PACIFIC CONSULTANTS INTERNATIONAL
ASIA, INC. vs. SHENFOLD (G.R. No. 166920 Feb.
19, 2007)
FACTS:
Respondent is a Canadian citizen and was a resident of
New Westminster, British Columbia, Canada. He had
been a consultant in the field of environmental
engineering and water supply and sanitation. Pacicon
Philippines, Inc. (PPI) is a corporation duly established
and incorporated in accordance with the laws of the
Philippines. The primary purpose of PPI was to engage
in the business of providing specialty and technical
services both in and out of the Philippines. It is a
subsidiary of Pacific Consultants International of
Japan (PCIJ). The president of PPI, Jens Peter
Henrichsen, who was also the director of PCIJ, was
based in Tokyo, Japan.
On January 7, 1998, Henrichsen transmitted a letter of
employment to respondent in Canada, requesting him
to accept the same and affix his conformity thereto.
Respondent made some revisions in the letter of
employment and signed the contract.
Respondent arrived in the Philippines and assumed his
position as PPI Sector Manager. He was accorded the
status of a resident alien.
As required by Rule XIV (Employment of Aliens) of
the Omnibus Rules Implementing the Labor Code, PPI
applied for an Alien Employment Permit (Permit) for
respondent before the Department of Labor and
Employment (DOLE).
On May 5, 1999, respondent received a letter from
Henrichsen informing him that his employment had
been terminated effective August 4, 1999 for the
reason that PCIJ and PPI had not been successful in the
water and sanitation sector in the Philippines.
On December 5, 2000, respondent filed a Complaint
for Illegal Dismissal against petitioners PPI and
Henrichsen with the Labor Arbiter. Petitioners filed a
Motion to Dismiss the complaint and the Labor Arbiter
rendered a decision granting petitioners’ Motion to
Dismiss.
On appeal, the NLRC agreed with the disquisitions of
the Labor Arbiter and affirmed the latter’s decision in
toto.
Respondent then filed a petition for certiorari under
Rule 65 with the CA. The CA found the petition
meritorious. Applying the four-fold test of determining
an employer-employee relationship, the CA declared
that respondent was an employee of PPI. It ordered the
remand of the case to the Labor Arbiter for disposition
of the merits of the case.
ISSUE:
Whether or not there exist an employer-employee
relationship between the respondent and the PPI.
1|Page
HELD:
We agree with the conclusion of the CA that there was
an employer-employee relationship between petitioner
PPI and respondent using the four-fold test.
Jurisprudence is firmly settled that whenever the
existence of an employment relationship is in dispute,
four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d)
the employer’s power to control the employee’s
conduct. It is the so-called "control test" which
constitutes the most important index of the existence
of the employer-employee relationship–that is,
whether the employer controls or has reserved the right
to control the employee not only as to the result of the
work to be done but also as to the means and methods
by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists
where the person for whom the services are performed
reserves the right to control not only the end to be
achieved but also the means to be used in reaching
such end.29 We quote with approval the following
ruling of the CA:
[T]here is, indeed, substantial evidence on record
which would erase any doubt that the respondent
company is the true employer of petitioner. In the case
at bar, the power to control and supervise petitioner’s
work performance devolved upon the respondent
company. Likewise, the power to terminate the
employment relationship was exercised by the
President of the respondent company. It is not the
letterhead used by the company in the termination
letter which controls, but the person who exercised the
power to terminate the employee. It is also
inconsequential if the second letter of employment
executed in the Philippines was not signed by the
petitioner. An employer-employee relationship may
indeed exist even in the absence of a written contract,
so long as the four elements mentioned in the Mafinco
case are all present.
SONZA vs. ABS-CBN BROADCASTING CORP.
(G.R. No. 138051 June 10, 2004)
FACTS:
In May 1994, respondent ABS-CBN Broadcasting
Corporation (ABS-CBN) signed an Agreement
(Agreement) with the Mel and Jay Management and
Development Corporation (MJMDC). ABS-CBN was
represented by its corporate officers while MJMDC
was represented by SONZA, as President and General
Manager, and Carmela Tiangco (TIANGCO), as EVP
and Treasurer. On 30 April 1996, SONZA filed a
complaint against ABS-CBN before the Department of
Labor and Employment, National Capital Region in
Quezon City. SONZA complained that ABS-CBN did
not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees
Stock Option Plan (ESOP). ABS-CBN filed a Motion
to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed
an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s
monthly talent fees through his account at PCIBank,
Quezon Avenue Branch, Quezon City. In July 1996,
ABS-CBN opened a new account with the same bank
where ABS-CBN deposited SONZAs talent fees and
other payments due him under the Agreement. The
Labor Arbiter rendered his decision dismissing the
petition for lack of jurisdiction. SONZA appealed to
the NLRC. On 24 February 1998, the NLRC rendered
a Decision affirming the Labor Arbiters decision.
SONZA filed a motion for reconsideration, which the
NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action
for certiorari before the Court of Appeals assailing the
decision and resolution of the NLRC. On 26 March
1999, the Court of Appeals rendered a Decision
dismissing the case. Hence, this petition.
ISSUES:
Whether or not an employer-employee relationship
exists between the parties.
