against the person of the employer or his immediate family member or
representative; and, analogous cases.

The authorized causes are:

(1) the installation of labor-saving devices;
(2) redundancy;
(3) retrenchment to prevent losses; and
(4) closing or cessation of operations of the establishment or undertaking, unless the closing is for the purpose of
circumventing the provisions of law.
Article 284 provides that an employer would be authorized to terminate the services of an employee found to be suffering
from any disease if the employees continued employment is prohibited by law or is prejudicial to his health or to the health of
his fellow employees[6]
Private respondents were dismissed not for any of the above causes. They were dismissed because petitioner
considered them to be mere voluntary workers, being its members, and as such work at its pleasure. Petitioner thus
vehemently insists that their dismissal is not against the law.
Procedural due process requires that the employer serve the employees to be dismissed two (2) written notices before
the termination of their employment is effected:
(a) the first, to apprise them of the particular acts or omissions for which their dismissal is sought and
(b) the second, to inform them of the decision of the employer that they are being dismissed. [7]
In this case, only one notice was served upon private respondents by petitioner. It was in the form of a Memorandum
signed by the Manager of the Cooperative dated January 2, 1990 terminating their services effective December 29,
1989. Clearly, petitioner failed to comply with the twin requisites of a valid notice.
We hold that private respondents have been illegally dismissed.

3. NO, Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) will not apply in PHCCIs favour.

Section 8 of R.A. No 6939 otherwise known as the Cooperative Development Authority Law provides that:

Mediation and Conciliation.- Upon request of either or both parties, the Authority shall mediate and conciliate
disputes within a cooperative or between cooperatives: Provided, That if no mediation or conciliation succeeds within three (3)
months from request thereof, a certificate of non-resolution shall be issued by the Commission prior to the filing of appropriate
action before the proper courts.

The above provisions apply to members, officers and directors of the cooperative involved in disputes within a
cooperative or between cooperatives.
In the case at bar, there is no evidence that private respondents are members of petitioner PHCCI and even if they are,
the dispute is about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217 of the Labor
Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.
Therefore, Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) will not apply in PHCCIs favour.

Vicente Sy, et al vs. Court of Appeals & Jaime Sahot

398 SCRA 301, G.R. No. 142293. February 27, 2003
Employer-Employee Relationship
Facts:

Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck helper for petitioners family-owned
trucking business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T.
Paulino Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since
1994. Throughout all these changes in names and for 36 years, private respondent continuously served the trucking business
of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various
ailments. Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He
inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered
that his premium payments had not been remitted by his employer.

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 Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR,
presleyopia, hypertensive retinopathy G II, [6] HPM, UTI, Osteoarthritis,[7] and heart enlargement.[8] On said grounds, Belen
Paulino of the SBT Trucking Service management told him to file a formal request for extension of his leave. At the end of his
week-long absence, Sahot applied for extension of his leave for the whole month of June, 1994. It was at this time when
petitioners allegedly threatened to terminate his employment should he refuse to go back to work.

At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work. But he could not retire on
pension because petitioners never paid his correct SSS premiums. The fact remained he could no longer work as his left thigh
hurt abominably. Petitioners ended his dilemma. They carried out their threat and dismissed him from work, effective June 30,
1994. He ended up sick, jobless and penniless.

On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal.
For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and
drivers. They contend that private respondent was not illegally dismissed as a driver because he was in fact petitioners
industrial partner. They add that it was not until the year 1994, when SBT Trucking Corporation was established, and only then
did respondent Sahot become an employee of the company, with a monthly salary that reached P4,160.00 at the time of his
separation.
Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for work
for almost seven days. On June 1, 1994, Sahot asked permission to extend his leave of absence until June 30, 1994. It
appeared that from the expiration of his leave, private respondent never reported back to work nor did he file an extension of
his leave. Instead, he filed the complaint for illegal dismissal against the trucking company and its owners.
Petitioners add that due to Sahots refusal to work after the expiration of his authorized leave of absence, he should be
deemed to have voluntarily resigned from his work. They contended that Sahot had all the time to extend his leave or at least
inform petitioners of his health condition.

The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal
in Sahots case. Private respondent had failed to report to work. Moreover, said the Labor Arbiter, petitioners and private
respondent were industrial partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay financial
assistance of P15,000 to Sahot for having served the company as a regular employee since January 1994 only.

