LABOR LAW and SOCIAL LEGISLATION | 2D

Employer-Employee Relationship
Existence of Employer-Employee Relationship

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Case Name DR. RENATO SARA et al., vs. CERIA AGARRADO and the NLRC
Case No. & Date G.R. No. 73199 October 26, 1988
Doctrine Four-fold Test of Employment

FACTS:
This case filed by the petitioners for certiorari questions the jurisdiction of the Labor
Tribunal.
Petitioners were engaged in the business of buying and selling of rice and palay being
owners of a rice mill. In 1977, respondent Agarrado, a former employee of petitioner Sara,
had a verbal agreement with said petitioners to sell their produce by earning a certain
percentage from whatever she could sell. They also agreed that respondent may use her
own money in this business venture or may borrow from other sources, as authorized by
the petitioners and the same be subject to reimbursement.
Subsequently, respondent filed with the NLRC, Cotabato City, a complaint against
petitioners for unpaid commissions and reimbursement. The Labor Arbiter rendered a
decision in favor of the respondent. On their appeal to the NLRC, petitioners’ appeal was
dismissed. Hence, this petition.
ISSUE:
1. Whether or not an employer-employee relationship exists between the parties;
2. Whether or not the Labor Tribunal has jurisdiction over the case.
RULING:
The Court granted the petition for certiorari.
To determine the existence of an employer-employee relationship, the Court applied the
four-fold test: the selection and engagement of the employee, the payment of wages, the
power of dismissal and the power to control the employee’s conduct.
In the above case, the Court found that there indeed was a selection and engagement of
respondent in 1977. However, the verbal agreement between the parties negated the
existence of other requisites. Respondent was not paid in wages but on commission basis
dependent on the volume of sale or purchase. The power terminate the relationship was
mutually vested upon the parties. Either may terminate the business arrangement at will,
with or without cause. And lastly, the most important element to determine employee-
employer relationship which is the power of control, was absent. Respondent was at
liberty to sell the palay to anybody at her pleasure, and was not subject to definite hours or
conditions of work. There was definitely no employer-employee relationship between the
parties.
The case filed by the respondent with NLRC was dismissed.

Case Name Sampaguita Pictures vs. Philippine Musicians Guild

Case No. & Date GR. No. L-12582, 110 Phil 725 | January 28, 1961
Doctrine Under the Right to 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 the end.

FACTS:
The Philippine Musicians Guild sought to be recognized as the sole bargaining
representative for musicians working with film companies, including LVN Pictures,
Sampaguita Pictures, and Premiere Productions, Inc. The Guild claimed that 95% of these

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musicians were its members and that no other legitimate labor organization represented
them.
The Guild prayed that it be certified as the sole and exclusive bargaining agency for all
musicians working in the aforementioned companies. In their respective answers, the latter
denied that they have any musicians as employees.
The film companies argued that the musicians were independent contractors, not
employees. However, the Court of Industrial Relations sided with the Guild, applying the
"right of control" test to establish an employer-employee relationship. The film companies
appealed the decision, resulting in the current case.
ISSUE:
Whether or not the musicians are employees of the companies?
RULING:
Yes. It is well settled that “an employer-employee 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 means to be used in reaching such end . . . .”
In other words, to determine whether a person who performs work for another is the
latter’s employee or an independent contractor, the National Labor Relations relies on ‘the
right to control’ test. Under this test an employer-employee relationship exist 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 the end.
In this case, the work of the musical director and musicians is a functional and integral part
of the enterprise performed at the same studio substantially under the direction and
control of the company.
Furthermore, the film companies summon the musicians to work, through the musical
directors. The film companies, through the musical directors, fix the date, the time and the
place of work. The film companies, not the musical directors, provide the transportation to
and from the studio. The film companies furnish meal at dinner time.
The motion picture director — not the musical director — “solely directs and performance
of the musicians before the camera“. The motion picture director “supervises the
performance of all the actors, including the musicians who appear in the scenes, so that in
the actual performance to be shown in the screen, the musical director’s intervention has
stopped.” Or, as testified to in the lower court, “the movie director tells the musical director
what to do; tells the music to be cut or tells additional music in this part or he eliminates
the entire music he does not (want) or he may want more drums or move violin or piano, as
the case may be”. The movie director “directly controls the activities of the musicians.” He
“says he wants more drums and the drummer plays more” or “if he wants more violin or he
does not like that.”

Case Name Air Material Wing Savings & Loan Association Inc. vs NLRC
Case No. & Date G.R. No. 233 SCRA 592 June 30, 1994
Doctrine

FACTS:
Private respondent Salas was appointed by Air Material Wing Savings & Loan Association
Inc. (AMWSLAI) in the year 1980 for notarial and legal counsel and renewed its contract on
March 1, 1987 for a term of 3 years unless terminated for some cause.
On January 9, 1990 petitioner reminded Salas of approaching termination. This prompted
Salas to file a complaint against AMWSLAI for claims such as separation pay, vacation &
sickness leave, cost of living allowance, refund of SSS premium, moral & exemplary
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damages, payment of notarial service rendered from February 1, 1980 to March 2, 1990
and attorneys fee.
AMWSLAI moved for the dismissal of the case for lack of jurisdiction stating that no ER-EE
relationship exists. Further, most of Salas claims were dismissed by the Labor Arbiter in its
decision dated November 21, 1991 on the ground that he was a Managerial Employee. He
was also denied moral and exemplary damages for lack of evidence of bad faith on the part
of AMWSLAI. Neither was he allowed to collect his notarial fees from 1980 up to 1986
because the claim therefore had already prescribed. However, the petitioner was ordered to
pay Salas his notarial fees from 1987 up to March 2, 1990, and attorney's fee equivalent to
10% of the judgment award.
ISSUE:
Whether or not Salas is an Employee of Petitioners Company?
RULING:
Yes, Elements of ER-EE Relationship are (1) Selection and engagement of the employee (2)
payment of wages (3) power to dismiss (4) Employer’s power to control its Employee’s
conduct. Thus, the existence of ER-EE relationship is supported by substantial evidence.
Letter-Contract on January 23, 1987 clearly shows Salas was an employee. Selection was
done by the Board of Director in one of its regular meetings, and paid him monthly
compensation for his service. Though his appointment has a fixed term, petitioner reserves
its power to dismiss with just cause or as it might be deemed necessary for its interest and
protection. AMWSLAI also exercised its power to control Salas by defining his duties
stipulated in their contract.
WHEREFORE, the public respondent committed no grave abuse of discretion in ruling that
ER-EE relationship exist.

Case Name MANILA GOLF & COUNTRY CLUB INC. VS. IAC
Case No. & Date September 27, 1994
Doctrine CONTROL TEST---determines an employer-employee relationship
by assessing if the employer controls or has the right to control
the employee's work and the means and methods by which it is
performed.

FACTS:
• The case originated from a petition filed by seventeen caddies who claimed to be
employees of the Manila Golf & Country Club and sought social security coverage.
However, all but two of the petitioners later withdrew their claim, realizing that they
were not employees of the club.
• The Social Security Commission (SSC) dismissed the petition for lack of merit,
stating that the caddies were not employees of the club because their fees were paid
by the golf players themselves, not by the club.
• The SSC also noted that the caddies were not subject to the direction and control of
the club in performing their work.
• The private respondent, Fermin Llamar, appealed the SSC's decision to the
Intermediate Appellate Court (IAC).
• The IAC reversed the SSC's decision and declared Llamar an employee of the Manila
Golf & Country Club.

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• The IAC based its decision on the club's promulgation of rules and regulations for
the caddies, the group rotation system implemented by the club, and the club's
suggestion of the rate of fees payable to the caddies.
• The IAC disregarded the fact that the caddies were paid by the players, not by the
club, and that they had no fixed working hours or income.
• The private respondent, Fermin Llamar, appealed the SSC's decision to the
Intermediate Appellate Court (IAC).
• The IAC reversed the SSC's decision and declared Llamar an employee of the Manila
Golf & Country Club.
• The IAC based its decision on the club's promulgation of rules and regulations for
the caddies, the group rotation system implemented by the club, and the club's
suggestion of the rate of fees payable to the caddies.
• The IAC disregarded the fact that the caddies were paid by the players, not by the
club, and that they had no fixed working hours or income.
ISSUE:
WON caddies at a golf club are considered employees entitled to social security coverage
RULING:
• [NO]
• In the determination of the existence of an employer-employee relationship, the
"control test" shall be considered decisive.
• (Petitioner) has no means of compelling the presence of a caddy. A caddy is not
required to exercise his occupation in the premises of petitioner. He may work with
any other golf club or he may seek employment a caddy or otherwise with any entity
or individual without restriction by petitioner.
• Petitioner has no way of compelling the presence of the caddies as they are not
required to render a definite number of hours of work on a single day. Even the
group rotation of caddies is not absolute because a player is at liberty to choose a
caddy of his preference regardless of the caddy's order in the rotation.
• The Decision of the Intermediate Appellant Court, review of which is sought, is
reversed and set aside, it being hereby declared that the private respondent, Fermin
Llamar, is not an employee of petitioner Manila Golf and Country Club and that
petitioner is under no obligation to report him for compulsory coverage to the Social
Security System.
• No pronouncement as to costs.

Case Name ILOILO CHINESE COMMERCIAL SCHOOL VS. FABRIGAR

Case No. & Date G.R. No. L-16600, December 27, 1961
Doctrine The Supreme Court affirms the decision of the Workmen's
Compensation Commission, ruling that the claimants provided
sufficient evidence to establish an employer-employee relationship
and that the school's negligence aggravated the employee's pre-
existing illness, leading to his death

FACTS:
Private respondent Fabrigar and her children filed a claim for compensation following the
death of her husband Santiago before the Workmen’s Compensations Commission alleging
that the cause of death was contracted during and as a result of his employment as janitor.