Whether or not Sonza can be considered as a regular
employee.
HELD:
No. Case law has consistently held that the elements of
an employer-employee relationship are: (a) the
selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d)
the employer’s power to control the employee on the
means and methods by which the work is
accomplished. The last element, the so-called control
test, is the most important element.
Selection and Engagement of Employee
Independent contractors often present themselves to
possess unique skills, expertise or talent to distinguish
them from ordinary employees. The specific selection
and hiring of SONZA, because of his unique skills,
talent and celebrity status not possessed by ordinary
employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
If SONZA did not possess such unique skills, talent
and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would
have hired him through its personnel department just
like any other employee.
Payment of Wages
ABS-CBN agreed to pay SONZA such huge talent fees
precisely because of SONZAs unique skills, talent and
celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent
fees way above the salary scales of ordinary employees
2|Page
is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
Power of Dismissal
During the life of the Agreement, ABS-CBN agreed to
pay SONZAs talent fees as long as AGENT and Jay
Sonza shall faithfully and completely perform each
condition of this Agreement. Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay
SONZAs talent fees during the life of the Agreement.
This circumstance indicates an independent
contractual relationship between SONZA and ABS-
CBN.
Power of Control
The hiring of exclusive talents is a widespread and
accepted practice in the entertainment industry This
practice is not designed to control the means and
methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast
station normally spends substantial amounts of money,
time and effort in building up its talents as well as the
programs they appear in and thus expects that said
talents remain exclusive with the station for a
commensurate period of time. Normally, a much
higher fee is paid to talents who agree to work
exclusively for a particular radio or television station.
In short, the huge talent fees partially compensate for
exclusivity, as in the present case.
Applying the control test to the present case, the Court
held that SONZA is not an employee but an
independent contractor. The control test is the most
important test our courts apply in distinguishing an
employee from an independent contractor. This test is
based on the extent of control the hirer exercises over
a worker. The greater the supervision and control the
hirer exercises, the more likely the worker is deemed
an employee. The converse holds true as well the less
control the hirer exercises, the more likely the worker
is considered an independent contractor. In any event,
not all rules imposed by the hiring party on the hired
party indicate that the latter is an employee of the
former. In this case, SONZA failed to show that these
rules controlled his performance. The Court finds that
these general rules are merely guidelines towards the
achievement of the mutually desired result, which are
top-rating television and radio programs that comply
with standards of the industry.
ZANOTTE SHOES vs. NLRC (G.R. No. 100665
Feb. 13, 1995)
FACTS:
Private respondents filed a complaint for illegal
dismissal and for various monetary claims, including
the recovery of damages and attorney's fees, against
petitioners. The complainants subsequently confined
themselves to the illegal dismissal charge and
abandoned the monetary claims. One of the original
eight complainants, Virgilio Alcunaba, decided to
resume his work with petitioners, thus leaving the rest
to pursue the case. Private respondents averred that
they started to work for petitioners, that they worked
for a minimum of twelve hours daily, including
Sundays and holidays when needed; that they were
paid on piece-work basis; that it "angered" petitioner
Lorenzo when they requested to be made members of
the SSS and that, when they demanded an increase in
their pay rates, they were prevented (starting 24
October 1988) from entering the work premises.
Petitioners, in turn, claimed that their business
operations were only seasonal, normally twice a year.
Private respondents, according to petitioners, were
engaged on purely contractual basis and paid the rates
conformably with their respective agreements. On 16
October 1989, Labor Arbiter Benigno C. Villarente,
Jr., rendered judgment in favor of the complainants.
An appeal was interposed by petitioners. The NLRC,
on 24 April 1991, sustained the findings of the Labor
Arbiter and dismissed the appeal. On 30 May 1991, the
NLRC denied petitioners' motion for reconsideration.
Hence, the instant petition.
ISSUE:
Whether or not there exists an employer-employee
relationship.
HELD:
YES. In his comment, dated 14 October 1991, the
Solicitor General moved for the modification of
NLRC's resolution of 24 April 1991. While conceding
that an employer-employee relationship existed
between petitioners and private respondents, the
Solicitor General, nevertheless, expressed strong
reservations on the award of separation pay in view of
the findings by both the Labor Arbiter and the NLRC
that there was neither dismissal nor abandonment in
the case at bench. The NLRC submitted its own
comment on 11 February 1992.
We see no reason, in this case at bench, for disturbing
the findings of the Labor Arbiter and the NLRC on the
existence of an employer-employee relationship
between herein private parties. The work of private
respondents is clearly related to, and in the pursuit of,
the principal business activity of petitioners. The
indicia used for determining the existence of an
employer-employee relationship, all extant in the case
at bench, include (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control
the employee with respect to the result of the work to
be done and to the means and methods by which the
work to be done and to the means and methods by
which the work is to be accomplished. The
requirement, so herein posed as an issue, refers to the
existence of the right to control and not necessarily to
the actual exercise of the right.
COCA COLA BOTTLERS PHIL. INC., vs.
CLIMACO (G.R. No. 146881 Feb. 5, 2007)
3|Page
FACTS:
Respondent Dr. Dean N. Climaco is a medical doctor
who was hired by petitioner Coca-Cola Bottlers Phils.,
Inc. by virtue of a Retainer Agreement. This
Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988.
