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G.R. No. 170087 August 31, 2006 FRANCISCO vs NLRC ANGELINA FRANCISCO, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI COR ORATION, SEIIC!IRO TAKA!AS!I, TIMOTEO ACE"O, "ELFIN LI#A, IRENE BALLESTEROS, TRINI"A" LI#A $%& RAMON ESC'ETA, Respondents. This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October !, ""4 # and October $, ""5, respectivel%, in CA&'.R. (P )o. $*5#5 dis+issin, the co+plaint for constructive dis+issal filed b% herein petitioner An,elina -rancisco. The appellate court reversed and set aside the Decision of the )ational .abor Relations Co++ission /).RC0 dated April #5, ""1, 1 in ).RC )CR CA )o. "1 $22&" which affir+ed with +odification the decision of the .abor Arbiter dated 3ul% 1#, "" , 4 in ).RC&)CR Case )o. 1"&#"&"&4*!&"#, findin, that private respondents were liable for constructive dis+issal. 4n #!!5, petitioner was hired b% 5asei Corporation durin, its incorporation sta,e. (he was desi,nated as Accountant and Corporate (ecretar% and was assi,ned to handle all the accountin, needs of the co+pan%. (he was also desi,nated as .iaison Officer to the Cit% of 6akati to secure business per+its, construction per+its and other licenses for the initial operation of the co+pan%. 5 Althou,h she was desi,nated as Corporate (ecretar%, she was not entrusted with the corporate docu+ents7 neither did she attend an% board +eetin, nor re8uired to do so. (he never prepared an% le,al docu+ent and never represented the co+pan% as its Corporate (ecretar%. 9owever, on so+e occasions, she was prevailed upon to si,n docu+entation for the co+pan%. 2 4n #!!2, petitioner was desi,nated Actin, 6ana,er. The corporation also hired 'err% )ino as accountant in lieu of petitioner. As Actin, 6ana,er,

petitioner was assi,ned to handle recruit+ent of all e+plo%ees and perfor+ +ana,e+ent ad+inistration functions7 represent the co+pan% in all dealin,s with ,overn+ent a,encies, especiall% with the :ureau of 4nternal Revenue /:4R0, (ocial (ecurit% (%ste+ /(((0 and in the cit% ,overn+ent of 6akati7 and to ad+inister all other +atters pertainin, to the operation of 5asei Restaurant which is owned and operated b% 5asei Corporation. $ -or five %ears, petitioner perfor+ed the duties of Actin, 6ana,er. As of Dece+ber 1#, """ her salar% was P $,5""."" plus P1,"""."" housin, allowance and a #"; share in the profit of 5asei Corporation. * 4n 3anuar% ""#, petitioner was replaced b% .i<a R. -uentes as 6ana,er. Petitioner alle,ed that she was re8uired to si,n a prepared resolution for her replace+ent but she was assured that she would still be connected with 5asei Corporation. Ti+oteo Acedo, the desi,nated Treasurer, convened a +eetin, of all e+plo%ees of 5asei Corporation and announced that nothin, had chan,ed and that petitioner was still connected with 5asei Corporation as Technical Assistant to (ei=i 5a+ura and in char,e of all :4R +atters. ! Thereafter, 5asei Corporation reduced her salar% b% P ,5""."" a +onth be,innin, 3anuar% up to (epte+ber ""# for a total reduction of P ,5""."" as of (epte+ber ""#. Petitioner was not paid her +id&%ear bonus alle,edl% because the co+pan% was not earnin, well. On October ""#, petitioner did not receive her salar% fro+ the co+pan%. (he +ade repeated follow&ups with the co+pan% cashier but she was advised that the co+pan% was not earnin, well. #" On October #5, ""#, petitioner asked for her salar% fro+ Acedo and the rest of the officers but she was infor+ed that she is no lon,er connected with the co+pan%. ## (ince she was no lon,er paid her salar%, petitioner did not report for work and filed an action for constructive dis+issal before the labor arbiter.