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The Hearing Officer of the EWCC denied the claim and dismissed the case finding
that the claimant failed to prove the casual effect of employment and death. Nothing was
shown that the disease was contracted in line of duty.
Upon appeal, the Commission reversed its decision finding that the short period of
intervention (the day he spat blood) between his last day of work due to due to pulmonary
tuberculosis, indicated that he had been suffering from such disease even during the time
he was employed by the respondent and considering the strenuous work he performed, his
employment as janitor aggravated his pre-existing illness; that although here is a
discrepancy between the cause of death "beriberi adult, “as appearing in the death
Certificate and the testimony of Dr. Villareal, the latter deserves more credence, because the
information (cause of death) was given by the sanitary inspector who did not, in any way,
examine the deceased before or after his death.
Petitioner alleged that the Commission erred contending that the preponderance of
evidence on the matters involved in this case, militates in its favor. Considering the doctrine
that the Commission, like the Court of Industrial Relations, is bound not by the rule of
preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence
ISSUE:
1. Whether or not substantial evidence supports the decision of the commission.
2. Whether or not Santiago was an employee of the petitioner.
RULING:
Yes. Substantial evidence supports the decision of the commission.
While seemingly there exists an inconsistency in the cause of death, as appearing in the
death certificate, it is a fact found by the Commission, that the Sanitary Inspector did not
examine the deceased before and after his death. The SC
Yes. Santiago was an employee of the petitioner.
There is substantial proof to the effect that Santiago was employed by and rendered service
for the petitioner and was an employee within the purview of the Workmen’s
Compensation Law. On the other hand, the most important test of employer-employee
relation is the power to control the employee's conduct. The records disclose that the
person in charge of the respondent school supervised the deceased in his work and had
control over the manner he performed the same.

Case Name FILAMER CHRISTIAN INSTITUTE V. HON. INTERMEDIATE

APPELLATE COURT, HON. ENRIQUE P. SUPLICO, IN HIS
CAPACITY AS JUDGE OF THE REGIONAL TRIAL COURT, BRANCH
XIV, ROXAS CITY AND POTENCIANO KAPUNAN, SR.
Case No. & Date G.R. NO. 75112, August 17, 1992
Doctrine An implementing rule on labor cannot be used by an employer as a
shield to avoid liability under the substantive provisions of the civil
code.
An employer is expected to impose upon its employees the
necessary discipline called for in the performance of any act
indispensable to the business and beneficial to their employer.

FACTS:
Funtecha was a working student, a part-time janitor and a scholar of Filamer. Funtecha
have a driver’s license and requested the driver, Allan Masa, to take over the vehicle while
the latter was on his way home. Masa allowed Funtecha to do so. Allan lives at his fathers’

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house who is also the school president, Agustin Masa. Funtecha was allowed to free board
in the same house while he was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating
a sharp dangerous curb, and viewing that the road was clear. In Allan’s testimony, a moving
truck with glaring lights nearly hit them so that they had to swerve to the right to avoid the
vehicle, but they did not stop to check. Actually, the Pinoy jeep (vehicle of Allan) swerved
towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction
against the vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise to
swerve to the right. At the time of the incident the jeep had only one functioning headlight.
The Court previously held that Filamer is not liable for the injuries caused by Funtecha on
the grounds that the latter was not an authorized driver for whose acts the petitioner shall
be directly and primarily answerable, and that Funtecha was merely a working scholar who
is not considered an employee of the petitioner under Section 14, Rule X, Book III of the
Rules and Regulations Implementing the Labor Code.
Private respondents, heirs of Potenciano Kapunan seek reconsideration of the Court’s
decision.
ISSUE:
Whether or not Funtecha is considered an employee of Filamer Christian Institute.
RULING:
YES. It is undisputed that Funtecha was a working student, being a part-time janitor and a
scholar of petitioner Filamer. He was, in relation to the school, an employee even if he was
assigned to clean the school premises for only two hours in the morning of each school day.
In learning how to drive while taking the vehicle home in the direction of Allan’s house,
Funtecha definitely was not having a joy ride. Funtecha was not driving for the purpose of
his enjoyment or for a “frolic of his own” but ultimately, for the service for which the jeep
was intended by the Filamer. Thus, the Court concluded that the act of Funtecha in taking
over the steering wheel was one done for and in behalf of his employer for which act the
petitioner-school cannot deny any responsibility by arguing that it was done beyind the
scope of his janitorial duties.
The petitioner anchors its defense on Section 14, Rule X, Book III of the Rules Implementing
the Labor Code. Such Rule was promulgated by the Secretary of Labor and employment
only for the purpose of administering and enforcing the provisions of the Labor Code on
conditions of employment. Rule X, however, is merely a guide to the enforcement of the
substantive law on labor. The Court makes the distinction and so holds that Section 14, Rule
X, Book III of the Rules is not the decisive law in a civil suit for damages instituted by an
injured person during a vehicular accident against a working student of a school and
against the school itself.
The present case does not deal with a labor dispute on conditions of employment between
an alleged employee and an alleged employer. It invokes a claim brought by one for
damages for injury caused by one for damages for injury caused by the patently negligent
acts of a person, against both doer-employee and his employer.
Funtecha is an employee of petitioner Filamer. He did not need an official appointment for a
driver’s position in order that the petitioner may be held responsible for his grossly
negligent act, it being sufficient that the act of driving at the time of the incident was for the
benefit of the petitioner. Hence, the fact that Funtecha was not the school driver or was not
acting within the scope of his janitorial duties does not relieve the petitioner of the burden
of rebutting the presumption juris tantum that there was negligence on its part either in the
selection of a servant or employee, or in the supervision over him.

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The petitioner has not shown that it has set forth such rules and guidelines as would
prohibit any one of its employees from taking control over its vehicles if one is not the
official driver or prohibiting the driver and son of the Filamer president from authorizing
another employee to drive the school vehicle. Furthermore, Filamer failed to prove that it
had imposed sanctions or warned its employees against the use of its vehicles by person
other than the driver. Thus, Filamer has an obligation to pay damages for injury arising
from the unskilled manner by which Funtecha drove the vehicle.

Case Name Aurora Land Projects Corp v. NLRC

Case No. & Date G.R. No. 114733 Jan. 2, 1997
Doctrine 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 achieved, but also the manner
and means to be used in reaching that end.

FACTS:
Private respondent Honorio Dagui was hired by Dona Aurora Suntay Tanjangco in 1953 to
take charge of the maintenance and repair of the Tanjangco apartments and residential
buildings. He was to perform carpentry, plumbing, electrical and masonry work. Upon the
death of Dona Aurora Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco
Quazon, took over the administration of all the Tanjangco properties. On June 8, 1991, on
the alleged ground that his work was unsatisfactory, private respondent Dagui was told by
Mrs. Quazon “Wala ka nang trabaho mula ngayon”. Thus, private respondent, already sixty-
two (62) years old, filed a complaint for illegal dismissal with the Labor Arbiter.
On May 25, 1992, the Labor Arbiter ruled in favor of Dagui and ordered the respondents to
pay the complainant the total amount of ONE HUNDRED NINETY FIVE THOUSAND SIX
HUNDRED TWENTY FOUR PESOS (P195,624.00) representing complainant's separation
pay and the ten (10%) percent attorney's fees within ten (10) days from receipt of this
Decision. Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T. Quazon
appealed to the National Labor Relations Commission. The Commission affirmed the Labor
Arbiter's with a modification- that complainant must be paid separation pay in the amount
of P88,920.00 instead of P177,840.00, and that the award of attorney's fees is deleted.
ISSUE:
(1) WON private respondent Honorio Dagui was an employee of petitioners;
(2) If he were, whether or not he was illegally dismissed.
RULING:
(1) YES. In fact, private respondent is a regular employee. The Court, consistent with the
labor arbiter and NLRC’s ruling, is not convinced that private respondent is only a
contractual employee. To qualify as a contractual employee, one must have substantial
capital investment (Sec.8, Rule VIII, Book III of the IRR of the Labor Code). Petitioners
showed no proof that private respondent was a contractual employee. The same ruling
based on fact is within the jurisdiction of the labor arbiter and NLRC. All the elements of
the four-fold test in identifying employer-employee relationship (power to hire, payment of
wages, power to fire, and power of control over conduct of employee) are present in the
instant case. The fact the private respondent was paid on a daily basis admits that he is an
employee compensated by way of wages and not by profit. The petitioner had indeed the
power of dismissal over private respondent.
The mere existence of the power of control is enough to show its compliance with the four-
fold test. This is the case with petitioner and the same is not negated by the fact the
petitioner does not directly supervise the performance of the private respondent. He works
between 7AM to 4PM within the premises of the petitioner, and thus, naturally has to

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receive supervision over his work from the petitioner. There are two ways to determine a
regular employee, and whichever is applied does not negate the fact that private
respondent is a regular employee by definition - “an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer” and that “any
employee who has rendered at least one year of service, whether such service is continuous
or broken, shall be considered a regular employee” (Art. 280, Labor Code).
The petitioners contest that private respondent is not a regular employee by reason that he
performs a specific job function and only while the same exists, falling as an exception1 to
Art. 280. The same argument is disproved by petitioners' act of not submitting a mandatory
“report of termination” for their alleged project employee, private respondent.
(2) YES. Due process requires the right to be heard and to defend himself with the option
of counsel, noted as procedural and substantive due process. The mandatory notice of
hearing and notice of dismissal was absent in the instant case, making private respondent
an illegally dismissed employee.
To correct is the plain error committed by the labor arbiter and NLRC by not awarding
backwages. The Court relaxes strict construction of procedural requirements (private
respondent’s failure to appeal for backwages) in pursuit of justice. Thus, the decision of the
labor arbiter and NLRC are modified to include backwages reckoning from the time Dagui
was re-employed until the day he was illegally dismissed, as well as other benefits entitled
to him by law.

