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LABOR AND THE CONSTITUTION
Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but theHumanization of laws and the equalization of social and economic forces by the State so that justice inits rational and objectively secular conception may at least be approximated. Social justice means thepromotion of the welfare of all the people, the adoption by the Government of measures calculated toinsure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally,through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi estsuprema lex. (Calalang vs. Williams [G.R. No. L-47800, 02 December 1940])The State is bound under the Constitution to afford full protection to labor and when conflictinginterests of labor and capital are to be weighed on the scales of social justice the heavier influence of the latter should be counterbalanced with the sympathy and compassion the law accords the lessprivileged workingman. This is only fair if the worker is to be given the opportunity and the right toassert and defend his cause not as a subordinate but as part of management with which he cannegotiate on even plane. Thus labor is not a mere employee of capital but its active and equal partner.(Fuente vs. NLRC [G.R. No. 110017, 02 January 1997])The cause of social justice is not served by upholding the interest of petitioners in disregard of theright of private respondents. Social justice ceases to be an effective instrument for the "equalization of the social and economic forces" by the State when it is used to shield wrongdoing. While it is true thatcompassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that thebenefits accorded to labor do not include compelling an employer to retain the services of an employeewho has been shown to be a gross liability to the employer. It should be made clear that when the lawtilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequalitybetween labor and management. The intent is to balance the scale of justice; to put the two parties onrelatively equal positions. There may be cases where the circumstances warrant favoring labor over theinterests of management but never should the scale be so tilted if the result is an injustice to theemployer,
Justicia remini regarda est 
(Justice is to be denied to none). (Jamer vs. NLRC [G.R. No.112630, 05 September 1997])It is true the Constitution regards labor as "a primary social economic force." But so does it declarethat it "recognizes the indispensable role of the private sector, encourages private enterprise, andprovides incentives to needed investment." The Constitution bids the State to "afford full protection tolabor." But it is equally true that "the law, in protecting the right's of the laborer, authorizes neither oppression nor self-destruction of the employer." And it is oppression to compel the employer tocontinue in employment one who is guilty or to force the employer to remain in operation when it is noteconomically in his interest to do so. (Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])
EMPLOYER-EMPLOYEE RELATIONSHIP
Importance of the existence of an employment relation
A basic factor underlying the exercise of rights under the Labor Code is status of employment. Thequestion of whether employer-employee relationship exists is a primordial consideration beforeextending labor benefits under the workmen's compensation, social security, medicare, termination payand labor relations law. It is important in the determination of who shall be included in a proposedbargaining unit because it is the sine qua non, the fundamental and essential condition that abargaining unit be composed of employees. Failure to establish this juridical relationship between theunion members and the employer affects the legality of the union itself. It means the ineligibility of theunion members to present a petition for certification election as well as to vote therein. (La Suerte vs.Director [123 SCRA 679])
Tests for the existence of Employer-Employee Relationship – South West Disaster Control 
 
In determining the existence of employer-employee relationship, the following elements aregenerally 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 employees' conduct-although thelatter is the most important element. (35 Am. Jur. 445).[T]o determine whether a person who performs work for another is the latter's employee or anindependent contractor, the National Labor Relations relies on 'the right to control' test. Under this testan employer-employee relationship exist where the person for whom the services are performedreserves the right to control not only the end to be achieved, but also the manner and means to beused in reaching the end. (LVN vs. Philippine Musicians Guild [G.R. No. 12582] citing United InsuranceCompany, 108, NLRB No. 115.)[T]he relationship between jeepney owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. We explained that inthe lease of chattels, the lessor loses complete control over the chattel leased although the lesseecannot be reckless in the use thereof, otherwise he would be responsible for the damages to the lessor.In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision andcontrol over the latter. The management of the business is in the owner's hands. The owner as holder of the certificate of public convenience must see to it that the driver follows the route prescribed by thefranchising authority and the rules promulgated as regards its operation. Now, the fact that the driversdo not receive fixed wages but get only that in excess of the so-called "boundary" they pay to theowner/operator is not sufficient to withdraw the relationship between them from that of employer andemployee. We have applied by analogy the abovestated doctrine to the relationships between busowner/operator and bus conductor, auto-calesa owner/operator and driver, and recently between taxiowners/operators and taxi drivers. Hence, petitioners are undoubtedly employees of private respondentbecause as taxi drivers they perform activities which are usually necessary or desirable in the usualbusiness or trade of their employer. (Jardin vs. NLRC [G.R. No. 119268, 23 February 2000])The case of Pajarillo vs. SSS, invoked by the public respondent as authority for the ruling that a"joint fishing venture" existed between private respondent and petitioners is not applicable in the instantcase. There is neither light of control nor actual exercise of such right on the part of the boat-owners inthe Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners as regards their employment; that they go out to sea not upon