Private respondents averred that petitioner is not an e+plo%ee of 5asei Corporation. The% alle,ed that petitioner was hired in #!!5 as one of its technical consultants on accountin, +atters and act concurrentl% as Corporate (ecretar%. As technical consultant, petitioner perfor+ed her work at her own discretion without control and supervision of 5asei Corporation. Petitioner had no dail% ti+e record and she ca+e to the office an% ti+e she wanted. The co+pan% never interfered with her work e>cept that fro+ ti+e to ti+e, the +ana,e+ent would ask her opinion on +atters relatin, to her profession. Petitioner did not ,o throu,h the usual procedure of selection of e+plo%ees, but her services were en,a,ed throu,h a :oard Resolution desi,natin, her as technical consultant. The +one% received b% petitioner fro+ the corporation was her professional fee sub=ect to the #"; e>panded withholdin, ta> on professionals, and that she was not one of those reported to the :4R or ((( as one of the co+pan%?s e+plo%ees. # Petitioner?s desi,nation as technical consultant depended solel% upon the will of +ana,e+ent. As such, her consultanc% +a% be ter+inated an% ti+e considerin, that her services were onl% te+porar% in nature and dependent on the needs of the corporation. To prove that petitioner was not an e+plo%ee of the corporation, private respondents sub+itted a list of e+plo%ees for the %ears #!!! and """ dul% received b% the :4R showin, that petitioner was not a+on, the e+plo%ees reported to the :4R, as well as a list of pa%ees sub=ect to e>panded withholdin, ta> which included petitioner. ((( records were also sub+itted showin, that petitioner?s latest e+plo%er was (ei=i Corporation. #1 The .abor Arbiter found that petitioner was ille,all% dis+issed, thus@ A9BRB-ORB, pre+ises considered, =ud,+ent is hereb% rendered as follows@ #. findin, co+plainant an e+plo%ee of respondent corporation7

. declarin, co+plainant?s dis+issal as ille,al7 1. orderin, respondents to reinstate co+plainant to her for+er position without loss of seniorit% ri,hts and =ointl% and severall% pa% co+plainant her +one% clai+s in accordance with the followin, co+putation@ a. :ackwa,es #"C ""# D "$C "" / $,5"" > #" +os.0 b. (alar% Differentials /"#C ""# D "!C ""#0 ,5""."" $5,""".""

c. 9ousin, Allowance /"#C ""# D "$C "" 0 5$,"""."" d. 6id%ear :onus ""# $,5""."" e. #1th 6onth Pa% $,5""."" f. #"; share in the profits of 5asei Corp. fro+ #!!2& ""# 12#,#$5."" ,. 6oral and e>e+plar% da+a,es #"","""."" h. #"; Attorne%?s fees *$,"$2.5" P!5$,$4 .5" 4f reinstate+ent is no lon,er feasible, respondents are ordered to pa% co+plainant separation pa% with additional backwa,es that would accrue up to actual pa%+ent of separation pa%. (O ORDBRBD. #4 On April #5, ""1, the ).RC affir+ed with +odification the Decision of the .abor Arbiter, the dispositive portion of which reads@

PRB64(B( CO)(4DBRBD, the Decision of 3ul% 1#, "" is hereb% 6OD4-4BD as follows@ #0 Respondents are directed to pa% co+plainant separation pa% co+puted at one +onth per %ear of service in addition to full backwa,es fro+ October ""# to 3ul% 1#, "" 7 0 The awards representin, +oral and e>e+plar% da+a,es and #"; share in profit in the respective accounts of P#"","""."" and P12#,#$5."" are deleted7 10 The award of #"; attorne%?s fees shall be based on salar% differential award onl%7 40 The awards representin, salar% differentials, housin, allowance, +id %ear bonus and #1th +onth pa% are A--4R6BD. (O ORDBRBD. #5 On appeal, the Court of Appeals reversed the ).RC decision, thus@ A9BRB-ORB, the instant petition is hereb% 'RA)TBD. The decision of the )ational .abor Relations Co++issions dated April #5, ""1 is hereb% RBEBR(BD and (BT A(4DB and a new one is hereb% rendered dis+issin, the co+plaint filed b% private respondent a,ainst 5asei Corporation, et al. for constructive dis+issal. (O ORDBRBD.