Case Name Great Pacific Life Assurance Corp vs. Judico and NLRC
Case No. & Date G.R. No. 73887. December 21, 1989
Doctrine Employer-employee relationship / A regular employee is entitled
to the protection of the law and could not just be terminated
without valid and justifiable cause.

FACTS:
• 9 June 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. He had definite work assignments including but not limited to
collection of premiums from policyholders and selling insurance to prospective
clients.
• Judico was promoted to the position of Zone Supervisor and was given additional
(supervisor's) allowance fixed at P110.00 per week. However, he was reverted to his
former position as debit agent, and later was dismissed by way of termination of his
agency contract.
• Judico filed a complaint for illegal dismissal against GREPALIFE before the NLRC
RAB No. VII, Cebu City. He 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 the
complainant the sum of P 1,000.00 by reason of Christian Charity.
• On appeal, said decision was reversed by the NLRC ruling that the 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 P 1,000.00 to
complainant moot and academic.

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• Petitioner company (GREPALIFE) moved to reconsider, which was denied. Hence,

this petition for review.
ISSUE:
W/N employer-employee relationship existed between the petitioner (GREPALIFE) and
private respondent (Honorato Juidco).
RULING:
Yes. As held in Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may
have two classes of agents who sell its insurance policies: (1) salaried employees who keep
definite hours and work under the control and supervision of the company; and (2)
registered representatives who work on commission basis. The agents who belong to the
second category are not required to report for work at any time, they do not have to devote
their time exclusively to or work solely for the company since the time and the effort they
spend in their work depend entirely upon their own will and initiative; they are not
required to account for their time nor submit a report of their activities; they shoulder their
own selling expenses as well as transportation; and they are paid their commission based
on a certain percentage of their sales.
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. In both cases he was required to make a regular report to the company
regarding these duties, and for which an anemic performance would mean a dismissal.
Conversely faithful and productive service earned him a promotion to Zone Supervisor with
additional supervisor's allowance, a definite amount of P110.00 aside from the regular P
200.00 weekly "allowance". Furthermore, his contract of services with the petitioner is not
for a piece of work nor for a definite period.
Undoubtedly, private respondent, by nature of his position and work, had been a
regular employee of petitioner and is therefore entitled to the protection of the law
and could not just be terminated without valid and justifiable cause.
Appealed decision AFFIRMED.

Case Name Insular Life Assurance Co., v. National Labor Relations

Commission and Melecio Basiao
Case No. & Date G.R. No. 84484 November 15, 1989
Doctrine The power of control to create employer–employee relationship
does not only refer to control the result; control power refers to
both the means and result of the work.

FACTS:
• On July 2, 1968, Insular Life Assurance Co., Ltd. (the Company) and Melecio T. Basiao
entered into a contract authorizing Basiao to solicit insurance applications within
the Philippines under the Company's rules and regulations.
• Basiao was to be compensated through commissions as outlined in the contract,
which also incorporated the Company's Rate Book, Agent's Manual, and any future
circulars.
• The contract specified that Basiao would exercise his own judgment regarding the
time, place, and means of soliciting insurance, explicitly stating that no employer-
employee relationship was created.
• In April 1972, Basiao entered into another contract with the Company as an Agency
Manager and established M. Basiao and Associates.

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• The Company terminated this second contract in May 1979, and after Basiao's
unsuccessful attempt to seek reconsideration, he filed a civil action.
• Subsequently, the Company terminated his first contract and ceased commission
payments from April 1, 1980.
• Basiao then filed a complaint with the Ministry of Labor to recover unpaid
commissions and attorney's fees.
• The Company contested the Ministry's jurisdiction, asserting that Basiao was an
independent contractor, not an employee.
• The Labor Arbiter ruled in favor of Basiao, establishing an employer-employee
relationship and awarding unpaid commissions and attorney's fees.
• This decision was upheld by the National Labor Relations Commission (NLRC),
prompting the Company to file a petition for certiorari and prohibition.
ISSUE:
Whether employer-employee relationship existed between Insular Life assurance Co., and
Melecio Basiano?
RULING:
• No. 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 should, however, be obvious that not every form of control that the hiring party
reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement.
• The respondents limit themselves to pointing out that Basiao's contract with the
Company bound him to observe and conform to such rules and regulations as the
latter might from time to time prescribe. No showing has been made that any such
rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods — or
the methods themselves — of selling insurance. Absent such showing, the Court will
not speculate that any exceptions or qualifications were imposed on the express
provision of the contract leaving Basiao "... free to exercise his own judgment as to
the time, place and means of soliciting insurance."
• 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.

Case Name AFP MUTUAL BENEFIT ASSOCIATION, INC. vs. NLRC

Case No. & Date G.R. No. 102199 January 28, 1997
Doctrine National Labor Relations Commission have no jurisdiction to
entertain and rule on money claims where no employer-employee
relations is involved.

FACTS:

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• Respondent Eutiquio Bustamante had been an insurance underwriter of the

petitioner since 1975 with a corresponding Sales Agent Agreement between them.
• On July 5, 1989, the Petitioner dismissed Bustamante for misrepresentation and for
simultaneously selling insurance for another life insurance company that violates
the said agreement.
• At the time of the respondent’s dismissal, he was entitled to accrued commissions
equivalent to twenty-four (24) months per the Sales Agent Agreement and also was
stated in the account of Summary with the total amount of commission receivable of
P438,835.00 of which he only received P78,039.89.
• On November 23, 1989, the respondent filed a complaint with the Office of the
Insurance Commissioner but later advised that Department of Labor and
Employment had the jurisdiction over his complaint.
• On February 26,1990, Eutiquio Bustamante filed his complaint against the petitioner
with the Department of Labor and Employment claiming his commission.
ISSUE:
W/N There is no Employer-Employee relationship between private respondent and the
petitioner.
RULING:
No. Under the contract invoked, private respondent had never been petitioner's employee,
but only its commission agent. As an independent contractor, his claim for unpaid
commission should have been litigated in an ordinary civil action. The jurisdiction of labor
arbiters and respondent Commission is set forth in Article 217 of the Labor Code. Prior to
its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the
article included "all other cases arising from employer-employee relation unless expressly
excluded by this Code. Without this critical element of employment relationship, the labor
arbiter and respondent Commission can never acquire jurisdiction over a dispute. As in the
case at bar. It was serious error on the part of the labor arbiter to have assumed jurisdiction
and adjudicated the claim. Likewise, the respondent Commission's affirmance thereof. Such
lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even
on appeal. The doctrine of estoppel cannot be properly invoked by respondent Commission
to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with,
was bereft of jurisdiction over a cause of action.

Case Name Cosmopolitan Funeral Homes, Inc. vs. National Labor

Relations Commission (NLRC)
Case No. & Date G.R. No.: 86693 May 7, 1991
Doctrine

FACTS:
In 1962, Cosmopolitan Funeral Homes, Inc. engaged the services of Noli Maalat as a
"supervisor" to solicit mortuary arrangements, sales, and collections. Maalat was paid on a
commission basis, receiving 3.5% of the amounts collected and remitted. On January 15,
1987, Maalat was dismissed for various infractions, including the understatement of
contract prices, misappropriation of funds, charging customers additional amounts without
issuing receipts, non-reporting of charges, and engaging in unauthorized tomb-making
activities.
Maalat filed a complaint for illegal dismissal and non-payment of commissions. The Labor
Arbiter declared his dismissal illegal and ordered the payment of separation pay,
commissions, interest, and attorney’s fees amounting to P205,571.52. Upon appeal, the
NLRC reversed this decision, upholding Maalat's dismissal as justified. However, the NLRC

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awarded him separation pay equivalent to one-half month’s average income for every year
of service. Both parties did not appeal the NLRC’s decision regarding the separation pay
computation.
Cosmopolitan Funeral Homes, Inc. filed a petition for review with the Supreme Court,
challenging the NLRC's ruling.
ISSUE:
1. Whether an employer-employee relationship existed between Cosmopolitan Funeral
Homes, Inc. and Noli Maalat.
2. Whether there was a valid basis for the award of separation pay.
RULING:
The Supreme Court upheld the NLRC's finding that an employer-employee relationship
existed between Cosmopolitan Funeral Homes, Inc. and Noli Maalat. The Court reasoned
that the "right of control" test was satisfied, as the petitioner imposed rules on Maalat that
demonstrated control over both the manner and means by which he performed his work.
This included prohibitions on engaging in other funeral businesses, requiring contracts to
be signed in the office, and mandatory reporting to the Social Security System, further
solidifying his status as an employee.
However, the Supreme Court disagreed with the NLRC’s decision to award separation pay.
The Court held that, based on its ruling in Philippine Long Distance Telephone Company
(PLDT) v. NLRC, separation pay should not be granted to employees dismissed for serious
misconduct or acts reflecting on their moral character, such as dishonesty. Consequently,
the award of separation pay to Maalat, who was terminated for dishonesty, was not
justified.
The Court modified the lower body's decision, setting aside the award of separation pay but
affirming Maalat’s entitlement to unpaid commissions amounting to P39,344.80, with 2%
attorney’s fees calculated at P786.89.