directions of the boat-owners,but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not inany way control the crew-members with whom the former have no relationship whatsoever; that theysimply join every trip for which the pilots allow them, without any reference to the owners of the vessel;and that they only share in their own catch produced by their own efforts.The aforementioned circumstances obtaining in Pajarillo do not exist in the instant case. Theconduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, thepatron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent'soperations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time toreturn to the fishing port were shown to be the prerogative of private respondent. While performing thefishing operations, petitioners received instructions via a single-side band radio from privaterespondent's operations manager who called the patron/pilot in the morning. They are told to reporttheir activities, their position, and the number of tubes of fish-catch in one day. Clearly thus, the conductof the fishing operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman IIwho is responsible for disseminating the instructions to the crew members. (Ruga vs. NLRC [G.R. No.L-72654-61, 22 January 1990])The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship between petitioners and private respondent. While it is true that the receipt of apercentage of net profits constitutes only prima facie evidence that the recipient is a partner in thebusiness, the evidence in the case at bar controverts an employer-employee relationship between theparties. In the first place, private respondent had a voice in management of the affairs of the salesforce. Secondly, petitioner Tocao’s admissions militate against an employer-employee relationship. Sheadmitted that, like her who owned Geminesse Enterprise, private respondent only receivedcommissions and transportation and representation allowances and not a fixed salary. If indeed
 
petitioner Tocano was private respondent’s employer, it is difficult to believe that they shall receive thesame income in the business. In a partnership, each partner must share in the profits and losses of theventure, except that the industrial partner shall not be liable for losses. As an industrial partner, privaterespondent had the right to demand for a formal accounting of the business and to receive her share inthe profit. (Tocao vs. CA [G.R. No. 127405, 04 October 2000])The barbershop claims it had no control over its barbers. The power to control refers to theexistence of the power and not necessarily to the actual exercise thereof, nor is it essential for theemployer to actually supervise the performance of duties of the employee. It is enough that theemployer has the right to exercise the power. As to the “control test,” the following facts indubitablyreveal that the respondent company wielded control over the work performance of petitioners; in that(1) they worked in the barber shop owned and operated by the respondents; (2) that they were requiredto report daily and observe definite hours of work; (3) they were not free to accept other employmentelsewhere but devoted their full time working at the New Looks Barber Shop for all the fifteen (15) yearsthey have worked until April 15, 1995; (4) that some have worker with respondent’s since the early1960’s; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6)petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss anyor all of them for just and vald cause. Petitioners were unarguably performing work necessary anddesiriable in the business of respondent company. (Corporal vs. NLRC [G.R. No. 129315, 02 October 2000])
Labor Only Contractor vis-à-vis an Independent Contractor 
In LEGITIMATE JOB CONTRACTING, no employer-employee relationship exists between theemployees of the job contractor and the principal employer. Even then, the principal employer becomes jointly and severally liable with the job contractor for the payment of the employees' wages whenever the contractor fails to pay the same. In such case, the law creates an employer-employee relationshipbetween the principal employer and the job contractor's employees for a limited purpose, that is, toensure that the employees are paid their wages. Other than the payment of wages, the principalemployer is not responsible for any claim made by the employees.On the other hand, in LABOR-ONLY CONTRACTING, an employer-employee relationship iscreated by law between the principal employer and the employees of the labor-only contractor. In thiscase, the labor-only contractor is considered merely an agent of the principal employer. The principalemployer is responsible to the employees of the labor-only contractor as if such employees had beendirectly employed by the principal employer. The principal employer therefore becomes solidarily liablewith the labor-only contractor for all the rightful claims of the employees. (PCI Automation vs. NLRC[GR No. 115920, 1996]
Basis of Liability 
The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-only"contracting. Here, by operation of law, the contractor is merely considered as an agent of the employer,who is deemed "responsible to the workers to the same extent as if the latter were directly employed byhim." On the other hand, Article 107 deals with "job contracting." In the latter situation, while thecontractor himself is the direct employer of the employees, the employer is deemed, by operation of law, as an indirect employer.In other words, the phrase "not an employer" found in Article 107 must be read in conjunction withArticle 106. A contrary interpretation would render the provisions of Article 107 meaningless consideringthat everytime an employer engages a contractor, the latter is always acting in the interest of theformer, whether directly or indirectly, in relation to his employees.It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent todeclaring that there is an employer-employee relationship between the owner of the project and theemployees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No.50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January1989, 169 SCRA 341). This is evidently because, as heretofore stated, the "labor-only" contractor isconsidered as a mere agent of an employer. In contrast, in "job contracting," no employer-employeerelationship exists between the owner and the employees of his contractor. The owner of the project isnot the direct employer but merely an indirect employer, by operation of law, of his contractor'semployees.
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