On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private
respondent was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but
his employment was terminated on account of his illness, pursuant to Article 284 [9] of the Labor Code. Accordingly, the NLRC
ordered petitioners to pay private respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for
29 years of service.

On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private
respondent was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but
his employment was terminated on account of his illness, pursuant to Article 284 [9] of the Labor Code. Accordingly, the NLRC
ordered petitioners to pay private respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for
29 years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000, the
appellate court affirmed with modification the judgment of the NLRC. It held that private respondent was indeed an employee
of petitioners since 1958. It also increased the amount of separation pay awarded to private respondent to P74,880, computed
at the rate of P2,080 per year for 36 years of service from 1958 to 1994.

Issues:

1. Whether or not an employer-employee relationship existed between petitioners and respondent Sahot;
2. Whether or not there was valid dismissal;
3. Whether or not Sahot is an industrial partner;
4. Whether or not Sahot is entitled to separation pay.

Ruling:

1. YES, an employer-employee existed.

In the case of Aurora Land Projects Corp. v. NLRC, 266 SCRA 48, 59 (1997), the court said that the elements
to determine the existence of an employment relationship are:

(a) the selection and engagement of the employee;

(b) the payment of wages;

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 (c) the power of dismissal; and

(d) the employers power to control the employees conduct.

The most important element is the employers control of the employees conduct, not only as to the result of
the work to be done, but also as to the means and methods to accomplish it.

In the case at bar, petitioners owned and operated a trucking business since the 1950s and by their own
allegations, they determined private respondents wages and rest day. [20] Records of the case show that private
respondent actually engaged in work as an employee. During the entire course of his employment he did not have the
freedom to determine where he would go, what he would do, and how he would do it. He merely followed instructions
of petitioners and was content to do so, as long as he was paid his wages. Indeed, said the CA, private respondent
had worked as a truck helper and driver of petitioners not for his own pleasure but under the latters control.

Therefore, an employer-employee existed between Vicenty Sy and Jaime Sahot.

2. YES, Jaime Sahot was invalidly dismissed.

Art. 277(b) of the Labor Code provides that:

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of
this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken
by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by
filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that
the termination was for a valid or authorized cause shall rest on the employer.

In addition to, article 284 of the Labor Code authorizes an employer to terminate an employee on the ground
of disease, thus:

Art. 284. Disease as a ground for termination - an employer may terminate the services of an employee who
has been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial
to his health as well as the health of his co-employees.

However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus
Implementing Rules of the Labor Code requires:

Sec. 8. Disease as a ground for dismissal - Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not
terminate his employment unless there is a certification by competent public health authority that the disease is of
such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but
shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately
upon the restoration of his normal health.

Furthermore, in the case of Triple Eight integrated Services, Inc. vs. NLRC, [31] the court ruled that the
requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness
and thus defeat the public policy in the protection of labor.

In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots dismissal
was effected. From the records, it clearly appears that procedural due process was not observed in the separation of private
respondent by the management of the trucking company. The employer is required to furnish an employee with two written
notices before the latter is dismissed:
(1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the
equivalent of a charge; and
(2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable
opportunity to answer and to be heard on his defense. [33]
These, the petitioners failed to do, even only for record purposes. What management did was to threaten the employee
with dismissal, then actually implement the threat when the occasion presented itself because of private respondents painful
left thigh.
Therefore, it is clear that Sahots dismissal is tainted with invalidity.

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Points to remember: (Do not include these in the recitation unless asked ^_~)

*Substantial Evidence - is such amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion. (Triple Eight Integrated Services, Inc. v. NLRC, 299 SCRA 608, 614 (1998))

**Doubtful Evidence - Time and again this Court has said that if doubt exists between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the employee.

3. NO, Sahot is not an industrial partner.

Article 1767[21] of the Civil Code states that in a contract of partnership two or more persons bind themselves
to contribute money, property or industry to a common fund, with the intention of dividing the profits among
themselves.

In the case at bar, Not one of these circumstances is present in this case. No written agreement exists to
prove the partnership between the parties. Private respondent did not contribute money, property or industry for the
purpose of engaging in the supposed business. There is no proof that he was receiving a share in the profits as a
matter of course, during the period when the trucking business was under operation. Neither is there any proof that he
had actively participated in the management, administration and adoption of policies of the business.