Case Name Makati Haberdashery, Inc. v. National Labor Relations

Commission
Case No. & Date G.R. Nos. 83380-81 November 15, 1989
Doctrine

FACTS:
The case involves two separate complaints filed by the members of Sandigan ng
Manggagawang Pilipino (SANDIGAN), a labor organization, against Makati Haberdashery,
Inc. and its officers. The private respondents, who were employed as tailors, seamstresses,
sewers, and "plantsadoras" by Makati Haberdashery, alleged that they were subjected to
illegal dismissal, underpayment of wages, non-payment of allowances, and other labor law
violations.
The workers, who were mostly paid on a piece-rate basis, were required to work from 9:30
a.m. to 6:00 or 7:00 p.m. from Monday to Saturday, and during peak periods, even on
Sundays and holidays. They also received a daily allowance of three pesos if they reported
to work before 9:30 a.m.
During the pendency of the first complaint (NLRC NCR Case No. 7-2603-84), an incident
occurred involving two workers, Pelobello and Zapata, who were accused by their employer
of accepting a job order that directly competed with the company’s business. Both workers
were dismissed after they failed to explain the incident satisfactorily and subsequently filed
a second complaint (NLRC NCR Case No. 2-428-85) alleging illegal dismissal.

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The Labor Arbiter ruled in favor of the workers in both cases, ordering their reinstatement
and awarding them various monetary claims. On appeal, the National Labor Relations
Commission (NLRC) affirmed the Labor Arbiter’s decision but reduced the back wages of
Pelobello and Zapata to one year.
The employer then elevated the case to the Supreme Court, raising issues regarding the
existence of an employer-employee relationship, the entitlement of the workers to
monetary claims, and the legality of the dismissal of Pelobello and Zapata.
ISSUE:
1. Whether there was an employer-employee relationship between Makati
Haberdashery and the private respondents.
2. Whether the private respondents were entitled to their monetary claims, despite not
being entitled to the minimum wage.
3. Whether the dismissal of Pelobello and Zapata was illegal.
RULING:
The Supreme Court held that there was an employer-employee relationship between
Makati Haberdashery and the private respondents. The Court applied the "control test,"
which determines whether the employer controls or has the right to control the employee
not only as to the result of the work but also as to the means and method by which the work
is accomplished. The Court found that the petitioner had reserved the right to control its
employees, as evidenced by a memorandum issued by the management that outlined
detailed procedures and supervisory controls over the workers.
Regarding the monetary claims, the Court ruled that the private respondents were entitled
to the minimum wage, cost of living allowance (COLA), and 13th-month pay, as they were
regular employees paid on a piece-rate basis. However, the Court found that they were not
entitled to service incentive leave pay and holiday pay, as these benefits do not apply to
piece-rate workers who are paid a fixed amount for performing work, regardless of the time
consumed.
On the issue of illegal dismissal, the Supreme Court found that the dismissal of Pelobello
and Zapata was justified. The Court noted that the workers had violated company rules by
accepting a job order that directly competed with the employer's business and had failed to
provide a satisfactory explanation when confronted. Their failure to comply with the
employer's memorandum and their subsequent absence from work constituted valid
grounds for termination. As such, the Court ruled that the dismissal was not illegal.
The Supreme Court modified the decisions of the NLRC and the Labor Arbiter by dismissing
the illegal dismissal complaint filed by Pelobello and Zapata and deleting the award of
service incentive leave pay to the private respondents.

Case Name CEBU METAL CORPORATION vs GREGORIO ROBERT DALILING,

ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO
Case No. & Date September 5, 2006
Doctrine

FACTS:
• Cebu Metal Corp is engaged in buying and selling of scrap iron in Bacolod Branch
composed of 3 regular employees as Officer-in-Charged, a scaler and a yardman
directly paid by its main office in Cebu while others are undertaking pakiao work in
the unloading of scrap iron for stockpiling. Among those enumerated are the
unemployed persons or trisicad drivers standing by in the vicinity are herein
complainants in this case namely; Saliling, Bolido, Alquiza and Amparado. These

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names mentioned are being paid at the rate of 15 pesos per ton for which each
person can unload at least 2 or 3 tons per hour and earn at least 240 pesos to 360
pesos in 8 hours the payment necessarily includes cost of living allowance and 13th
month pay.
• To elaborate the nature of the petitioner’s business in Bacolod buying station is
mainly stockyard where scrap metal delivered by its suppliers are stockpiled by
means that the supply of scrap metal is not steady as it depends upon many factors,
such as availability of supplies, price, competition and demand. The arrivals of these
trucks and the deliveries of scrap metal are not regular.
• the unloaders hired by the respondent to unload the scrap metal from these trucks
are basically seasonal workers. They are hired only whenever there are trucks of
suppliers of scrap metal that deliver scrap metal to the yard of the respondent and
these trucks happen not to have any accompanying truck boys.
• The complainants never received any other benefits from the respondents even they
worked on Saturdays, Sundays, and Holidays. Also, they never received 13th month
pay, holiday pay, incentive leave pay, bonuses and other labor benefits. They were
requires to work from 8am to 12 noon and from 1pm to 5pm for 8hours a day, 7
days a week and 30 days a month. They also added in their complaints the illegal
dismissal when they were dismissed by the company after they filed the case.
• On the complaints manifested the Labor Arbiter rendered decision in favor of the
complainants and ordered the Cebu Metal Corporation to reinstate the complainants
and with backwages limited to 1 year and 13th month pay. And if the former is no
longer feasible, the complainants are to be given separation pay equivalent to 15
days for every year of service.
• The case has been appealed by the said Corporation to the NLRC, and the latter
reversed and set aside the ruling of the Labor Arbiter. the Commission held that
respondent complainants were not regular employees of petitioner company, thus,
they could not have been illegally dismissed. The order of reversal was based on the
Commission's finding that the petty cash vouchers submitted by petitioner company
confirmed the fact that unloaders were paid on "pakiao" or task basis at P15.00 per
metric ton. Commission further rationalized that with the irregular nature of the
work involved, the stoppage and resumption of which depended solely on the
availability or supply of scrap metal, it necessarily follows that after the job of
unloading was completed and "unloaders" were paid the contract price, the latter's
working relationship with petitioner company legally ended. They were then free to
offer their services to others. Commission declared that respondent complainants
invalidly raised the issue of illegal dismissal in the position paper they filed before
the Labor Arbiter as the issue was only brought up via manifestation after the filing
of the parties’ respective position papers.
• CA, annulled and set aside the assailed decision of the NLRC. Said Decision was
grounded exclusively on the argument that the Commission committed grave abuse
of discretion in reversing and setting aside the Decision of the Labor Arbiter since
petitioner company did not make an issue out of the Labor Arbiter's action in ruling
on a cause of action that is illegal dismissal, not specifically stated in the complaint.
Stated differently, the NLRC gravely abused its discretion in ruling on an issue that
was allegedly not raised on appeal before it.
ISSUE:
W/N the CA committed reversible error in ruling that the NLRC had no authority to
adjudicate on an issue not properly raised in petitioner company’s Memorandum on
Appeal.
RULING:

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The Court finds that it was plain error for the Court of Appeals to annul and set aside the
decision of the NLRC on the lone reason that the latter "dismissed Petitioner's appeal on the
basis of an issue not raised by Private Respondent in its appeal. Based on the facts of the
case and the evidence presented by the parties to the case at bar, however, the NLRC arrived
at a divergent conclusion, which the court fully agree in. Labor Arbiter had given credence
and probative value to the Petty Cash Vouchers submitted by the respondents. The findings
validate respondent's position as to the nature of complainants' work. Their services are
needed only when scrap metals are delivered which occurs only one or twice a week or
sometimes no delivery at all in a given week. The irregular nature of work, stoppage of
work and then work again depending on the supply of scrap metal has not been denied by
complainants. It would be unjust to require respondent to maintain complainants in the
payroll even if there is no more work to be done. To do so would make complainants
privileged retainers who collect payment from their employer for work not done. This is
extremely unfair and amount to cuddling of labor at the expense of management. The policy
of social justice so as to strike a balance between an avowed predilection for labor, and the
the maintenance of the legal rights of capital. The complainants cannot claim regularity in
the hiring every time a truck comes loaded with scrap metal. This is confirmed in the Petty
cash Vouchers which are in the names of different leaders who apportion the amount
earned among his members.
The court held that there’s no grave abuse of discretion can be attributed to the NLRC, the
issue of illegal dismissal was not raised as a cause of action it was only raised later on.
The Court reinstated the decision of the NLRC.

Case Name Sevilla v. Court of Appeals

Case No. & Date G.R. Nos. L-41182-3, 15 April 1988
Doctrine

FACTS:
In 1960, the Tourist World Services Inc. (TWS) and Sevilla entered into a lease contract
for the use as branch office. In the said contract, both parties were held solidarily liable
for the prompt payment of the monthly rental agreed on. When the branch office was
opened, it was run by appellant Sevilla wherein any airline fare brought in on her efforts,
4% of that would go to her and 3% was to be withheld by TWS.
The TWS appears to have been informed that Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office was anyhow losing, the TWS
considered closing down its office. The premises were locked and neither the appellant
Sevilla nor any of her employees could enter, a complaint was filed by the herein
appellants against the appellees with a prayer for the issuance of mandatory preliminary
injunction.

In the appeal, Lina Sevilla claims she was not an employee of the TWS to the end that
her relationship with TWS was one of a joint business venture. She declares that she did
not receive any salary from TWS and only earned commissions. Sevilla likewise claimed
that she shared in the expenses maintaining the office and TWS shouldered the rental in
consideration for the 3% split in the commissions procured.TWS contend that the
appellant was an employee of the appellee Tourist World Service, Inc. and as such was
designated manager and she had no say on the lease executed.

ISSUE:
Whether or not appellant Sevilla was in a joint venture with TWS or at least its agent
coupled with an interest which could not be terminated or revoked unilaterally by TWS.

