Encyclopedia Britanica vs.

NLRC, 264 SCRA 4 [1996]

Facts:

Limjoco was a Sales Divison of Encyclopaedia Britannica and was in charge of selling the products through some sales
representatives. As compensation, he would receive commissions from the products sold by his agents. He was also allowed to
use the petitioner’s name, goodwill and logo. It was agreed that office expenses would be deducted from Limjoco’s
commissions. In 1974, Limjoco resigned to pursue his private business and filed a complaint against petitioner for alleged non-
payment of separation pay and other benefits and also illegal deduction from sales commissions. Petitioner alleged that Limjoco
was not an employee of the company but an independent dealer authorized to promote and sell its products and in return,
received commissions therein. Petitioner also claims that it had no control and supervision over the complainant as to the
manners and means he conducted his business operations. Limjoco maintained otherwise. He alleged he was hired by the
petitioner and was assigned in the sales department.

The Labor Arbiter ruled that Limjoco was an employee of the company. NLRC also affirmed the decision and opined that there
was no evidence supporting allegation that Limjoco was an independent contractor or dealer. On appeal, petitioner assails that
there was no employee-employer relationship.

Ruling:

There was no employee-employer relationship. In determining the relationship, the following elements must be present:
selection and engagement of the employee, payment of wages, power of dismissal and power to control the employee’s
conduct. The power of control is commonly regarded as the most crucial and determinative indicator of the presence or
absence of an employee-employer relationship. Under the control test, an employee-employer relationship exists where the
person for whom the services are performed reserves a right to control not only the end to be achieved, but also the manner
and means to be employed in reaching that end. The issuance of guidelines by the petitioner was merely guidelines on company
policies which sales managers follow and impose on their respective agents. Limjoco was not an employee of the company since
he had the free rein in the means and methods for conducting the marketing operations. He was merely an agent or an
independent dealer of the petitioner. He was free to conduct his work and he was free to engage in other means of livelihood.

In ascertaining the employee-employer relationship, the factual circumstances must be considered. The element of control is
absent where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or
conditions of work, and in turn is compensated in according to the result of his efforts and not the amount thereof. Hence, there
was no employee-employer relationship.