Therefore, Sahot is not an industrial partner.

4. YES, Sahot is entitled to a separation pay.

Article 284 of the Labor Code provides that:

Disease as ground for termination An employer may terminate the services of an employee who has been
found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his
health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least
one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.

In the case at bar, his separation pay was computed by the appellate court at P2,080 times 36 years (1958 to
1994) or P74,880. The court agreed with the computation, after noting that his last monthly salary was P4,160.00 so
that one-half thereof is P2,080.00.

Therefore, Sahot is entitled to a separation pay.

Chavez v NLRC
[G.R. No. 146530. January 17, 2005]
Employer-Employee Relationship

Facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging
materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25,
1984. As such, the petitioner was tasked to deliver the respondent companys products from its factory in Mariveles, Bataan, to
its various customers, mostly in Metro Manila. The respondent company furnished the petitioner with a truck. Most of the
petitioners delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the
afternoon two or three days after. The deliveries were made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This
was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant manager, his (the
petitioners) desire to avail himself of the benefits that the regular employees were receiving such as overtime pay, nightshift
differential pay, and 13th month pay, among others. Although he promised to extend these benefits to the petitioner,
respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the
NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company terminated the services of the
petitioner. Consequently, on May 25, 1995, the petitioner filed an amended complaint against the respondents for illegal
dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month pay, among others.
The case was docketed as NLRC Case No. RAB-III-02-6181-95.

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The respondents, for their part, denied the existence of an employer-employee relationship between the respondent company
and the petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract of service
which he and the respondent company entered into.

The contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and
September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts were substantially the same.
The relationship of the respondent company and the petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by which his work was
accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled to
regularization because he was not an employee of the respondent company. The respondents, likewise, maintained that they
did not dismiss the petitioner. Rather, the severance of his contractual relation with the respondent company was due to his
violation of the terms and conditions of their contract. The petitioner allegedly failed to observe the minimum degree of
diligence in the proper maintenance of the truck he was using, thereby exposing respondent company to unnecessary
significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997,
finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee of the
respondent company as he was performing a service that was necessary and desirable to the latters business. Moreover, it
was noted that the petitioner had discharged his duties as truck driver for the respondent company for a continuous and
uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the
constitutional provision affording full protection to labor and security of tenure. The Labor Arbiter found that the petitioners
dismissal was anchored on his insistent demand to be regularized. Hence, for lack of a valid and just cause therefor and for
their failure to observe the due process requirements, the respondents were found guilty of illegal dismissal. The Labor Arbiter
ordered the respondent company to pay petitioner the amount of:
a) Backwages .. P248,400.00
b) Separation Pay .. P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in
its Decision[4] dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the petitioner as a scheme that was resorted to by
the respondents who, taking advantage of the petitioners unfamiliarity with the English language and/or legal niceties,
wanted to evade the effects and implications of his becoming a regularized employee.
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC
rendered another Decision[6] dated July 10, 1998, reversing its earlier decision and, this time, holding that no employer-
employee relationship existed between the respondent company and the petitioner. In reconsidering its earlier decision, the
NLRC stated that the respondents did not exercise control over the means and methods by which the petitioner accomplished
his delivery services. It upheld the validity of the contract of service as it pointed out that said contract was silent as to the time
by which the petitioner was to make the deliveries and that the petitioner could hire his own helpers whose wages would be
paid from his own account. These factors indicated that the petitioner was an independent contractor, not an employee of the
respondent company.
Upon appeal the appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the
NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular
employee of the respondent company because as its truck driver, he performed a service that was indispensable to the latters
business. Further, he had been the respondent companys truck driver for ten continuous years. The CA also reasoned that the
petitioner could not be considered an independent contractor since he had no substantial capital in the form of tools and
machinery. In fact, the truck that he drove belonged to the respondent company. The CA also observed that the routing slips
that the respondent company issued to the petitioner showed that it exercised control over the latter. The routing slips
indicated the chronological order and priority of delivery, the urgency of certain deliveries and the time when the goods were to
be delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting that he just filed a
complaint for regularization. This actuation of the petitioner negated the respondents allegation that he abandoned his job.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the
petitioner in this wise:

In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of regular
employment, it is but necessary for the courts to scrutinize with extreme caution their legality and justness. Where from the
circumstances it is apparent that a contract has been entered into to preclude acquisition of tenurial security by the employee,
they should be struck down and disregarded as contrary to public policy and morals. In this case, the contract of service is just

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another attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear that
the stipulations of the parties were governed by the Civil Code as in ordinary transactions. [9]

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the
assailed Resolution dated December 15, 2000 upholding the contract of service between the petitioner and the respondent
company. In reconsidering its decision, the CA explained that the extent of control exercised by the respondents over the
petitioner was only with respect to the result but not to the means and methods used by him. The CA cited the following
circumstances: (1) the respondents had no say on how the goods were to be delivered to the customers; (2) the petitioner had
the right to employ workers who would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of
no moment because his status was determined not by the length of service but by the contract of service. This contract, not
being contrary to morals, good customs, public order or public policy, should be given the force and effect of law as between
the respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC
dismissing the petitioners complaint for illegal dismissal.
Issues:
1. Whether or not there existed an employer-employee relationship between the respondent company and the petitioner;
2. Whether or not respondents validly dismissed the petitioner.

Ruling:

1. Yes, an employer-employee relationship existed between the parties.

The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employers power to control the
employees conduct.[11] The most important element is the employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish it. [12]
In the case at bar, all the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third
party.
Second. Wages are defined as remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be
done, or for service rendered or to be rendered. [13] That the petitioner was paid on a per trip basis is not significant. This is
merely a method of computing compensation and not a basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an
employment status, depending on whether the elements of an employer-employee relationship are present or not. [14] In this
case, it cannot be gainsaid that the petitioner received compensation from the respondent company for the services that he
rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of
payroll.[15] The payroll should show, among other things, the employees rate of pay, deductions made, and the amount actually
paid to the employee. Interestingly, the respondents did not present the payroll to support their claim that the petitioner was not
their employee, raising speculations whether this omission proves that its presentation would be adverse to their case. [16]
Third. The respondents power to dismiss the petitioner was inherent in the fact that they engaged the services of the
petitioner as truck driver. They exercised this power by terminating the petitioners services albeit in the guise of severance of
contractual relation due allegedly to the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test is the most
important. Compared to an employee, an independent contractor is one who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its own account and under its own responsibility according to its 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. [17] Hence, while an independent contractor enjoys independence and freedom from the
control and supervision of his principal, an employee is subject to the employers power to control the means and methods by
which the employees work is to be performed and accomplished. [18]
Although the respondents denied that they exercised control over the manner and methods by which the petitioner
accomplished his work, a careful review of the records shows that the latter performed his work as truck driver under the
respondents supervision and control. Their right of control was manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent
companys goods; [19]

8
 3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places
only, to wit: at its office in Metro Manila at 2320 Osmea Street, Makati City or at BEPZ, Mariveles, Bataan; [20] and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes
and routing slips.
These circumstances, to the Courts mind, prove that the respondents exercised control over the means and methods by
which the petitioner accomplished his work as truck driver of the respondent company. On the other hand, the Court is hard
put to believe the respondents allegation that the petitioner was an independent contractor engaged in providing delivery or
hauling services when he did not even own the truck used for such services. Evidently, he did not possess substantial
capitalization or investment in the form of tools, machinery and work premises. Moreover, the petitioner performed the delivery
services exclusively for the respondent company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish
the existence of an employer-employee relationship between the respondent company and the petitioner. It bears stressing
that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and
providing therein that the employee is an independent contractor when, as in this case, the facts clearly show otherwise.
Indeed, the employment status of a person is defined and prescribed by law and not by what the parties say it should be.
Therefore, an employer-employee exists.

2. Yes, respondents were not validly dismissed.

Article 282 of the Labor Code provides: An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his
family or his duly authorized representative;
(e) Other causes analogous to the foregoing.