RULING:
It is the Court’s considered opinion, that when the petitioner, Lina Sevilla, agreed to
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(wo)man the private respondent, Tourist World Service, Inc.’s Ermita office, she must
have done so pursuant to a contract of agency.
It is the essence of this contract that the agent renders services “in representation or on
behalf of another.” In the case at bar, Sevilla solicited airline fares, but she did so for and
on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4%
of the proceeds in the concept of commissions. And as we said, Sevilla herself, based on
her letter of November 28, 1961, presumed her principal’s authority as owner of the
business undertaking. The Supreme Court was convinced, considering the circumstances
and from the respondent Court’s recital of facts, that the parties had contemplated a
principal-agent relationship, rather than a joint management or a partnership.
The agency that Supreme Court declared in this case, to be compatible with the intent of
the parties, cannot be revoked at will. The reason is that it is one coupled with an interest,
the agency having been created for the mutual interest of the agent and the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
And apparently, Sevilla herself did not recognize the existence of such a relation. In her
letter of November 28, 1961, she expressly “concedes your [Tourist World Service, Inc.’s]
right to stop the operation of your branch office,” in effect, accepting Tourist World Service,
Inc.’s control over the manner in which the business was run. A joint venture, including a
partnership, presupposes generally a parity of standing between the joint co-venturers or
partners, in which each party has an equal proprietary interest in the capital or property
contributed and where each party exercises equal rights in the conduct of the business.
Furthermore, the parties did not hold themselves out as partners, and the building itself
was embellished with the electric sign “Tourist World Service, Inc.,” in lieu of a distinct
partnership name.
Hence, the Supreme Court ruled that the decision of the Court of Appeals was
REVERSED and SET ASIDE. The SC ordered Tourist World Service, Inc., and Eliseo
Canilao, to jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of
P25,000.00 as and for moral damages, the sum of P10,000.00, as and for exemplary
damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.
Case Name FRANCISCO v. NLRC
Case No. & Date G.R. NO. 170087, August 31, 2006
Doctrine Two-tiered test: the putative employer’s power to control the
employee with respect to the means and methods by which the work
is to be accomplished; and (2) the underlying economic realities of
the activity or relationship.

FACTS:
• 1995, Petitioner was hired by Kasei Corporation during its incorporation stage. She
was designated as Accountant and Corporate Secretary and was assigned to handle
all the accounting needs of the company. She was also designated as Liaison Officer
to the City of Makati to secure business permits, construction permits and other
licenses for the initial operation of the company.
• Although she was designated as Corporate Secretary, she was not entrusted with the
corporate documents; neither did she attend any board meeting nor required to do
so. She never prepared any legal document and never represented the company as
its Corporate Secretary.
• 1996, petitioner was designated 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
BIR, 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.

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• January 2001, petitioner was replaced by a certain Liza R. Fuentes as Manager. Kasei
Corporation reduced her salary, she was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not
receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well.
Eventually she was informed that she is no longer connected with the company.
• Since she was no longer paid her salary, petitioner did not report for work and filed
an action for constructive dismissal before the labor arbiter. Private respondents
averred that petitioner is not an employee of Kasei Corporation. They alleged that
petitioner was hired in 1995 as one of its technical consultants on accounting
matters and act concurrently as Corporate Secretary. As technical consultant,
petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came
to the office any time she wanted and that her services were only temporary in
nature and dependent on the needs of the corporation.
• The Labor Arbiter found that petitioner was illegally dismissed, NLRC affirmed with
modification the Decision of the Labor Arbiter. On appeal, CA reversed the NLRC
decision. CA denied petitioner’s MR, hence, the present recourse.
ISSUE:
1. WON there was an employer-employee relationship between petitioner and private
respondent; and if in the affirmative,
2. Whether petitioner was illegally dismissed.
RULING:
[1]Yes. It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power
to control; and (2) the economic realities of the activity or relationship.
The control test means that there is an employer-employee relationship when the person
for whom the services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.
By applying the control test, it can be said that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporation’s Technical Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is, rendering
accounting and tax services to the company and performing functions necessary and
desirable for the proper operation of the corporation such as securing business permits and
other licenses over an indefinite period of engagement. Respondent corporation had the
power to control petitioner with the means and methods by which the work is to be
accomplished.
Under the economic reality test, the petitioner can also be said to be an employee of
respondent corporation because she had served the company for 6 yrs. before her
dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month
pay, bonuses and allowances, as well as deductions and Social Security contributions from.
When petitioner was designated General Manager, respondent corporation made a report
to the SSS. Petitioner’s membership in the SSS evinces the existence of an employer-
employee relationship between petitioner and respondent corporation. The coverage of
Social Security Law is predicated on the existence of an employer-employee relationship.
[2]Yes. The corporation constructively dismissed petitioner when it reduced her. This
amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages

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LABOR LAW and SOCIAL LEGISLATION | 2D

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. Petition is GRANTED.

Case Name Jao v BCC Products

Case No. & Date G.R. No. 163700, April 18, 2012
Doctrine

FACTS:
• Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its
President, respondent Terrance Ty (Ty), employed him as comptroller, but his
attempts to go to work were frustrated as he was continuously barred from entering
the BCC premises
• Respondents countered that petitioner was not their employee but the employee of
Sobien Food Corporation (SFC), the major creditor and supplier of BCC; and that SFC
had posted him as its comptroller in BCC to oversee BCC’s finances and business
operations and to look after SFC’s interests or investments in BCC.
• Labor Arbiter Felipe Pati ruled in favor of the petitioner
• NLRC vacated the ruling and remanded the case for further proceedings.
• Labor Arbiter Jovencio Ll. Mayor rendered a new decision, dismissing petitioner’s
complaint for want of an employer-employee relationship between the parties.
Petitioner appealed the September 20, 2001 decision of the Labor Arbiter Mayor.
• NLRC rendered a decision reversing the Labor Arbiter Mayor’s decision, and
declaring that petitioner had been illegally dismissed.
• The Court of Appeals found no existing employer-employee relationship between
BCC and the private respondent. "Etched in an unending stream of cases are the four
(4) standards in determining the existence of an employer-employee relationship,
namely, (a) the manner of selection and engagement of the putative employee; (b)
the mode of payment of wages; (c) the presence or absence of power of dismissal;
and, (d) the presence or absence of control of the putative employee’s conduct." Of
these powers the power of control over the employee’s conduct is generally
regarded as determinative of the existence of the relationship. Apparently, in the
case before us, all these four elements are absent.
ISSUE:
Whether there exists an employer-employee relationship between the petitioner and BCC
RULING:
No. The Court reached a similar conclusion as that of the CA and Labor Arbiter. The
petitioner's affidavit to prove his employment in BCC, was referring to his employment by
SFC even while he was reporting to BCC as a comptroller in behalf of SFC.
Moreover, in determining the presence or absence of an employer-employee relationship,
the Court has consistently looked for the following incidents, to wit: (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.

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LABOR LAW and SOCIAL LEGISLATION | 2D

It can be deduced from the affidavit of the petitioner that respondents challenged his
authority to deliver some 158 checks to SFC. Considering that he contested respondents’
challenge by pointing to the existing arrangements between BCC and SFC, it should be clear
that respondents did not exercise the power of control over him, because he thereby acted
for the benefit and in the interest of SFC more than of BCC.
In addition, petitioner presented no document setting forth the terms of his employment by
BCC.1awphi1 The failure to present such agreement on terms of employment may be
understandable and expected if he was a common or ordinary laborer who would not
jeopardize his employment by demanding such document from the employer, but may not
square well with his actual status as a highly educated professional.

Case Name Tongko vs. Manulife

Case No. & Date June 29, 2010
Doctrine The existence of an employer-employee relationship is crucial in
determining whether the National Labor Relations Commission
(NLRC) has jurisdiction over a case. If such a relationship exists, the
NLRC has jurisdiction; otherwise, it would fall under the Regional
Trial Court's jurisdiction.

FACTS:
• Manufacturers Life Insurance, Co. is a domestic corporation engaged in life
insurance business. De Dios was its President and Chief Executive Officer. Petitioner
Tongko started his relationship with Manulife in 1977 by virtue of a Career Agent's
Agreement.
• Pertinent provisions of the agreement state that:
• It is understood and agreed that the Agent is an independent contractor and
nothing contained herein shall be construed or interpreted as creating an
employer-employee relationship between the Company and the Agent.
• The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange
for provisional receipts issued by the Agent, money due or to become due to
the Company in respect of applications or policies obtained by or through the
Agent or from policyholders allotted by the Company to the Agent for
servicing, subject to subsequent confirmation of receipt of payment by the
Company as evidenced by an Official Receipt issued by the Company directly
to the policyholder.
• The Company may terminate this Agreement for any breach or violation of
any of the provisions hereof by the Agent by giving written notice to the
Agent within fifteen (15) days from the time of the discovery of the breach.
No waiver, extinguishment, abandonment, withdrawal or cancellation of the
right to terminate this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this Agreement.
• Either of the parties hereto may likewise terminate his Agreement at any
time without cause, by giving to the other party fifteen (15) days notice in
writing.
• Sometime in 2001, De Dios addressed a letter to Tongko, then one of the Metro
North Managers, regarding meetings wherein De Dios found Tongko's views and
comments to be unaligned with the directions the company was taking. De Dios also
expressed his concern regarding the Metro North Managers' interpretation of the
company's goals. He maintains that Tongko's allegations are unfounded. Some
allegations state that some Managers are unhappy with their earnings, that they're