The Retainer Agreement, which began on January 1,
1988, was renewed annually. The last one expired on
December 31, 1993. Despite the non-renewal of the
Retainer Agreement, respondent continued to perform
his functions as company doctor to Coca-Cola until he
received a letter dated March 9, 1995 from petitioner
company concluding their retainership agreement
effective 30 days from receipt thereof.
September 1992, petitioner was already making
inquiries regarding his status with petitioner company.
First, he wrote a letter addressed to Dr. Willie Sy, the
Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational
Medicine. In response, Dr. Sy wrote a letter to the
Personnel Officer of Coca-Cola Bottlers Phils.,
Bacolod City, stating that respondent should be
considered as a regular part-time physician, having
served the company continuously for four (4) years.
He likewise stated that respondent must receive all the
benefits and privileges of an employee under Article
157 (b) of the Labor Code.
Petitioner company did not take any action. Hence,
respondent made another inquiry directed to the
Assistant Regional Director, Bacolod City District
Office of the Department of Labor and Employment
(DOLE), who referred the inquiry to the Legal Service
of the DOLE, Manila. Director Dennis P. Ancheta,
Legal Service, DOLE, stated that he believed that an
employer-employee relationship existed between
petitioner and respondent based on the Retainer
Agreement and the Comprehensive Medical Plan, and
the application of the "four-fold" test.
An inquiry was likewise addressed to the Social
Security System (SSS). Mr. Romeo R. Tupas, OIC-
FID of SSS-Bacolod City, wrote a letter8 to the
Personnel Officer of Coca-Cola Bottlers Phils., Inc.
informing the latter that the legal staff of his office was
of the opinion that the services of respondent partake
of the nature of work of a regular company doctor and
that he was, therefore, subject to social security
coverage. On February 24, 1994, respondent filed a
Complaint9 before the NLRC, Bacolod City, seeking
recognition as a regular employee of petitioner
company and prayed for the payment of all benefits of
a regular employee.
While the complaint was pending before the Labor
Arbiter, respondent received a letter dated March 9,
1995 from petitioner company concluding their
retainership agreement effective thirty (30) days from
receipt thereof. This prompted respondent to file a
complaint for illegal dismissal against petitioner
company with the NLRC, Bacolod City. Labor arbiter
dismissed the complaint of illegal dismissal. On
appeal, NLRC dismissed the appeal in both cases for
lack of merit. It declared that no employer-employee
relationship existed between petitioner company and
respondent based on the provisions of the Retainer
Agreement which contract governed respondent’s
employment. Motion for reconsideration but was
denied. Respondent filed a petition for review to CA.
The Court of Appeals ruled that an employer-
employee relationship existed between petitioner
company and respondent. Petitioner company filed a
motion for reconsideration of the Decision of the
Court of Appeals. CA sustained its decision on all
other matters sought to be reconsidered. Hence, this
petition.
ISSUE:
Whether or not the relationship of the petitioner and
respondent constitute an employer-employee
relationship.
HELD:
The Court, in determining the existence of an employer-
employee relationship, has invariably adhered to the four-fold
test: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power
to control the employee’s conduct, or the so-called "control
test," considered to be the most important element.
NO. The Court agrees with the finding of the Labor
Arbiter and the NLRC that the circumstances of this
case show that no employer-employee relationship
exists between the parties. The Labor Arbiter and the
NLRC correctly found that petitioner company lacked
the power of control over the performance by
respondent of his duties. The Labor Arbiter reasoned
that the Comprehensive Medical Plan, which contains
the respondent’s objectives, duties and obligations,
does not tell respondent "how to conduct his physical
examination, how to immunize, or how to diagnose
and treat his patients, employees of [petitioner]
company, in each case."
In effect, the Labor Arbiter held that petitioner
company, through the Comprehensive Medical Plan,
provided guidelines merely to ensure that the end
result was achieved, but did not control the means
and methods by which respondent performed his
assigned tasks. The NLRC affirmed the findings of
the Labor Arbiter and stated that it is precisely
because the company lacks the power of control that
the contract provides that respondent shall be directly
responsible to the employee concerned and their
dependents for any injury, harm or damage caused
through professional negligence, incompetence or
other valid causes of action. The Labor Arbiter also
correctly found that the provision in the Retainer
Agreement that respondent was on call during
4|Page
emergency cases did not make him a regular
employee. In addition, the Court finds that the
schedule of work and the requirement to be on call
for emergency cases do not amount to such control,
but are necessary incidents to the Retainership
Agreement. The Court agrees with the Labor Arbiter
and the NLRC that there is nothing wrong with the
employment of respondent as a retained physician of
petitioner company and upholds the validity of the
Retainership Agreement which clearly stated that no
employer-employee relationship existed between the
parties. The Agreement also stated that it was only for
a period of 1 year beginning January 1, 1988 to
December 31, 1998, but it was renewed on a yearly
basis.
Considering that there is no employer-employee
relationship between the parties, the termination of
the Retainership Agreement, which is in accordance
with the provisions of the Agreement, does not
constitute illegal dismissal of respondent.
Consequently, there is no basis for the moral and
exemplary damages granted by the Court of Appeals
to respondent due to his alleged illegal dismissal.
