WIP Cases Digest: Employee-employer Relationship

Case #6 Subject: 2-tiered Employee-employer Relationship Test  Constructive Dismissal G.R. No. 170087 August 31, 2006 ANGELINA FRANCISCO v NLRC, Kasei Corp Facts: Angelina Francisco was initially hired as an accountant for Kasei Corp. Later then appointed as Acting manager with monthly basis salary of 27,500 plus 3,000 Housing allowance and with 10% share in the profits of Kasei. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. The designated treasurer called for a meeting to announce that nothing had changed and Ms. Francisco was still connected with Kasei as Technical Assistant to Mr. Kamura and in-charge of BIR Matters. Thereafter, Kasei reduced her salary to 2,500 per month and wasn't paid of mid-year bonus. She made follow ups and was informed that the company was not earning well. She filed complaint for Constructive dismissal. Employer contended that she was not an employee because: - She was initially hired as technical consultant on accounting matters and concurrently assigned as Corp Sec; her services may be terminated anytime - Ms. Francisco performed her work at her own discretion and Kasei never interfered with her work except for matters relating to her profession; she did not have a time card and went to office at will - Selection did not go through usual procedure, but by board resolution designating her as Technical Consultant - Money received were professional fees subject to expanded withholding tax and was not among those reported as employees for BIR and SSS purposes Issues: (1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed Ruling: Ms. Francisco is an employee of Kasei Corp The court used the 2-tiered approach which is broader and applicable to cases where there are no written agreement or terms of reference; we take into consideration the totality of circumstances surrounding the true nature of the relationship (1) Control over the means and methods - the putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) Dependence of employee to the employer for salaries and benefits - the underlying economic realities of the activity or relationship i.e. inclusion of the employee in the payrolls, analysis of the totality of economic circumstances of the worker Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity,  such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. Ms. Francisco reported for work regularly and served in various capacities, for 6 continuous years, and was reported for SSS purposes as an employee.  "She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished." Employer is guilty of Constructive Dismissal - when employer reduced her salary "A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee"

Case #9 Subject: Abandonment of Work as ground for Dismissal G. R. No. 123938. May 21, 1998 Labor Congress of the Philippines v NLRC, Empire Food Products Facts: The 99 persons named as petitioners in this proceeding were rank-and-file employees of respondent Empire Food Products, which hired them on various dates. Petitioners filed against private respondents a complaint for payment of money claim and for violation of various labor standards. They also filed a petition for direct certification of petitioner Labor Congress of the Philippines as their bargaining representative . Complaints: - Unfair Labor practice - illegal lockout - Union Busting - threatening and preventing employees to self organize - Underpayment of wages - Actual, moral and exemplary damages Employer contends Issues: > Illegal Dismissal - Employees charged with abandonment of Work Summary of Decisions: Labor Arbiter:   

Case #10 Subject: Employee-employer Relationship Test Illegal Deduction Illegal Dismissal G.R. No. 119268. February 23, 2000 ANGEL JARDIN et. al v NLRC, GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.) Aggrieved taxicab drivers of Goodman taxi filed complaint for illegal dismissal, illegal deduction and unfair labor practice. Employer admittedly deducted 30Php from the daily earnings of the drivers, supposedly for washing of taxi units. These drivers work for Goodman every other day, on 24-hr work schedule and are paid 400Php per day. Finding the deduction illegal, these drivers decided to form a Labor Union to protect their rights.  Employer, upon learning of this move, Goodman refused to let these drivers drive the cabs when they reported and on succeeding days. Cab drivers believe they were singled out for being most active in the propose labor union. The NLRC dismissed the case for lack of jurisdiction. There was no employee-employer relationship. Relation was of leasehold covered under civil code. Issue: Whether or not employee-employer relationship exists between taxicab drivers and Goodman Taxi Whether or not the cab driver were illegally dimissed Whether or not the deduction for cleaning the cab unit constituted an illegal deduction Ruling: Employee-employer relationship Exists In a number of cases decided by this Court,[19] we ruled that 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. We explained that in the lease of chattels, the lessor loses complete control over the chattel leased although the lessee cannot 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 and control over the latter. The management of the business is in the owners hands. The owner as holder of the certificate of public convenience must see to it that the driver follows the route prescribed by the franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. We have applied by analogy the abovestated doctrine to the relationships between bus owner/operator and bus conductor,[20] auto-calesa owner/operator and driver,[21] and recently between taxi owners/operators and taxi drivers.[22] Hence, petitioners are undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually necessary or desirable in the usual business or trade of their employer. Drivers were illegally dismissed Deduction was not illegal With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition when he took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play.[25] Hence, the drivers are not entitled to reimbursement of washing charges.  