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LABOR LAW and SOCIAL LEGISLATION | 2D

earning less than what they deserve and that these are the reasons why Tonko's
division is unable to meet agency development objectives. However, not a single
Manager came forth to confirm these allegations. Finally, De Dios related his worries
about Tongko's inability to push for company development and growth.
• De Dios subsequently sent Tongko a letter of termination in accordance with
Tongko's Agents Contract. Tongko filed a complaint with the NLRC against Manulife
for illegal dismissal, alleging that he had an employer-employee relationship with De
Dios instead of a revocable agency by pointing out that the latter exercised control
over him through directives regarding how to manage his area of responsibility and
setting objectives for him relating to the business. Tongko also claimed that his
dismissal was without basis and he was not afforded due process. The NLRC ruled
that there was an employer-employee relationship as evidenced by De Dios's letter
which contained the manner and means by which Tongko should do his work. The
NLRC ruled in favor of Tongko, affirming the existence of the employer-employee
relationship.
• The Court of Appeals, however, set aside the NLRC's ruling. It applied the four-fold
test for determining control and found the elements in this case to be lacking, basing
its decision on the same facts used by the NLRC. It found that Manulife did not exert
control over Tongko, there was no employer-employee relationship and thus the
NLRC did not have jurisdiction over the case.
• The Supreme Court reversed the ruling of the Court of Appeals and ruled in favor of
Tongko. However, the Supreme Court issued another Resolution dated June 29,
2010, reversing its decision. Tongko filed a motion for reconsideration, which is now
the subject of the instant case.
ISSUE:
Whether the Supreme Court erred in issuing the June 29, 2010 resolution, reversing its
earlier decision that an employer-employee relationship existed
RULING:
• No, the Supreme Court did not err in its earlier resolution.
• The Supreme Court finds no reason to reverse the June 29, 2010 decision. Control
over the performance of the task of one providing service both with respect to the
means and manner, and the results of the service is the primary element in
determining whether an employment relationship exists. The Supreme Court ruled
petitioners Motion against his favor since he failed to show that the control Manulife
exercised over him was the control required to exist in an employer-employee
relationship; Manulife’s control fell short of this norm and carried only the
characteristic of the relationship between an insurance company and its agents, as
defined by the Insurance Code and by the law of agency under the Civil Code.
• In the Supreme Courts June 29, 2010 Resolution, they noted that there are built-in
elements of control specific to an insurance agency, which do not amount to the
elements of control that characterize an employment relationship governed by the
Labor Code. The Insurance Code provides definite parameters in the way an agent
negotiates for the sale of the company’s insurance products, his collection activities
and his delivery of the insurance contract or policy. They do not reach the level of
control into the means and manner of doing an assigned task that invariably
characterizes an employment relationship as defined by labor law.
• To reiterate, guidelines indicative of labor law "control" do not merely relate to the
mutually desirable result intended by the contractual relationship; they must have
the nature of dictating the means and methods to be employed in attaining the
result. Tested by this norm, Manulife’s instructions regarding the objectives and

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sales targets, in connection with the training and engagement of other agents, are
among the directives that the principal may impose on the agent to achieve the
assigned tasks. They are targeted results that Manulife wishes to attain through its
agents. Manulife’s codes of conduct, likewise, do not necessarily intrude into the
insurance agents means and manner of conducting their sales. Codes of conduct are
norms or standards of behavior rather than employer directives into how specific
tasks are to be done.

Case Name Atok v. Gison

Case No. & Date G.R. No. 169510
Doctrine

FACTS:
In February 1992, Jesus P. Gison was hired as a part-time consultant on a retainer basis by
Atok Big Wedge Company, Inc., with a monthly retainer fee of ₱3,000. His duties included
assisting the company with legal matters and liaising with various government agencies.
Gison’s role continued for 11 years. Despite this, the company did not consider him a
regular employee, and he was not registered with the Social Security System (SSS).
In 2003, Gison requested SSS registration, which was ignored by the company. Shortly after,
his services were terminated. Gison then filed a complaint for illegal dismissal, claiming
that he had become a regular employee due to the nature and duration of his work.
Both the Labor Arbiter and the NLRC found no employer-employee relationship between
Gison and Atok Big Wedge, dismissing the complaint.
The Court of Appeals reversed the NLRC’s decision, ruling that Gison had become a regular
employee based on Article 280 of the Labor Code, which states that an employee who has
rendered at least one year of service is deemed regular.
ISSUE:
1. Whether there was an employer-employee relationship between Atok Big Wedge
and Gison.
2. Whether the termination of Gison’s services constituted illegal dismissal.
RULING:
The Supreme Court reversed the decision of the Court of Appeals.
1. The Court held that the four-fold test (selection and engagement, payment of wages,
power of dismissal, and control test) determines the existence of an employer-
employee relationship. The control test, which is the most critical, was not satisfied
because Atok Big Wedge did not control the manner in which Gison performed his
tasks.
2. The Court clarified that Article 280 of the Labor Code, which distinguishes regular
from casual employees, does not apply in determining whether an employer-
employee relationship exists. This provision is relevant only when such a
relationship has already been established, which was not the case here. Gison was
not a regular employee of Atok Big Wedge. Consequently, his termination was not
illegal, and he was not entitled to reinstatement or backwages.

Case Name Lirio v. Genovia

Case No. & Date G.R. No. 169757. November 23, 2011
Doctrine If doubts exist between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the
latter.

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FACTS:
• Respondent Genovia alleged, among others, that he was hired as studio manager by
petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He was
employed to manage and operate Celkor and to promote and sell the recording
studio's services to music enthusiasts and other prospective clients. He received a
monthly salary of ₱7,000.00.
• Respondent stated that a few days after he started working as a studio manager,
petitioner told him about his project to produce an album for his 15-year-old
daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner asked
respondent to compose and arrange songs for Celine and promised that he (Lirio)
would draft a contract to assure respondent of his compensation for such services.
• Respondent alleged that before the end of September 2001, he reminded petitioner
about his compensation as composer and arranger of the album.
• Petitioner verbally assured him that he would be duly compensated. Respondent
finally finished the compositions and musical arrangements of the songs to be
included in the album.
• On February 2002, respondent again reminded petitioner about the contract on his
compensation as composer and arranger of the album. Petitioner told respondent
that since he was practically a nobody and had proven nothing yet in the music
industry, respondent did not deserve a high compensation, and he should be
thankful that he was given a job to feed his family.
• Petitioner informed respondent that he was entitled only to 20% of the net profit,
and not of the gross sales of the album, and that the salaries he received and would
continue to receive as studio manager of Celkor would be deducted from the said
20% net profit share. Respondent objected and insisted that he be properly
compensated.
• On March 14, 2002, petitioner verbally terminated respondent’s services, and he
was instructed not to report for work.
• In defense, petitioner stated that respondent was not hired as studio manager,
composer, technician or as an employee in any other capacity of Celkor. Respondent
could not have been hired as a studio manager, since the recording studio has no
personnel except petitioner.
• Petitioner further claimed that his daughter Celine Mei Lirio, failed to come up with
an album as the latter aborted its project to produce one. Thus, he decided to
produce an album for his daughter and established a recording studio, which he
named Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger.
• July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed
to be an amateur composer, an arranger with limited experience and musician
without any formal musical training.
• Respondent verbally agreed with petitioner to co-produce the album based on the
following terms and conditions: (1) petitioner shall provide all the financing,
equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs; (3)
respondent shall act as composer and arranger of all the lyrics and the music of the
five songs he already composed and the revival songs; (4) petitioner shall have
exclusive right to market the album; (5) petitioner was entitled to 60% of the net
profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net
profit; and (6) respondent shall be entitled to draw advances of ₱7,000.00 a month,

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which shall be deductible from his share of the net profits and only until such time
that the album has been produced.
ISSUE:
Whether or not the Employer-Employee relationship exists between the petitioner and the
respondent?
RULING:
Yes. The Court agrees with the Court of Appeals that the evidence presented by the parties
showed that an employer-employee relationship existed between petitioner and
respondent.
The elements to determine the existence of an employment 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’s conduct. The most
important element is the employer’s control of the employee’s conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it.
It is settled that 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.
In this case, the documentary evidence presented by respondent to prove that he was an
employee of petitioner are as follows:
A document denominated as “payroll” (dated July 31, 2001 to March 15, 2002) certified
correct by petitioner, which showed that respondent received a monthly salary of
P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of the
month) with the corresponding deductions due to absences incurred by respondent; and
(2) copies of petty cash vouchers, showing the amounts he received and signed for in the
payrolls. (a) The said documents showed that petitioner hired respondent as an employee
(b) and he was paid monthly wages of P7,000.00. (c) Petitioner wielded the power to
dismiss as respondent stated that he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner. (d) The power of control
refers merely to the existence of the power. It is not essential for the employer to actually
supervise the performance of duties of the employee, as it is sufficient that the former has a
right to wield the power. Nevertheless, petitioner stated in his Position Paper that it was
agreed that he would help and teach respondent how to use the studio equipment. In such
case, petitioner certainly had the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent was one
of partnership. Such claim was not supported by any written agreement. The Court notes
that in the payroll dated July 31, 2001 to March 15, 2002, there were deductions from the
wages of respondent for his absence from work, which negates petitioner’s claim that the
wages paid were advances for respondent’s work in the partnership.

Case Name Sorreda vs. Cambridge Electronics G.R. No. 172927

Case No. & Date G.R. No. 172927 February 11, 2010
Doctrine A labor arbiter may only take cognizance of a case and award
damages where the claim for such damages arises out of an
employer-employee relationship. Otherwise, it will fall under the
jurisdiction of regular courts.

FACTS:
On May 8, 1999, petitioner was hired by respondent as a technician for a period of 5
months at minimum wage.6 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.7

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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
Dasmarinas, Cavite a complaint8 for illegal dismissal (later changed to breach of contract).
ISSUE:
1. whether there was a valid agreement or contract of perpetual employment perfected
between the parties concerned;
2. whether respondent corporation was bound thereby and
3. whether [petitioner] has a cause of action for damages against respondent based on the
contract.
RULING:
Jurisdiction over the subject matter of a complaint is determined by the allegations of the
complaint. In Pioneer Concrete Philippines, Inc. v. Todaro, the Court reiterated that where
no employer-employee relationship exists between the parties, and the Labor Code or any
labor statute or collective bargaining agreement is not needed to resolve any issue raised by
them, it is the Regional Trial Court which has jurisdiction. Thus it has been consistently
held that the determination of the existence of a contract as well as the payment of
damages is inherently civil in nature. A labor arbiter may only take cognizance of a case and
award damages where the claim for such damages arises out of an employer-employee
relationship.
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.
The court noted that petitioner filed the case only when respondent refused to rehire him. 23
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.
Moreover, aside from the self-serving claim of petitioner, there was no concrete proof to
establish the existence of such agreement. Petitioner cannot validly force respondent to
enter into a permanent employment contract with him. Such stance is contrary to the
consensuality principle of contracts as well as to the management prerogative of
respondent company to choose its employees.
WHEREFORE, the petition is hereby DENIED.