Considerin, the conflictin, findin,s b% the .abor Arbiter and the )ational .abor Relations Co++ission on one hand, and the Court of Appeals on the other, there is a need to ree>a+ine the records to deter+ine which of the propositions espoused b% the contendin, parties is supported b% substantial evidence. #$ Ae held in Sevilla v. Court of Appeals #* that in this =urisdiction, there has been no unifor+ test to deter+ine the e>istence of an e+plo%er&e+plo%ee relation. 'enerall%, courts have relied on the so&called ri,ht of control test where the person for who+ the services are perfor+ed reserves a ri,ht to control not onl% the end to be achieved but also the +eans to be used in reachin, such end. 4n addition to the standard of ri,ht&of&control, the e>istin, econo+ic conditions prevailin, between the parties, like the inclusion of the e+plo%ee in the pa%rolls, can help in deter+inin, the e>istence of an e+plo%er&e+plo%ee relationship. 9owever, in certain cases the control test is not sufficient to ,ive a co+plete picture of the relationship between the parties, owin, to the co+ple>it% of such a relationship where several positions have been held b% the worker. There are instances when, aside fro+ the e+plo%er?s power to control the e+plo%ee with respect to the +eans and +ethods b% which the work is to be acco+plished, econo+ic realities of the e+plo%+ent relations help provide a co+prehensive anal%sis of the true classification of the individual, whether as e+plo%ee, independent contractor, corporate officer or so+e other capacit%. The better approach would therefore be to adopt a two&tiered test involvin,@ /#0 the putative e+plo%er?s power to control the e+plo%ee with respect to the +eans and +ethods b% which the work is to be acco+plished7 and / 0 the underl%in, econo+ic realities of the activit% or relationship. This two&tiered test would provide us with a fra+ework of anal%sis, which would take into consideration the totalit% of circu+stances surroundin, the true nature of the relationship between the parties. This is especiall% appropriate in this case where there is no written a,ree+ent or

The appellate court denied petitioner?s +otion for reconsideration, hence, the present recourse. The core issues to be resolved in this case are /#0 whether there was an e+plo%er&e+plo%ee relationship between petitioner and private respondent 5asei Corporation7 and if in the affir+ative, / 0 whether petitioner was ille,all% dis+issed.

ter+s of reference to base the relationship on7 and due to the co+ple>it% of the relationship based on the various positions and responsibilities ,iven to the worker over the period of the latter?s e+plo%+ent. The control test initiall% found application in the case of Viaa v. AlLagadan and Piga, #! and latel% in Leonardo v. Court of Appeals, " where we held that there is an e+plo%er&e+plo%ee relationship when the person for who+ the services are perfor+ed reserves the ri,ht to control not onl% the end achieved but also the +anner and +eans used to achieve that end. 4n Sevilla v. Court of Appeals, # we observed the need to consider the e>istin, econo+ic conditions prevailin, between the parties, in addition to the standard of ri,ht&of&control like the inclusion of the e+plo%ee in the pa%rolls, to ,ive a clearer picture in deter+inin, the e>istence of an e+plo%er&e+plo%ee relationship based on an anal%sis of the totalit% of econo+ic circu+stances of the worker. Thus, the deter+ination of the relationship between e+plo%er and e+plo%ee depends upon the circu+stances of the whole econo+ic activit%, such as@ /#0 the e>tent to which the services perfor+ed are an inte,ral part of the e+plo%er?s business7 / 0 the e>tent of the worker?s invest+ent in e8uip+ent and facilities7 /10 the nature and de,ree of control e>ercised b% the e+plo%er7 /40 the worker?s opportunit% for profit and loss7 /50 the a+ount of initiative, skill, =ud,+ent or foresi,ht re8uired for the success of the clai+ed independent enterprise7 /20 the per+anenc% and duration of the relationship between the worker and the e+plo%er7 and /$0 the de,ree of dependenc% of the worker upon the e+plo%er for his continued e+plo%+ent in that line of business. 1 The proper standard of econo+ic dependence is whether the worker is dependent on the alle,ed e+plo%er for his continued e+plo%+ent in that line of business. 4 4n the Fnited (tates, the touchstone of econo+ic realit% in anal%<in, possible e+plo%+ent relationships for purposes of the -ederal .abor (tandards Act is dependenc%. 5 :% analo,%, the bench+ark of econo+ic realit% in anal%<in, possible e+plo%+ent