Sevilla vs. Court of Appeals (GR No. 44182-44183 April 15, 1988)

Facts: Tourist World Service, Inc.(TWS) and Mrs. Lina Sevilla were named as parties to a lease contract over the premises belonging to Mrs. Segundina Noguera, to serve as their Ermita branch office. The lessees agreed to be solidarily obligated for the monthly rental. Lina Sevilla was designated as branch manager. TWS and Mrs. Sevilla would share on any airline fare brought in on the efforts of Mrs. Sevilla. She solicited airline fares and received 4% of the proceeds as compensation. Her earnings were in fluctuating amounts depending on her booking successes and she was not admitted in the company’s payroll. She also shared in the expenses for maintaining the office and pays the salary of an office secretary. Sometime later, the TWS was informed that Lina Sevilla was connected with a rival firm. The company also thought of closing down its Ermita office considering that the branch was losing. The leased premises were no longer used by the company even before the effectivity of the termination of their contract set on January 31, 1962. The company decided to abolish the office of the manager and vice-president of the Ermita Branch and authorized the corporate secretary to receive the properties in the said office. Later on, the corporate secretary visited the office and after not being able to contact Mrs. Sevilla, he padlocked the place in line with the interest of TWS. Mrs. Lina Sevilla and her employees could not get inside the place. The telephone line was also disconnected. This event disrupted the business of Mrs. Sevilla. She filed a complaint for damages. The company contended that Mrs. Sevilla was an employee of TWS, designated as branch manager. The company was the true lessee and possessed the sole prerogative to terminate the lease and padlock the premises. Mrs. Sevilla contended that her relationship with TWS was more of joint venture or a partnership. She held that whatever might have been the true relationship TWS and its Corp. Secretary should not have padlocked the office place. Issue: Whether or not an employee-employer relationship exists between Mrs. Sevilla and TWS Ruling: No employee-employer relationship exists. Two-tiered Test The court used the 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. In addition to this, the court considered the existing economic conditions prevailing between the parties or such other indications of employer-employee relationship such as inclusion in the payroll. In this case, TWS had no control over the result of Mrs. Sevilla’s work. She worked with her own means and capabilities for her bookings. Her compensation depended on her own successes, unlike an employee that earns a fixed salary. She also bound herself in solidum with TWS for the rent payment and was named as one of the parties in the contract. The Court was impressed that the parties were bound by some other relationship other than employment. The Court concluded that their relationship was that of agency.

Brotherhood Labor Unity Movement vs NLCR (G.R. No. L-48645 January 7, 1987)

Complainants in this case are workers who were employed at the San Miguel Parola Glass Factory averaging about seven (7) years of service at the time of their termination. They worked at the SMC Plant as "cargadores" or "pahinante" tasked with loading, unloading, piling or palleting empty bottles and woosen shells to and from company trucks and warehouses. They also accompanied the company trucks on their delivery routes. These workers first reported for work to Superintendent-in-Charge Camahort who issues to them gate passes. The company provided them with tools, equipment and paraphernalia used in their activities. Job orders came from Camahort. Which are then handed to an assistant-officer-in-charge who informs the warehousemen and checkers regarding the orders. Said orders are relayed to the group leaders who then give instructions to the workers. Work in the glass factory depended wholly on the volume of bottles manufactured to be loaded and unloaded. Work day was not fixed at 8 hours. There were times it exceeded 8 hours and they were required to render work on Sundays and holidays. No overtime or additional compensation was paid to them for these instances. Workers were paid every ten (10) days on piece-rate based on the number of cartons and wooden shells they were able to load, unload, or pile. The complainants worked exclusive at the SMC plant. When any of the glass furnaces suffered a breakdown, making a shutdown necessary, the work was temporarily suspended. As soon as things were fixed, they would return to work at the glass plant. There was no written contract specifying the performance of a specified piece of work, the nature and extent of the work and the duration of their engagement. Later, the workers organized and affiliated themselves with SMC’s employees union and engaged in union activities. They tried to bargain with management who did not heed to any of their demands. San Miguel refused to bargain alleging that the workers are not their employee, and their real employer was Guaranteed Labor Contractor, an independent labor contracting firm. Their jobs were dismissed. Issue: Whether or not an employee-employer relationship exists between San Miguel Corporation and the workers Ruling: Employee-employer relationship exists. The indicators of Independent Contracting The existence of an independent contractor relationship is generally established by the following guidelines: whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the control and supervision over the work, hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises tools, appliances, materials and labor; and the mode, manner and terms of payment" the right to assign the performance of a specified piece of work; San Miguel failed to impress the court that the employees were of the independent contractor. Most importantly, the company possessed the right of control over the means and methods for performing the work. The workers were under the supervision of the company supervisor.