SORREDA vs. CAMBRIDGE ELECTRONICS
CORPORATION (G.R. No. 172927 Feb. 11, 2010)
FACTS:
On May 8, 1999, petitioner was hired by respondent as
a technician for a period of 5 months at minimum
wage. Five weeks into the job (on June 15, 1999),
petitioner met an accident in which his left arm was
crushed by a machine and had to be amputated.
Petitioner claimed that, shortly after his release from
the hospital, officers of respondent company called
him to a meeting with his common-law wife, father
and cousin. There he was assured a place in the
company as a regular employee for as long as the
company existed and as soon as he fully recovered
from his injury.
In September 1999, after he recovered from his injury,
petitioner reported for work. Instead of giving him
employment, they made him sign a memorandum of
resignation to formalize his separation from the
company in the light of the expiration of his five-
month contract. On November 16, 1999, petitioner
filed in the Regional Arbitration Branch of the NLRC
of Dasmariñas, Cavite a complaint for illegal dismissal
(later changed to breach of contract). Respondent
denied that it extended regular employment to
petitioner. Only words of encouragement were offered
but not perpetual employment. Moreover, it assailed
the labor arbiter’s jurisdiction over the case, claiming
a lack of causal connection between the alleged breach
of contract and their employer-employee relationship.
The labor arbiter held that he had jurisdiction to hear
and decide the case as it involved the employer-
employee relationship of the contending parties. Both
petitioner and respondent appealed to the NLRC.
Respondent, asked for the reversal of the labor
arbiter’s decision based on grave abuse of discretion
for assuming jurisdiction over the case. The NLRC
agreed with respondent. It found that petitioner was
not a regular employee; thus, he was neither illegally
dismissed nor entitled to reinstatement and backwages.
Aggrieved, petitioner filed a petition for certiorari in
the CA. The CA dismissed the petition for lack of
merit. Petitioner moved for reconsideration but the
motion was denied.18 Thus, this petition.
ISSUE:
Whether or not there is an employer-employee
relationship.
HELD:
YES. In this instance, petitioner, from the period May
8, 1999 to October 8, 1999, was clearly a per-project
employee of private respondent, resulting in an
employer-employee relationship. Consequently,
questions or disputes arising out of this relationship
fell under the jurisdiction of the labor arbiter. While
there was an employer-employee relationship between
the parties under their five-month per-project contract
of employment, the present dispute is neither rooted in
the aforestated contract nor is it one inherently linked
to it. Petitioner insists on a right to be employed again
in respondent company and seeks a determination of
the existence of a new and separate contract that
established that right. As such, his case is within the
jurisdiction not of the labor arbiter but of the regular
courts. The NLRC and the CA were therefore correct
in ruling that the labor arbiter erroneously took
cognizance of the case.
GREAT PACIFIC LIFE INSURANCE CORP. vs.
JUDICO (G.R. No. 73887 Dec. 29, 1989)
FACTS:
Honorato Judico filed a complaint for illegal dismissal
against Grepalife, a duly organized insurance firm,
before the NLRC on August 27, 1982. Said complaint
prayed for award of money claims consisting of
separation pay, unpaid salary and 13th month pay,
refund of cash bond, moral and exemplary damages
and attorney's fees. Both parties appealed to the NLRC
when a decision was rendered by the Labor Arbiter
dismissing the complaint on the ground that the
employer-employee relations did not exist between the
parties but ordered Grepalife to pay complainant the
sum of Pl,000.00 by reason of Christian Charity.
On appeal, said decision was reversed by the NLRC
ruling that complainant is a regular employee as
defined under Art. 281 of the Labor Code and
declaring the appeal of Grepalife questioning the
legality of the payment of Pl,000.00 to complainant
moot and academic. Petitioner company moved to
reconsider, which was denied, hence this petition.
ISSUE:
5|Page
Whether or not the employer-employee relationship is
present in this case.
HELD:
YES. Petitioner admits that on June 9, 1976, private
respondent Judico entered into an agreement of agency
with petitioner Grepalife to become a debit agent
attached to the industrial life agency in Cebu City.
Petitioner defines a debit agent as "an insurance agent
selling/servicing industrial life plans and policy
holders. Such admission is in line with the findings of
public respondent that as such debit agent, private
respondent Judico had definite work assignments
including but not limited to collection of premiums
from policy holders and selling insurance to
prospective clients. Public respondent NLRC also
found out that complainant was initially paid P 200. 00
as allowance for thirteen (13) weeks regardless of
production and later a certain percentage denominated
as sales reserve of his total collections but not lesser
than P 200.00. One salient point in the determination
of employer-employee relationship which cannot be
easily ignored is the fact that the compensation that
these agents on commission received is not paid by the
insurance company but by the investor (or the person
insured). After determining the commission earned by
an agent on his sales the agent directly deducts it from
the amount he received from the investor or the person
insured and turns over to the insurance company the
amount invested after such deduction is made.