In the case at bar, the respondents failed to prove any such cause for the petitioners dismissal. They insinuated that the
petitioner abandoned his job. To constitute abandonment, these two factors must concur:
(1) the failure to report for work or absence without valid or justifiable reason; and
(2) a clear intention to sever employer-employee relationship. [24]
Obviously, the petitioner did not intend to sever his relationship with the respondent company for at the time that he
allegedly abandoned his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for
illegal dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal,
more so when it includes a prayer for reinstatement.
Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper maintenance of the
truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them.[26] The negligence, to warrant removal from service, should not merely be gross but also habitual.[27] The
single and isolated act of the petitioners negligence in the proper maintenance of the truck alleged by the respondents does
not amount to gross and habitual neglect warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to
complainants breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we are very
much inclined to believe complainants story that his dismissal from the service was anchored on his insistent demand that he
be considered a regular employee. Because complainant in his right senses will not just abandon for that reason alone his
work especially so that it is only his job where he depends chiefly his existence and support for his family if he was not
aggrieved by the respondent when he was told that his services as driver will be terminated on February 23, 1995.
Therefore, respondents were not validly dismissed.

Francisco v NLRC
G.R. No. 170087, August 31, 2006
Employer-Employee Relationship

9
Facts:

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant
and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation
of the company.[5]

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither
did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the
company.[6]

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government agencies, especially with the Bureau of
Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. [7]

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. [8]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to
sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to
Seiji Kamura and in charge of all BIR matters.[9]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for
a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the
company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated
follow-ups with the company cashier but she was advised that the company was not earning well. [10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that
she is no longer connected with the company.[11]

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was
hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her
work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner did
not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS
as one of the companys employees.[12]

Petitioners designation as technical consultant depended solely upon the will of management. As such, her
consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the
needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for
the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR,
as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted
showing that petitioners latest employer was Seiji Corporation. [13]

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights
and jointly and severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 07/2002 (27,500 x 10 mos.) 275,000.00

b. Salary Differentials (01/2001 09/2001) 22,500.00

10
 c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of KaseiCorp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation pay

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter.

On appeal, the Court of Appeals reversed the NLRC.

Issues:

1. Whether or not whether there was an employer-employee relationship between petitioner and private respondent
Kasei Corporation;

2. (2) whether petitioner was illegally dismissed.

Ruling:

1. YES, there was an employer-employee relationship between petitioner and private respondent Kasei Corporation.

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the
person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to
be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-
employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are
instances when, aside from the employers power to control the employee with respect to the means and methods by which the
work is to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving:

(1) the putative employers power to control the employee with respect to the means and methods by which the work
is to be accomplished; and

(2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this
case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the period of the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,[19] and lately in Leonardo v. Court
of Appeals,[20] where we held that there is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a
clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of
the whole economic activity,[22] such as:

(1) the extent to which the services performed are an integral part of the employers business;

(2) the extent of the workers investment in equipment and facilities;

11
 (3) the nature and degree of control exercised by the employer;

(4) the workers opportunity for profit and loss;

(5) the amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise;

(6) the permanency and duration of the relationship between the worker and the employer; and

(7) the degree of dependency of the worker upon the employer for his continued employment in
that line of business.[23]

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. [24] In the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is dependency.[25] By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.

In the case at bar, by applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation
because she was under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She
reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting
Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to
the company and performing functions necessary and desirable for the proper operation of the corporation such as securing
business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions
from August 1, 1999 to December 18, 2000. [26] When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS
specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line
inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent
corporation.[27]

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latters line of business.

In Domasig v. National Labor Relations Commission,[28] we held that in a business establishment, an identification card
is 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. Together with the cash vouchers covering petitioners salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the SSS is proof that the
latter were the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted
as Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as
Kamuras direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits,
license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate
documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was required to sign prepared documentation for the company.
[30]

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case. [31]Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on
any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would
make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. [32] A recantation
does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility
and should be received with caution.[33]

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job function involved accounting and tax services
rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired

12
and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation
had the power to control petitioner with the means and methods by which the work is to be accomplished.

2. YES, petitioner was illegally dismissed.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained
relations, petitioner is further entitled to separation pay, in lieu of reinstatement. [34]

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive
dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to an employee. [35] In Globe Telecom, Inc. v. Florendo-Flores,
[36]
we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable
situation arises which creates an adverse working environment rendering it impossible for such employee to continue working
for her employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal
termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or
creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we
are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would
enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid
and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social
justice and national development.

13