Encyclopaedia Britannica Philippines, Inc., vs NLRC (G.R. No. 87098. November 4, 1996)

Benjamin Limjoco was a Sales Division Manager of Encyclopaedia Britannica(EB) and was in charge of selling petitioners products through some sales representatives. As compensation, he received commissions from the products sold by his agents. He was also allowed to use petitioners name, goodwill and logo. Mr. Limjoco agreed to deduct the office expenses from the commissions. At the time he was connected with EB, he was also a director and later became the president of the Farmers Rural Bank. Mr. Limjoco decided to resign from EB to pursue other interests which requires his personal attention. Some time later, he filed a complaint against EB for non-payment of separation pay and other benefits as well as illegal deductions. EB alleged that Limjoco was an independent dealer authorized to promote and sell its products and in return, and that he did not have any salary, only commissions which were dependent on his sales accomplishment. He maintained a separate office, financed the business expenses, and had his own workforce such as a secretary, a utility man, and sales representatives whose salaries were paid through Limjoco’s commissions. EB held that they did not exercise control over Limjoco as to the means and manner of conducting his work. Limjoco was not required to report to EB’s office, and he did not observe fixed office hours. EB gave memoranda containing the guidelines on company policies which the sales managers follow and impose on their respective agents, as well as other instructions. He was also required to make periodic reports of sales activity to the company. The prices of the products were fixed by EB. EB’s selling of encyclopaedias and books were done through dealership agreements. Independent authorized agents primarily conducted the sales operations. They are not given regular salary, only commissions based on sales volume. These independent agents hire and maintain their own staff and finance their own office expenses. Limjoco posited that he was hired by EB and assigned to the sales department, earning an average of 4,000Php monthly as sales commissions and was under the supervision of the EB’s officials who issued to him and his other personnel, memoranda, guidelines on company policies, instructions and other orders. Issue: Whether or not an employee-employer relationship exists between Limjoco and EB Ruling: There is no employee-employer relationship. The four-tiered test The court followed a four-step formula 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 employees conduct. Of the above, control of employees 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 to be used in reaching that end. Company has no control over the means and methods of Limjoco’s conduct of work The issuance of memoranda to Limjoco and to other division sales managers did not prove that company had actual control over them. In accordance with business practice in entering into dealership aggreements, the independent dealers kept their own office and staffs. The different memoranda were merely guidelines to be imposed to the sales representatives and other staffs. EB’s requirement of submitting periodic reports was necessary to update the company of the dealer’s performance and business income. EB fixed the prices of the products for uniformity, but nonetheless the dealers had free rein in the means and methods of conducting the marketing operations. Also, Limjoco was free to to conduct his work and he was free to engage in other means of livelihood. It was found that he was not exclusively working for EB.