relationships for purposes of the .abor Code ou,ht to be the econo+ic dependence of the worker on his e+plo%er. :% appl%in, the control test, there is no doubt that petitioner is an e+plo%ee of 5asei Corporation because she was under the direct control and supervision of (ei=i 5a+ura, the corporation?s Technical Consultant. (he reported for work re,ularl% and served in various capacities as Accountant, .iaison Officer, Technical Consultant, Actin, 6ana,er and Corporate (ecretar%, with substantiall% the sa+e =ob functions, that is, renderin, accountin, and ta> services to the co+pan% and perfor+in, functions necessar% and desirable for the proper operation of the corporation such as securin, business per+its and other licenses over an indefinite period of en,a,e+ent. Fnder the broader econo+ic realit% test, the petitioner can likewise be said to be an e+plo%ee of respondent corporation because she had served the co+pan% for si> %ears before her dis+issal, receivin, check vouchers indicatin, her salariesCwa,es, benefits, #1th +onth pa%, bonuses and allowances, as well as deductions and (ocial (ecurit% contributions fro+ Au,ust #, #!!! to Dece+ber #*, """. 2 Ahen petitioner was desi,nated 'eneral 6ana,er, respondent corporation +ade a report to the ((( si,ned b% 4rene :allesteros. Petitioner?s +e+bership in the ((( as +anifested b% a cop% of the ((( speci+en si,nature card which was si,ned b% the President of 5asei Corporation and the inclusion of her na+e in the on&line in8uir% s%ste+ of the ((( evinces the e>istence of an e+plo%er&e+plo%ee relationship between petitioner and respondent corporation. $ 4t is therefore apparent that petitioner is econo+icall% dependent on respondent corporation for her continued e+plo%+ent in the latter?s line of business. 4n Domasig v. National Labor Relations Commission, * we held that in a business establish+ent, an identification card is provided not onl% as a securit% +easure but +ainl% to identif% the holder thereof as a bona fide e+plo%ee of the fir+ that issues it. To,ether with the cash vouchers

coverin, petitioner?s salaries for the +onths stated therein, these +atters constitute substantial evidence ade8uate to support a conclusion that petitioner was an e+plo%ee of private respondent. Ae likewise ruled in lores v. Nuestro ! that a corporation who re,isters its workers with the ((( is proof that the latter were the for+er?s e+plo%ees. The covera,e of (ocial (ecurit% .aw is predicated on the e>istence of an e+plo%er&e+plo%ee relationship. -urther+ore, the affidavit of (ei=i 5a+ura dated Dece+ber 5, ""# has clearl% established that petitioner never acted as Corporate (ecretar% and that her desi,nation as such was onl% for convenience. The actual nature of petitioner?s =ob was as 5a+ura?s direct assistant with the dut% of actin, as .iaison Officer in representin, the co+pan% to secure construction per+its, license to operate and other re8uire+ents i+posed b% ,overn+ent a,encies. Petitioner was never entrusted with corporate docu+ents of the co+pan%, nor re8uired to attend the +eetin, of the corporation. (he was never priv% to the preparation of an% docu+ent for the corporation, althou,h once in a while she was re8uired to si,n prepared docu+entation for the co+pan%. 1" The second affidavit of 5a+ura dated 6arch $, "" which repudiated the Dece+ber 5, ""# affidavit has been alle,edl% withdrawn b% 5a+ura hi+self fro+ the records of the case. 1# Re,ardless of this fact, we are convinced that the alle,ations in the first affidavit are sufficient to establish that petitioner is an e+plo%ee of 5asei Corporation. 'rantin, arguendo, that the second affidavit validl% repudiated the first one, courts do not ,enerall% look with favor on an% retraction or recanted testi+on%, for it could have been secured b% considerations other than to tell the truth and would +ake sole+n trials a +ocker% and place the investi,ation of the truth at the +erc% of unscrupulous witnesses. 1 A recantation does not necessaril% cancel an earlier declaration, but like an% other testi+on% the sa+e is sub=ect to the test of credibilit% and should be received with caution. 11

