PEDRITO R.

PARAYDAY and JAIME REBOSO, Petitioners,

vs.
SHOGUN SHIPPING CO., INC., Respondent.

TOPIC: Illegal Dismissal

DOCTRINE:

An indispensable precondition of illegal dismissal is the prior existence of an employer-employee

relationship.

FACTS:

Petitioners Parayday and Reboso alleged that they were employed as fitter/welders by Oceanview which
is a corporation engaged in the business of ship building sometime in October 1996 and March 1997,
respectively. They presented an Oceanview Identification Card and Certificate of Employment dated
February 5, 2001 to support their allegation.

Sometime in 2003, Oceanview changed its corporate name to “Shogun Ships Inc.” In May 2006, the
petitioners were assigned to do a welding job on a barge of Shogun Ships, M/T Daniela Natividad
wherein an explosion occurred causing grave injuries to petitioners. They were hospitalized until June
2006, so they were not paid their salaries while in hospital confinement. After they were discharged from
the hospital, the respondent discontinued providing for medical expenses of the petitioners, but resumed
payment of their salaries.

On May 1, 2008, the petitioners were verbally dismissed by the respondent due to lack of work as
fitters/welders. Hence, they filed a petition for illegal dismissal. The respondent denied its employer-
employee relationship with the petitioners, pointing out that Shogun Shops is a corporation engaged in
domestic cargo shipping, and was only incorporated in 2002. The respondent maintained that Oceanview
was a separate and distinct entity from Shogun Ships.

The Labor Arbiter held that the petitioners were regular employees considering that they (1) performed
tasks necessary and desirable, and (2) rendered more than one year of service at the time of their
dismissal. On the issue of illegal dismissal, the respondent failed to prove that the petitioners were
dismissed for just or authorized reasons. NLRC dismissed the appeal, taking note of the 2006 explosion
wherein they reported back for work in August 2006, and with this, it would appear that the petitioners
have already rendered more than one year of service with Shogun Ships, a sufficient evidence of the
necessity if not indispensability of their functions, thus making them regular employees.

The CA reversed the decision of LA and NLRC, and concluded that the petitioners failed to adduce
substantial evidence to prove the existence of an employer-employee relationship, hence, there was no
dismissal to speak of. Hence, the petitioners filed a motion before this court.

ISSUE:
WON the petitioners were regular employees of Shogun Ships.
WON the petitioners were validly dismissed from employment.

RULING:
The Court grants the petition.

On the issue of an employer-employee relationship

The Court ruled that an employer-employee relationship did exist between the petitioners and Shogun
Ships by applying the four-fold test. This Court has time and again applied the “four-fold test” which has
the following elements, to wit: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power to discipline and dismiss; 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.

It is worth noting that in May 2006, the petitioners were engaged by herein respondent to work on repairs
on one of the barges of Shogun Ships. The respondent did not deny that petitioner worked for Shogun
Ships until they were supposedly verbally dismissed from employment on May 1, 2008, they even
admitted that the petitioners were called in to do repairs on the barges. The respondent also admitted that
Shogun Ships provided petitioners financial assistance when they were hospitalized, and resumed to pay
their salaries after getting discharged from the hospital.

With this, the Court ruled that Shogun Ships (1) engaged them as its employees; (2) paid their salaries for
services rendered; and (3) had ultimate discretion to dismiss their services after the needed repairs were
carried out.

As regards to power of control, this Court held that an employer’s power of control is deemed inferred
from the petitioners working alongside regular employees of Shogun Ships and taking orders from its
engineers as to the required specifications on how the barges should be repaired.

On the issue of illegal dismissal

The Court ruled that the petitioners were illegally dismissed as they are deemed regular employees of the
respondent. The records of the case show that the petitioners were not duly informed of the nature and
status of their engagement, the absence of which gives rise to the presumption of regular employment.

Moreover, the petitioners were performing activities which are necessary or desirable in the business of
Shogun Ships. It is essential for the respondent that it must continuously conduct vital repairs for the
proper maintenance of its barges. And lastly, the respondent was unable to discharge the burden of proof
required to establish petitioners’ dismissal from employment was legal and valid. They also failed to
show that the respondent afforded the petitioners due process prior to their dismissal, as in fact, they were
merely verbally dismissed.

WHEREFORE, the instant Petition is GRANTED.