Air Material Wing Savings and Loan Association, Inc. vs NLRC

Luis S. Salas was appointed "notarial and legal counsel" for Air Material Wings Savings and Loan Association, Inc. (AMWSLAI) in 1980. The appointment was renewed for three years in an implementing order dated January 23, 1987, reading as follows: SUBJECT: Implementing Order on the Reappointment of the Legal Officer TO: ATTY. LUIS S. SALAS Per approval of the Board en banc in a regular meeting held on January 21, 1987, you are hereby reappointed as Notarial and Legal Counsel of this association for a term of three (3) years effective March 1, 1987, unless sooner terminated from office for cause or as may be deemed necessary by the Board for the interest and protection of the association. Aside from notarization of loan & other legal documents, your duties and responsibilities are hereby enumerated in the attached sheet, per Articles IX, Section 1-d of the by-laws and those approved by the Board en banc. Your monthly compensation/retainer's fee remains the same. This shall form part of your 201 file. BY AUTHORITY OF THE BOARD: LUVIN S. MANAY President & Chief of the Board   AMWSLAI also defined some of his duties, as follows: 1. To act on all legal matters pertinent to his Office. 2. To seek remedies to effect collection of overdue accounts of members without prejudice to initiating court action to protect the interest of the association. 3. To defend by all means all suit against the interest of the Association.   On January 9, 1990, the company issued another order reminding Salas of the approaching termination of his legal services under their contract. This prompted Salas to file a complaint with NLRC against AMWSLAI for separation pay, vacation and sick leave benefits, cost of living allowances, refund of SSS premiums, moral and exemplary damages, payment of notarial services and attorney's fees. AMWSLAI moved to dismiss for lack of jurisdiction. The company held that there was no employer-employee relationship and that Salas’ monetary claims properly fell within the jurisdiction of the regular courts. They contended that the NLRC is not empowered to adjudicate claims for notarial fees Issue: Whether or not an employee-employer relationship exists between AMWSLAI and Atty. Salas Ruling: Employee-employer relationship exists. The Labor Arbiter has jurisdiction over money claims arising out of or in connection with the employer-employee relationship or some aspect or incident of such relationship. The terms and conditions set out in the letter-contract entered by the parties show that Salas was an employee of AMWSLAI. His selection as the company counsel was done by the board of directors in one of its regular meetings. The company paid him a monthly compensation/retainer's fee for his services. Though his appointment was for a fixed term of three years, the employer reserved its power of dismissal for cause or as it might deem necessary. AMWSLAI also exercised its power of control over Salas by defining his duties and functions. The two classes of lawyers The Court quoted an earlier case Hydro Resources Contractors Corp. v. Pagalilauan: A lawyer, like any other professional, may very well be an employee of a private corporation or even of the government. It is not unusual for a big corporation to hire a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its table of organization, and otherwise treat them like its other officers and employees. At the same time, it may also contract with a law firm to act as outside counsel on a retainer basis. The two classes of lawyers often work closely together but one group is made up of employees while the other is not. A similar arrangement may exist as to doctors, nurses, dentists, public relations practitioners and other professionals.

Insular Assurance Co., Ltd. vs NLRC

Insular entered into contract with Pantaleon De los Reyes authorizing the latter to solicit applications for life insurance and annuities for which he would receive commissions as compensation. The contract, prepared solely by Insular, was designated as an Agency contract, and expressly stipulated that no employee-employer relationship shall exist between the parties and that the agent shall be free to exercise his own judgement as to time, place and means of soliciting insurance. De los Reyes was prohibited for working for any other life insurance company, and a violation of this would be a ground for termination. He was also required by the company to submit completed application forms, to deliver policies, deposit payments of policy loans, to receive and collect premiums Months later, the parties entered into another contract where De los Reyes was appointed as Acting Unit Manager with duties and responsibilities on recruitment, training, organization and development of underwriters, and to supervise and coordinate the sales efforts. The management contract expressly stipulated that the relation of the acting unit manager and/or the agents of his unit to the company shall be that of independent contractor. Insular however, reserved the right to determine the assignments of the agents and underwriters trained by the Acting Unit Manager. As compensation De los Reyes was entitled to override commissions, production bonus, development allowance and a “Unit Development Financing (UDF)”, a financial assistance scheme of the company consisting of a free portion (300Php) and a validate portion(1,200Php) paid on the basis of performance and some other conditions. The UDF is released on a monthly basis, even without the results of the quarterly performance evaluation. As acting Unit Manager in an acting capacity, De los Reyes was prohibited from working for other life insurance companies or with the government. He could not also accept a managerial or supervisory position in any firm doing business in the Philippines without the written consent of petitioner. A few months later, he was notified by the company that his services were going to be terminated. He later filed for illegal dismissal, non-payment of salaries and separation pay. Insular contended that it never had any employer-employee relationship with De los Reyes as expressly stipulated between them in the agency contracts, and that he had freedom to conduct his work. The company insisted that he was paid based on output. They held that the first requirement of selection and engagement of the employee was not met since De los Reyes was never required to go through the pre-employment procedures and that the probationary employment status was reserved only to employees of petitioner. Issue: Whether or not employee-employer relationship exists between De los Reyes and Insular Assurance Ruling: Employee-employer relationship exists. As to the Selection and Engagement process, the Court determined that in substance De los Reyes was put through probation in the beginning. A look at the provisions of the contract shows that he was appointed as Acting Unit Manager only upon favorable endorsement of the District Manager. Also the very designation of the appointment as acting unit manager obviously implies a temporary employment status which may be made permanent only upon compliance with company standards. As to payment of wages, contrary to the contentions of Insular that De los Reyes received compensation strictly on output basis determined through quarterly performance evaluation, the Court found that the company paid both the free and validated portions of the UDF every month. This indicates that unit managers’ quarterly performance had no bearing at all on his entitlement. This comprised the regular salary of the employee. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management contract and providing therein that the employee is an independent contractor. Stipulation by parties in the contract as to whether employee-employer relationship exists does not control; Labor contracts are subject to the police power of laws, and that laws shall prevail over the stipulations of the parties. The Court stated that the four-fold test to examine the substance of relationship should be used to examine the substance of their arrangement. De los Reyes was under the effective control of the company in the critical and most important aspects of his work as Unit Manager, as gleaned from provisions in the contract as Acting Unit Manager, to wit: (a) De los Reyes was to serve exclusively the company, therefore, he was not an independent contractor; (b) he was required to meet certain manpower and production quota; and, (c) Insular controlled the assignment to and removal of soliciting agents from his unit.