The test therefore is whether the "employer" controls
or has reserved the right to control the "employee" not
only as to the result of the work to be done but also as
to the means and methods by which the same is to be
accomplished. Applying the aforementioned test to the
case at bar, we can readily see that the element of
control by the petitioner on Judico was very much
present. The record shows that petitioner Judico
received a definite minimum amount per week as his
wage known as "sales reserve" wherein the failure to
maintain the same would bring him back to a
beginner's employment with a fixed weekly wage of P
200.00 for thirteen weeks regardless of production. He
was assigned a definite place in the office to work on
when he is not in the field; and in addition to his
canvassing work he was burdened with the job of
collection.
INSULAR LIFE ASSURANCE CO. LTD., vs.
NLRC (G.R. No. 84484 Feb. 5, 2007)
FACTS:
On July 2, 1968, Insular Life Assurance Co., Ltd. and
Melecio T. Basiao entered into a contract by which by
which: (1) Basiao was "authorized to solicit within the
Philippines applications for insurance policies and
annuities in accordance with the existing rules and
regulations" of the Company; (2) he would receive
"compensation, in the form of commissions ... as
provided in the Schedule of Commissions" of the
contract to "constitute a part of the consideration of ...
(said) agreement;" and (3) the "rules in ... (the
Company's) Rate Book and its Agent's Manual, as well
as all its circulars ... and those which may from time to
time be promulgated by it, ..." were made part of said
contract. The contract also contained, among others,
provisions governing the relations of the parties, the
duties of the Agent, the acts prohibited to him, and the
modes of termination of the agreement.
On April 1972, the parties entered into another
contract — an Agency Manager's Contract. In May,
1979, the Company terminated the Agency Manager's
Contract. Basiao filed with the then Ministry of Labor
a complaint against the Company and its president.
Without contesting the termination of the first
contract, the complaint sought to recover commissions
allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over
Basiao's claim, asserting that he was not the
Company's employee, but an independent contractor
and that the Company had no obligation to him for
unpaid commissions under the terms and conditions of
his contract. The Labor Arbiter to whom the case was
assigned found for Basiao. He ruled that the
underwriting agreement had established an employer-
employee relationship between him and the Company,
and this conferred jurisdiction on the Ministry of Labor
to adjudicate his claim. This decision was, on appeal
by the Company, affirmed by the National Labor
Relations Commission. Hence, the present petition for
certiorari and prohibition.
ISSUE:
Whether or not Basiao, as he asserts, become the
Company's employee by virtue of the contract invoked
by him.
HELD:
NO. The Court, therefore, rules that under the contract
invoked by him, Basiao was not an employee of the
petitioner, but a commission agent, an independent
contractor whose claim for unpaid commissions
should have been litigated in an ordinary civil action.
The Labor Arbiter erred in taking cognizance of, and
adjudicating, said claim, being without jurisdiction to
do so, as did the respondent NLRC in affirming the
Arbiter's decision. This conclusion renders it
unnecessary and premature to consider Basiao's claim
for commissions on its merits.
In determining the existence of employer-employee
relationship, the following elements are generally
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 the latter is the most
important element.
It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its
commission agents in selling its policies that they may
not run afoul of the law and what it requires or
prohibits. Of such a character are the rules which
6|Page
prescribe the qualifications of persons who may be
insured, subject insurance applications to processing
and approval by the Company, and also reserve to the
Company the determination of the premiums to be paid
and the schedules of payment. None of these really
invades the agent's contractual prerogative to adopt his
own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be said
to establish an employer-employee relationship
between him and the company.
RUGA vs. NLRC (G.R. No. L-72654-61 Jan. 22,
1990)
FACTS:
Petitioners were the fishermen-crew members of 7/B
Sandyman II, one of several fishing vessels owned and
operated by private respondent De Guzman Fishing
Enterprises which is primarily engaged in the fishing
business with port and office at Camaligan, Camarines
Sur. For services rendered in the conduct of private
respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis
in cash by one Mrs. Pilar de Guzman, cashier of private
respondent. As agreed upon, they received thirteen
percent (13%) of the proceeds of the sale of the fish-
catch if the total proceeds exceeded the cost of crude
oil consumed during the fishing trip, otherwise, they
received ten percent (10%) of the total proceeds of the
sale.
On September 11, 1983 upon arrival at the fishing port,
petitioners were told by Jorge de Guzman, president of
private respondent, to proceed to the police station at
Camaligan, Camarines Sur, for investigation on the
report that they sold some of their fish-catch at midsea
to the prejudice of private respondent. During the
investigation, no witnesses were presented to prove the
charge against petitioners, and no criminal charges
were formally filed against them. Notwithstanding,
private respondent refused to allow petitioners to
return to the fishing vessel to resume their work.
Petitioners individually filed their complaints for
illegal dismissal and non-payment of 13th month pay,
emergency cost of living allowance and service
incentive pay, with the then Ministry (now
Department) of Labor and Employment. Private
respondent, submitted its position paper denying the
employer-employee relationship between private
respondent and petitioners on the theory that private
respondent and petitioners were engaged in a joint
venture.
Labor Arbiter rendered a joint decision dismissing all
the complaints of petitioners on a finding that a "joint
fishing venture" and not one of employer-employee
relationship existed between private respondent and
petitioners. Petitioners appealed to the National Labor
Relations Commission which affirmed the decision of
the labor arbiter, hence this instant petition.