Case Name Jose Mel Bernarte vs. Philippine Basketball Association Jose
Emmanuel Eala, and Perry Martinez
Case No. & Date G.R. No. 192084, September 14, 2011

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Doctrine The Supreme Court applied the four-fold test to determine the
existence of an employer-employee relationship. The test includes
the selection and engagement of the employee, the payment of
wages, the power of dismissal, and the employer’s power to control
the employee’s work method.

FACTS:
• This is a petition for review filed by the basketball referee Jose Mel Bernarte.
• Bernarte together with another refreee, Renato Guevara, were invited to join as
referee in the PBA, during the leadership of Comissioner Emilio Bernardo and was
made to sign a contract of year to year basis.
• however,during the leadership of Comissioner Eala, changes were made, for
instance, Bernarte was not made to sign a contract during the first conference of All-
Filipino Cup dated, February 23, 2003 to June 2003. it was only during the second
conference that he was made to sign a one nad a half month contract from July 1, to
August 5, 2003.
• On January 2004, Bernarte received a letter from the Office of Comissioner, advising
him that due to his unsatisfactory performance, his contract would not be renewed.
Being awarded as the referee of the year in 2003, h was shocked and felt that his
dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.
• Guevarra, on the other hand, was invited to join PBA pool referees in 2001 where he
signed as a contract as trainee. Beginning 2002, he signed a yearly contract as
Regular Class C referee. May 2003, respondent Martinez issued a memorandum to
Guevarra expressing his dissatisfaction over his questioning on the assignment of
referees officiating out-of-town games, and since 2004 he was no longer made to
sign a contract. Hence, they filed a case for illegal dismissal.
• Respondents argued that the complainants entered into two separatecontracts of
retainer with the PBA in the year 2003. The first contract was for the period of
January 2003 o July 2003; the second was for September 1 2003 to December 2003,
and after it lapsed, the PBA decided not to renew their contracts.
• The Labor Arbiter in its decision declared petitioner an employees of the PBA and
that their dismissal was illegal and ordered their reinstatement and payment of back
wages, and damages. (Bernarte- P754,875, Guevarra- P397375)
• The respondent filed an appeal before NLRC but it was dismissed and affirmed the
labor arbiter’s decision. Unsatisfied, they filed a tuition for certiorari before Court
OF Appeals, which annulled and set aside the NLRCs decision.and the complaint
before the Labor Arbiter is dismissed.
• The CA held that the petitioner is an independent contractor since the respondents
did not exercise any form of control over means and method by which petitioner
performed his work as a basketball referee. Hence, this petition for review before
the SC.
ISSUE:
WON the referee is an employee of the PBA
RULING:
NO. The Supreme Court held that the referee is an independent contractor and not
an employee of the PBA. The SC applied the four-fold test to determine the existence of an
employeremployee relationship. The test includes the selection and engagement of the
employee, the payment of wages, the power of dismissal, and the employer's power to

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control the employee's work methods. The court held that while the PBA engaged
Bernarte’s services and paid him a retainer fee, the element of control was absent. For
instance, the blowing of whistle and making the calls is merely a skills of a referee; an act of
their own independent judgment, and not a means of control over the performance of their
work. And the fact that they are required to attend all basketball games organized or
authorized by the PBA, officiate games, alternate or substitute referees, the observance and
compliance of the requirements governing the conduct of a referees in no out of court, keep
themselves in good physical, entail, and emotional condition, and the imposition of
sanctions in case there is violation, among others, are all hardly demonstrating control over
them but serves as the rules of conduct in order to maintain the integrity of the
professional basketball league.
Moreover, unlike other regular employees, who ordinarily report for eight hours per day for
five days a week, petitioner, being an independent contractor, is required to report for work
only when the PBA games are scheduled or three times a week at two hours per game.
In addition, here are no deductions for contributions to the SSS, Philhealth, or Pag-Ibig,
whic are the usual deductions from the employees salaries.
Lastly, to determine the employee-employer relationship, the employer has the right to
control and direct the work of an individual, not only as the result to be archived but also
the details by which the result is to be achieved. In the case at bar, the control was absent.
Therefore, although the PBA repeatedly hired the petitioner, simply signifies the renewal of
the contract between the parties due to the satisfactory service, and if the PBA decides o
discontinue the the service, either by unsatisfactory performance or violation of the terms
and conditions of the contract, does not constitute an illegal dismissal.

Case Name Javier vs. Fly Ace Corp.

Case No. & Date G.R. No. 192558
Doctrine Feb 15, 2012

FACTS:
The case involves Bitoy Javier (Danilo P. Javier), the petitioner, against Fly Ace Corporation
and Flordelyn Castillo, the respondents. On May 23, 2008, Javier filed a complaint before
the National Labor Relations Commission (NLRC) for underpayment of salaries and other
labor standard benefits, alleging that he had been an employee of Fly Ace since September
2007. He claimed to have performed various tasks at Fly Ace's warehouse, including
cleaning and arranging canned items and occasionally accompanying delivery vehicles as a
"pahinante." Javier reported for work from Monday to Saturday, from 7:00 AM to 5:00 PM,
but was not issued an identification card or payslips. On May 6, 2008, he was barred from
entering the company premises by the security guard on the instruction of his superior,
Ruben Ong, allegedly due to a personal issue involving Ong courting Javier's daughter. Javier
claimed he was terminated without notice or the opportunity to refute the cause of his
dismissal. Fly Ace countered that Javier was contracted on a "pakyaw" (piece-rate) basis as
an extra helper and was not a regular employee. The Labor Arbiter (LA) dismissed Javier's
complaint for lack of merit, but the NLRC reversed this decision, finding that Javier was a
regular employee and had been illegally dismissed. The Court of Appeals (CA) annulled the
NLRC's findings, reinstating the LA's dismissal of Javier's complaint. Javier then appealed to
the Supreme Court.
ISSUE:
1. Whether the Court of Appeals erred in holding that the petitioner was not a regular
employee of Fly Ace.
2. Whether the Court of Appeals erred in holding that the petitioner is not entitled to
his monetary claims.

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LABOR LAW and SOCIAL LEGISLATION | 2D

RULING:
The Supreme Court denied the petition and affirmed the March 18, 2010 Decision and June
7, 2010 Resolution of the Court of Appeals, which reinstated the Labor Arbiter's dismissal
of Javier's complaint.
The Supreme Court agreed with the CA and the LA that Javier failed to establish an
employer-employee relationship with Fly Ace by substantial evidence. The Court
emphasized that the burden of proof lies on the petitioner to substantiate his claim of
employment. Javier's evidence, consisting mainly of self-serving statements and an affidavit
from a witness without personal knowledge of his employment status, was insufficient. The
Court noted that Fly Ace provided documentary proof, such as acknowledgment receipts
indicating payment on a "pakyaw" basis, which Javier failed to convincingly refute. The
Court reiterated that the most crucial element in determining an employer-employee
relationship is the control test, which Javier failed to satisfy. The Court also highlighted that
while the Constitution and labor laws favor the protection of workers, justice must be
dispensed based on established facts and applicable law. Consequently, the Court found no
reason to depart from the CA's findings and upheld the dismissal of Javier's complaint.

Case Name Royale Homes Marketing Corporation v. FIDEL P. ALCANTARA

[deceased], substituted by his heirs
Case No. & Date G.R. No. 195190, July 28, 2014
Doctrine Rules and regulations that merely serve as guidelines towards the
achievement of a mutually desired result without dictating the
means and methods of accomplishing it do not establish employer-
employee relationship.

FACTS:
1. Royale Homes is a corporation engaged in marketing real estate. In 1994, it appointed
Alcantara as its Marketing Director for a fixed period of 1 yr. His work consisted of
marketing its real estate inventories on an exclusive basis.
2. He was reappointed for several consecutive years. In 2003, he held the position of
Division 5, Vice-President-Sales.
3. He filed a Complaint for Illegal Dismissal against Royale Homes and its executive officers.
He prayed for his reinstatement, sought ownership of a Mitsubishi Adventure and payment
of backwages and damages.
He alleged the ff:
a) That he is a regular employee because he performed tasks necessary and
desirable to its business;
b) That he was paid P1.2m for his services;
c) That the executive officers told him they were wondering why he had the gall to
still come to office;
d) That their acts amounted to dismissal w/o just cause and in gross disregard of the
proper procedure for dismissal.
4. Royale Homes argued that:
a) Alcantara was hired as an independent sales contractor for a fix term of 1 yr and
paid purely on commission basis;
b) They had no control on how he accomplished his tasks as he was free to solicit
sales in any time and by any manner;