Opulencia Ice Plant vs NLRC

Manuel Esita was hired as compressor operator-mechanic for the Tanauan ice plant of Dr. Melchor Opulencia, working from seven o'clock in the morning to five o'clock in the afternoon receiving a daily wage of P35.00. He was later transferred to the Calamba ice plant, which was then undergoing overhauling, taking the place of compressor operator who was already old and weak. For less than a month, Esita also helped in the construction-remodeling of Dr. Opulencia's house. He was a compressor operator for 20 years at the Calamba Ice Plant.   Later, Esita was dismissed from service for demanding the correct amount of wages due him. The company claimed that Esita could not have been employed in the Tanauan ice plant which was not in operation due to low voltage of electricity and that Esita was merely a helper/peon of one of the contractors engaged in the renovation. They alleged that he rendered services in a similar capacity in the repair and expansion of the Calamba ice plant, as well as in the remodeling of Dr. Opulencia's residence. Opulencia said that he initially refused the Esita’s plea for employment in the ice plants due to lack of vacancy, but allowed him to stay in the premises of the ice plant for free and to collect fees for crushing or loading ice of the customers and dealers of the ice plant. Esita also enjoyed free electricity and water, and was allowed to cultivate crops within the premises of the ice plant to augment his income, as a token of gratitude because he helps in the cleaning of the ice plant premises and engine room whenever requested, and this happens only twice a month..   They hold that the benevolence in allowing Esita to stay inside the company's premises free of charge for humanitarian reason deserves commendation rather than imposition of penalty, and that Esita's name does not appear in the payrolls of the company which necessarily means that he was not an employee. The company stated that granting  Esita was indeed a mechanic, he could never be a regular employee because his presence would be required only when there was a need for repair. Issue: Whether or not an employer-employee relationship between Esita and Dr. Opulencia Ruling: Employee-employer relationship exists. The Court declared that the absence of time sheet, time record or payroll has become inconsequential in this case. No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. Also the company’s payrolls contained only the names of those who are present which goes to show that the same is not a complete and accurate list of the employees. The Court determined that Esita was a regular employee as he was required to remain on call in the employer's premises or so close thereto that he cannot use the time effectively and gainfully for his own purpose shall be considered as working while on call.  Such status is not affected by the fact that his regular presence in the workplace is not required. The significant criterion is whether the work of the employee is usually necessary or desirable in the business of the employer. Esita worked for 9 years and, under the Labor Code, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to that activity in which he is employed.   The company deserves commendation in allowing Esita privileges. However, in view of the existence of an employer-employee relationship the Court cannot treat humanitarian reasons as justification for stripping away the rights and privileges of employees granted by law. Benevolence does not operate as a license to circumvent labor laws.

PHILIPPINE FUJI XEROX CORPORATION vs NLRC (G.R. No. 111501 March 5, 1996)