ISSUE:
Whether or not the relationship of the petitioners and
private respondent constitute an employer-employee
relationship.
HELD:
YES. The court ruled in favor of the petitioners. We
have consistently ruled that in determining the
existence of an employer-employee relationship, the
elements that are generally considered are the
following (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by
which the work is to be accomplished. The
employment relation arises from contract of hire,
express or implied. In the absence of hiring, no actual
employer-employee relation could exist. From the four
(4) elements mentioned, we have generally 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. The test calls
merely for the existence of the right to control the
manner of doing the work, not the actual exercise of
the right.
The conduct of the fishing operations was
undisputably shown by the testimony of Alipio Ruga,
the patron/pilot of 7/B Sandyman II, to be under the
control and supervision of private respondent's
operations manager. Matters dealing on the fixing of
the schedule of the fishing trip and the time to return
to the fishing port were shown to be the prerogative of
private respondent. While performing the fishing
operations, petitioners received instructions via a
single-side band radio from private respondent's
operations manager who called the patron/pilot in the
morning. They are told to report their activities, their
position, and the number of tubes of fish-catch in one
day. Clearly thus, the conduct of the fishing operations
was monitored by private respondent thru the
patron/pilot of 7/B Sandyman II who is responsible for
disseminating the instructions to the crew members.
JO vs. NLRC (G.R. No. 121605 Feb. 2, 2009)
FACTS:
Private respondent Peter Mejila worked as barber on a
piece rate basis at Dina's Barber Shop. In 1970, the
owner, Dina Tan, sold the barbershop to petitioners
Paz Martin Jo and Cesar Jo. All the employees,
including private respondent, were absorbed by the
new owners. The name of the barbershop was changed
to Windfield Barber Shop. The owners and the barbers
shared in the earnings of the barber shop. The barbers
got two-thirds (2/3) of the fee paid for every haircut or
shaving job done, while one-third (1/3) went to the
owners of the shop. In 1977, petitioners designated
private respondent as caretaker of the shop because the
former caretaker became physically unfit.
7|Page
Private respondent's duties as caretaker, in addition to
his being a barber, were: (1) to report to the owners of
the barbershop whenever the airconditioning units
malfunctioned and/or whenever water or electric
power supply was interrupted, (2) to call the laundry
woman to wash dirty linen; (3) to recommend
applicants for interview and hiring; (4) to attend to
other needs of the shop. For this additional job, he was
given an honorarium equivalent to one-third (1/3) of
the net income of the shop. When the building
occupied by the shop was demolished in 1986, the
barbershop closed. But soon a place nearby was rented
by petitioners and the barbershop resumed operations
as Cesar's Palace Barbershop and Massage Clinic.
In November 1992, private respondent had an
altercation with his co-barber, Jorge Tinoy. Private
respondent reported the matter to Atty. Allan
Macaraya of the labor department. Atty. Macaraya
directed petitioners' counsel, Atty. Prudencio Abragan,
to thresh out the problem. During the mediation
meeting held at Atty. Abragan's office, private
respondent demanded payment for several thousand
pesos as his separation pay and other monetary
benefits. Meanwhile, private respondent continued
reporting for work at the barbershop. But, on January
2, 1993, he turned over the duplicate keys of the shop
to the cashier and took away all his belongings
therefrom. On January 8, 1993, he began working as a
regular barber at the newly opened Goldilocks
Barbershop also in Iligan City.
On January 12, 1993, private respondent filed a
complaint2 for illegal dismissal. the Labor Arbiter
found that private respondent was an employee of
petitioners, and that private respondent was not
dismissed but had left his job voluntarily because of
his misunderstanding with his co-worker. On appeal
on NLRC, it set aside the labor arbiters judgment
however it sustained the employer-employee
relationship but ruled that private respondent was
illegally dismissed. Motion for reconsideration was
denied, hence this petition.
ISSUE:
Whether or not there was an employer-employee
relationship in this present case.
HELD:
YES. In determining the existence of an employer-
employee relationship, the following elements are
considered: (1) the selection and engagement of the
workers; (2) power of dismissal; (3) the payment of
wages by whatever means; and (4) the power to control
the worker's conduct, with the latter assuming primacy
in the overall consideration. The power of control
refers to the existence of the power and not necessarily
to the actual exercise thereof. It is not essential for the
employer to actually supervise the performance of
duties of the employee; it is enough that the employer
has the right to wield that power.
we entertain no doubt that private respondent was
employed by petitioners as caretaker-barber. Initially,
petitioners, as new owners of the barbershop, hired
private respondent as barber by absorbing the latter in
their employ. Undoubtedly, the services performed by
private respondent as barber is related to, and in the
pursuit of the principal business activity of petitioners.
Later on, petitioners tapped private respondent to serve
concurrently as caretaker of the shop. Certainly,
petitioners had the power to dismiss private respondent
being the ones who engaged the services of the latter.
In fact, private respondent sued petitioners for illegal
dismissal, albeit contested by the latter. As a caretaker,
private respondent was paid by petitioners wages in the
form of honorarium, originally, at the rate of one-third
(1/3) of the shop's net income but subsequently pegged
at a fixed amount per month. As a barber, private
respondent earned two-thirds (2/3) of the fee paid per
haircut or shaving job done.