:ased on the fore,oin,, there can be no other conclusion that petitioner is an e+plo%ee of respondent 5asei Corporation. (he was selected and en,a,ed b% the co+pan% for co+pensation, and is econo+icall% dependent upon respondent for her continued e+plo%+ent in that line of business. 9er +ain =ob function involved accountin, and ta> services rendered to respondent corporation on a re,ular basis over an indefinite period of en,a,e+ent. Respondent corporation hired and en,a,ed petitioner for co+pensation, with the power to dis+iss her for cause. 6ore i+portantl%, respondent corporation had the power to control petitioner with the +eans and +ethods b% which the work is to be acco+plished. The corporation constructivel% dis+issed petitioner when it reduced her salar% b% P ,5"" a +onth fro+ 3anuar% to (epte+ber ""#. This a+ounts to an ille,al ter+ination of e+plo%+ent, where the petitioner is entitled to full backwa,es. (ince 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 pa%, in lieu of reinstate+ent. 14 A di+inution of pa% is pre=udicial to the e+plo%ee and a+ounts to constructive dis+issal. Constructive dis+issal is an involuntar% resi,nation resultin, in cessation of work resorted to when continued e+plo%+ent beco+es i+possible, unreasonable or unlikel%7 when there is a de+otion in rank or a di+inution in pa%7 or when a clear discri+ination, insensibilit% or disdain b% an e+plo%er beco+es unbearable to an e+plo%ee. 15 4n !lobe "elecom# $nc. v. lorendo- lores, 12 we ruled that where an e+plo%ee ceases to work due to a de+otion of rank or a di+inution of pa%, an unreasonable situation arises which creates an adverse workin, environ+ent renderin, it i+possible for such e+plo%ee to continue workin, for her e+plo%er. 9ence, her severance fro+ the co+pan% was not of her own +akin, and therefore a+ounted to an ille,al ter+ination of e+plo%+ent. 4n affordin, full protection to labor, this Court +ust ensure e8ual work opportunities re,ardless of se>, race or creed. Bven as we, in ever% case, atte+pt to carefull% balance the fra,ile relationship between e+plo%ees

and e+plo%ers, we are +indful of the fact that the polic% of the law is to appl% the .abor Code to a ,reater nu+ber of e+plo%ees. This would enable e+plo%ees to avail of the benefits accorded to the+ b% law, in line with the constitutional +andate ,ivin, +a>i+u+ aid and protection to labor, pro+otin, their welfare and reaffir+in, it as a pri+ar% social econo+ic force in furtherance of social =ustice and national develop+ent. (!EREFORE, the petition is GRANTE". The Decision and Resolution of the Court of Appeals dated October !, ""4 and October $, ""5, respectivel%, in CA&'.R. (P )o. $*5#5 are ANN'LLE" and SET ASI"E. The Decision of the )ational .abor Relations Co++ission dated April #5, ""1 in ).RC )CR CA )o. "1 $22&" , is REINSTATE". The case is REMAN"E" to the .abor Arbiter for the reco+putation of petitioner An,elina -rancisco?s full backwa,es fro+ the ti+e she was ille,all% ter+inated until the date of finalit% of this decision, and separation pa% representin, one&half +onth pa% for ever% %ear of service, where a fraction of at least si> +onths shall be considered as one whole %ear.