PAGUIO TRANSPORT vs. NLRC (G.R. No.
119500 Aug. 28, 1998)
FACTS:
Complainant respondent Wilfredo Melchor was hired
by petitioner company as a taxi driver on 25 December
1992 under the "[b]oundary [s]ystem. He was engaged
to drive the taxi unit assigned to him on a 24-hour
schedule per trip every two (2) days, for which he used
to earn an average income from P500 to P700 per trip,
exclusive of the P650.00 boundary and other
deductions imposed on him. On Nov. 24,1993
complainant allegedly met a vehicular accident along
Quirino Avenue near the PNR Station and Plaza Dilao
when he accidentally bumped a car which stopped at
the intersection even when the traffic light was green
and go. After he submitted the traffic accident report
to the office of respondents, he was allegedly advised
to stop working and have a rest. After several days, he
allegedly reported for work only to be told that his
service was no longer needed. Hence, the complaint
for illegal dismissal, among others.
The company for their part maintained that
complainant was not illegally dismissed, there being in
the first place no employer-employee relationship
between them. In amplification, it was argued that the
element of control which was a paramount test to
determine the existence of such a relationship was
lacking. The company then argued that even if an
employer-employee relationship were to be presumed
as present, still complainant's termination arose out of
a valid cause and after he refused to articulate his stand
on the investigation being conducted on him. The
company then harped on the supposed three occasions
when complainant figured in a vehicular accident
involving the taxi unit he was driving, viz: On August
3, which resulted in damages to the company in the
amount of P150.00; On August 4 which again resulted
in the damages to the company in the amount of
P615.00; and, again on 4 November 1993, the mishap
costing the company this time P25,370.00 in damages.
8|Page
As a result of the alleged compounded damages which
the company had to shoulder on account of the
supposed reckless driving of the complainant, the
former was allegedly left with no alternative but to ask
complainant's explanation why he should still be
allowed to drive. Complainant, despite several
chances, allegedly failed to do so.
The NLRC sustained the ruling of the labor arbiter that
the private respondent was illegally dismissed. The
NLRC held that private respondent was an illegally
dismissed employee of petitioner. Upholding the
existence of an employer-employee relationship, it
cited Doce v. WCC, in which the Supreme Court ruled
that "the relationship created between the parties
operating under a 'boundary system' is one of an
employer and employee, and not of a lessor and a
lessee. Hence, this petition.
ISSUE:
Whether or not the relationship of petitioner and
private respondent is one of an employer-employee
relationship?
HELD:
YES. Under the "boundary system," private
respondent was engaged to drive petitioner's taxi unit
on a 24-hour schedule every two days. On each such
trip, private respondent remitted to petitioner a
"boundary" of P650. Whatever he earned in excess of
that amount was considered his income. In Martinez v.
National Labor Relations Commission, this Court
already ruled that the relationship of taxi owners and
taxi drivers is the same as that between jeepney owners
and jeepney drivers under the "boundary system." In
both cases, the employer-employee relationship was
deemed to exist.
“The 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. In the lease of chattels, the lessor loses
complete control over the chattel leased. In the case of
jeepney owners/operators and jeepney drivers, the
former exercise supervision and control over the latter.
The fact that the drivers do not receive fixed wages but
get only the excess of that so-called boundary they pay
to the owner/operator is not sufficient to withdraw the
relationship between them from that of employer and
employee. The doctrine is applicable in the present
case. Thus, private respondents were employees
because they had been engaged to perform activities
which were usually necessary or desirable in the usual
trade or business of the employer.
BESA vs TRAJANO (G.R. No. 72409 Dec. 29, 1986)
FACTS:
In January, 1985, private respondent Kaisahan ng
Mangagawang Pilipino KAMPIL for short) a
legitimate labor union duly registered with the
Ministry of Labor and Employment (MOLE, for
short), filed a Petition for Certification Election, in the
National Labor Relations Division of the National
Capital Region. Petitioner opposed it alleging that —
1. There is no employer-employee
relationship between Besa's and the petitioners-
signatories to the petition;
2. The subject of the present petition had
previously been decided by the defunct Court of
Industrial Relations, and is therefore barred under the
principle of res judicata;
3. The petition fails to comply with the
mandatory formal requirements under Sec. 2, Book V,
of the Omnibus Rules Implementing the Labor Code;
and
4. This Hon. Commission has no
jurisdiction over the subject matter and parties to the
petition.
Med-Arbiter on June 27, 1985, issued an order
declaring that there was an employer-employee
relationship between the parties and directed that an
election be conducted. Petitioner appealed the order to
the Director of BLR. Appeal was dismissed by the
Director of BLR as contained in his decision dated
Sept. 27, 1985 upholding the finding of the Med-
Arbiter that supervisors were appointed to oversee the
bootblacks' performance.
Thus the Petition of the Union (KAMPIL) before the
Med-Arbiter for the holding of the certification
election was granted. While the pre-election
conference was in progress, petitioner herein BESAS
filed with Us with petition for certiorari with
Prohibition and simultaneously filed with the Med-
Arbiter a motion to suspend the pre-election
conference. The petition filed before Us was dismissed
for lack of merit but was reconsidered upon Motion of
petitioner.
ISSUE:
Whether or not there was an employer-employee
relationship.
HELD:
NO. The records of the case reveal that an employer-
employee relationship does not exist between the 17
shoeshiners and petitioner. Entitlement of the
minimum requirements of the law particularly on
wages and allowances presupposes the existence of
employer-employee relationship which is determined
by the concurrence of the following conditions: (1)
right to hire, (2) payment of wages, (3) right to fire, (4)
control and supervision.
The most important condition to be considered is the
exercise of control and supervision over the
employees, per our conversation, the persons
concerned under your query are the shoe shiners and
based on the decision rendered by Associate Judge
Emiliano Tabigne of the defunct Court of Industrial
9|Page
Relations, these shoe shiners are not employees of the
company, but are partners instead. This is due to the
fact that the owner/manager does not exercise control
and supervision over the shoe shiners. That the shiners
have their own customers from whom they charge the
fee and divide the proceeds equally with the owner,
which make the owner categorized them as on purely
commission basis. The attendant circumstances clearly
show that there is no employer-employee relationship
existing, and such the owner/manager is not by law,
under obligation to extend to those on purely
commission basis the benefit of Wage Order No. 2.
However, the law does not preclude the employer in
giving such benefit to all its employees including those
which may not be covered by the mandate of the law.
ENCYCLOPEDIA BRITANICA vs. NLRC (G.R.
No. 87098 Nov. 4, 1996)
FACTS:
Private respondent Benjamin Limjoco was a Sales
Division Manager of petitioner and was in charge of
selling petitioner's products through some sales
representatives. As compensation, private respondent
received commissions from the products sold by his
agents. He was also allowed to use petitioner's name,
goodwill and logo. It was, however, agreed upon that
office expenses would be deducted from private
respondent's commissions. Petitioner would also be
informed about appointments, promotions, and
transfers of employees in private respondent's district.
On June 14, 1974, private respondent resigned from
office to pursue his private business. On October 30,
1975, he filed a complaint against petitioner with the
Department of Labor and Employment, claiming for
non-payment of separation pay and other benefits, and
also illegal deduction from his sales commissions.
Petitioner alleged that complainant Benjamin was not
its employee but an independent dealer authorized to
promote and sell its products and in return, received
commissions therefrom. Limjoco did not have any
salary and his income from the petitioner company was
dependent on the volume of sales accomplished. He
also had his own separate office, financed the business
expenses, and maintained his own workforce. The
salaries of his secretary, utility man, and sales
representatives were chargeable to his commissions.
Thus, petitioner argued that it had no control and
supervision over the complainant as to the manner and
means he conducted his business operations. The latter
did not even report to the office of the petitioner and
did not observe fixed office hours. Consequently, there
was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was
hired by the petitioner in July 1970, was assigned in
the sales department, and was earning an average of
P4,000.00 monthly as his sales commission. He was
under the supervision of the petitioner's officials who
issued to him and his other personnel, memoranda,
guidelines on company policies, instructions and other
orders. On December 7, 1982, Labor Arbiter Dogelio, appointments was for purpose of deducting the
in a decision ruled that Limjoco was an employee of employees' salaries from his commissions.
the petitioner company. On appeal, the Third Division
of the National Labor Relations Commission affirmed
the assailed decision. Dissatisfied with the outcome of
the case, petitioner Encyclopaedia Britannica now
comes to us in this petition for certiorari and injunction
with prayer for preliminary injunction.
ISSUE:
Whether or not there is an existence of an employer-
employee relationship.
HELD:
No. This court does not agree with the decisions of the
NLRC. In determining the existence of an employer-
employee relationship the following elements must be
present: 1) selection and engagement of the employee;
2) payment of wages; 3) power of dismissal; and 4) the
power to control the employee's conduct. Of the above,
control of employee's conduct is commonly regarded
as the most crucial and determinative indicator of the
presence or absence of an employer-employee
relationship. Under the control test, an employer-
employee relationship exists where the person for
whom the services are performed reserves the right to
control not only the end to be achieved, but also the
manner and means used in reaching that end.
The fact that petitioner issued memoranda to private
respondents and to other division sales managers did
not prove that petitioner had actual control over them.
The different memoranda were merely guidelines on
company policies which the sales managers follow and
impose on their respective agents. It should be noted
that in petitioner's business of selling encyclopedias
and books, the marketing of these products was done
through dealership agreements. The sales operations
were primarily conducted by independent authorized
agents who did not receive regular compensations but
only commissions based on the sales of the products.
These independent agents hired their own sales
representatives, financed their own office expenses,
and maintained their own staff. Thus, there was a need
for the petitioner to issue memoranda to private
respondent so that the latter would be apprised of the
company policies and procedures. Nevertheless,
private respondent Limjoco and the other agents were
free to conduct and promote their sales operations. The
periodic reports to the petitioner by the agents were but
necessary to update the company of the latter's
performance and business income.
Private respondent was not an employee of the
petitioner company. While it was true that the
petitioner had fixed the prices of the products for
reason of uniformity and private respondent could not
alter them, the latter, nevertheless, had free rein in the
means and methods for conducting the marketing
operations. He selected his own personnel and the only
reason why he had to notify the petitioner about such

10 | P a g e