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LABOR LAW and SOCIAL LEGISLATION | 2D

c) Alcantara publicly announced that he would leave the company to join his wife’s
brokerage company which also hired Royale’s former sales agents. He began claiming that
he was illegally dismissed 2 months later.
5. LA: Alcantara was a fixed-term employee until 2003. The pre-termination of his contract
was against the law. So, he was entitled to compensation for the unexpired term. The
corporate officers were absolved from liability.
6. NLRC: Alcantara was not an employee but a mere independent contractor. This was
based on the contract which did not require him to observe regular working hours, freedom
to choose his own selling methods and payment on a commission basis. So, his Complaint
was instead cognizable by regular courts.
7. CA: Alcantara was an employee based on the four-fold and economic reality tests. He was
subjected to company regulations and the exclusivity clause made him economically
dependent on Royale Homes. Case was remanded to LA to determine his annual salary and
monetary award. Corporate officers were absolved from liability.
ISSUE:
Whether or not Alcantara was an employee of Royale Homes.
RULING:
No. The contract and the extent of control exercised by Royale Homes indicates that he is
only an independent contractor.
The written contract serves as the primary evidence of their intention and the nature of
their juridical relationship. Undisputed contract provides that no ER-EE relationship exists
between Royale Homes, Alcantara and its sales agents. The literal meaning of its
stipulations should control since the terms are clear and leave no doubt upon their
intention. He was an educated man and veteran sales broker who would have contested it if
their true intention was otherwise.
The juridical relationship of the parties based on Control Test.
In determining the existence of an employer-employee relationship, this Court has
generally relied on the four-fold test, to wit:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the employer’s power to control the employee with respect to the means and methods
by which the work is to be accomplished.
The most determinative factor in the four-fold test is the “right of control test”. Not every
form of control is indicative of ER-EE relationship. As long as the level of control does not
interfere with the means of accomplishing the tasks, the rules imposed by the hiring party
do not amount to the concept of control that is indicative of ER-EE relationship. The
regulations, code of ethics and periodic evaluation by Royale Homes do not involve control
over the methods. It was necessary for Royale Homes to fix the price, requirements on
prospective buyers, conditions of the sale, allocate inventories among independent
contractors, grand commissions and monitor the result of their marketing. First Insular
Life case: Commitment to abide by rules does not ipso facto make the agent an employee.
The principal can determine quotas, number of agents and specify territories as
management policies for mutually desired results.
Alcantara has the burden to prove the existence of ER-EE relationship. He failed to cite
specific rules that controlled his methods of soliciting sales. He was not required to observe
definite working hours. He was not assigned to other tasks. The continued rehiring simply

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signifies his satisfactory services warranting renewal of his contract. Exclusivity clause not
indicative of an ER-EE relationship: He was not prohibited from engaging in unrelated
businesses. No payment of backwages. His remunerations consisted only of a commission
override, budget allocation, sales incentive and other forms of company support. There is
no proof that he ever received a fixed monthly salary nor was he registered with SSS,
PhilHealth or Pag-Ibig by Royale Homes. He did not complain about his remuneration for 9
consecutive years.

Case Name SONZA v. ABSCBN BROADCASTING CORPORATION

Case No. & Date GR No. 138051 June 10 2004
Doctrine 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.

FACTS:
Petitioner Jose Y. Sonza, a well-known TV and radio personality, entered into an Agreement
in May 1994 with ABS-CBN Broadcasting Corporation. The Agreement was facilitated
through the Mel and Jay Management and Development Corporation (MJMDC), where
Sonza served as President and General Manager. Referred to in the Agreement as “AGENT,”
MJMDC agreed to provide SONZA’s services exclusively to ABS-CBN as talent for radio and
television.
ABS-CBN agreed to pay Sonza a monthly talent fee of P310,000 for the first year and
P317,000 for the subsequent years.
On April 1, 1996, Sonza sent a letter to ABS-CBN's President, Eugenio Lopez III, indicating
his irrevocable resignation and alleging a breach of the Agreement by ABS-CBN. Sonza filed
a complaint with the Department of Labor and Employment, National Capital Region,
seeking unpaid salaries, separation pay, and other benefits. ABS-CBN filed a Motion to
Dismiss, arguing that no employer-employee relationship existed.
The Labor Arbiter denied the motion but later dismissed the complaint for lack of
jurisdiction.
“It must be noted that complainant was engaged by respondent by reason of his peculiar
skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was
free to perform the services he undertook to render in accordance with his own style…
Whatever benefits complainant enjoyed arose from specific agreement by the parties and
not by reason of employer-employee relationship… The fact that complainant was made
subject to respondent’s Rules and Regulations, likewise, does not detract from the absence
of employer-employee relationship.”
NLRC and the CA upheld the Labor Arbiter's decision.
MJMDC is an agent of SONZA, not a mere ‘labor-only’ contractor of ABSCBN such that there
exists an employer-employee relationship between the latter and SONZA. Jurisdiction over
the instant controversy belongs to the regular courts, the same being in the nature of an
action for alleged breach of contractual obligation on the part of respondent-appellee. The
compensation and bonuses for Mr. Sonza’s services are not based on the Labor Code but
rather on the provisions of their agreement.
The CA affirmed the NLRC's finding that Sonza was an independent contractor, not an
employee of ABS-CBN. Sonza filed a petition for review on certiorari with the Supreme
Court.

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ISSUE:
Whether or not the court of appeals gravely erred in affirming the NLRC’s decision and
refusing to find that an employer-employee relationship existed between SONZA and ABS-
CBN.
RULING:
NO, the SC affirmed the assailed decision. No convincing reason exists to warrant a reversal
of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor
Arbiter’s dismissal of the case for lack of jurisdiction.
SONZA maintains that all essential elements of an employer-employee relationship are
present in this case.
SELECTION AND ENGAGEMENT OF THE EMPLOYEE: ABS-CBN engaged SONZA’s services
to co-host its television and radio programs because of SONZA’s peculiar skills, talent and
celebrity status. 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.
PAYMENT OF WAGES: All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. Whatever benefits SONZA enjoyed arose from
contract and not because of an employer-employee relationship.
POWER OF DISMISSAL: For violation of any provision of the Agreement, either party may
terminate their relationship. SONZA failed to show that ABS-CBN could terminate his
services on grounds other than breach of contract, such as retrenchment to prevent losses
as provided under labor laws.
POWER OF CONTROL: Applying the control test to the present case, we find that SONZA is
not an employee but an independent contractor. ABSCBN was not involved in the actual
performance that produced the finished product of SONZA’s work. ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule “for more effective programming.” ABS-CBN’s sole
concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN
did not exercise control over the means and methods of performance of SONZA’s work.
Although ABS-CBN did have the option not to broadcast SONZA’s show, ABS-CBN was still
obligated to pay SONZA’s talent fees. Thus, even if ABS-CBN was completely dissatisfied
with the means and methods of SONZA’s performance of his work, or even with the quality
or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-
CBN could do is not to broadcast SONZA’s show but ABS-CBN must still pay his talent fees in
full. The present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of
action is for breach of contract which is intrinsically a civil dispute cognizable by the
regular courts.

Case Name OSCAR VILLAMARIA, JR. VS. COURT OF APPEALS and JERRY V.
BUSTAMANTE
Case No. & Date G.R. No. 165881 April 19, 2006
Doctrine

FACTS:
Petitioner Oscar Villamaria, Jr. owned Villamaria Motors, where Bustamante was a driver
who paid P450.00 daily as a boundary and kept the remainder as compensation. Villamaria
agreed to sell Bustamante a jeepney under a "boundary-hulog scheme," where Bustamante
would pay P550.00 daily for four years, after which he would own the vehicle and continue
driving it under Villamaria's franchise. If Bustamante missed three days of payments,

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Villamaria Motors would withhold the vehicle until arrears, including a daily P50.00
penalty, were settled. Failure to pay for a week would nullify the agreement, requiring
Bustamante to return the vehicle. Bustamante was not authorized to use the vehicle for
purposes other than transporting passengers. Despite Bustamante's default on annual
registration fees, Villamaria let him keep driving until he repossessed the jeepney and
barred Bustamante. Bustamante then sued Villamaria and his wife for illegal dismissal. The
Labor Arbiter ruled in favor of the Villamarias, dismissing the complaint on the grounds
that the Boundary-Hulog contract and related agreements showed Bustamante breached
the contract and abandoned the vehicle. The NLRC upheld this, stating the relationship was
that of vendor and vendee, so the Labor Arbiter lacked jurisdiction. The court found the
control Villamaria exercised over Bustamante inconsistent with claims that he was not
running a transportation business.
ISSUE:
WON employer-employee relationship exists between the parties
RULING:
Yes. The Supreme Court ruled that Article 217 of the Labor Code mandates an employer-
employee relationship as a crucial requirement for jurisdiction. Labor Arbiters and the
NLRC have jurisdiction under Article 217 only over disputes stemming from an employer-
employee relationship, which are resolved according to the Labor Code, labor statutes, or
collective bargaining agreements. Disputes between an employer and employee that do not
involve a direct employer-employee relationship fall under the jurisdiction of regular
courts. When a case primarily involves labor legislation or a collective bargaining
agreement, it is within the exclusive jurisdiction of the Labor Arbiter and the NLRC, even if
there are incidental claims for damages.
In the boundary-hulog scheme outlined in the Kasunduan, a dual legal relationship existed
between the petitioner and the respondent, encompassing both employer-employee and
vendor-vendee roles. The Kasunduan did not negate the existing employer-employee
relationship prior to its execution. The boundary system is designed for compensation in
passenger transportation, where the driver's daily earnings are remitted to the
owner/operator, with the excess as the driver’s compensation. The owner/operator
maintains control and supervision over the driver, unlike in chattel leasing where the lessor
relinquishes control but the lessee remains responsible. The owner/operator, holding the
certificate of public convenience, must ensure compliance with prescribed routes and
business regulations. The fact that the driver receives compensation beyond the boundary
does not alter the fundamental relationship. The driver's activities are integral to the
owner/operator’s business.
The control exercised by the private respondent over the petitioner’s operations is
inconsistent with the claim that he was not involved in the transportation business. It was
not demonstrated that the petitioner allowed others to drive the vehicle, nor does the
nature of payment affect the employment relationship. The excess earned over the
boundary is considered wages, and the absence of dismissal power in the Kasunduan does
not imply that such power was never exercised or could not be exercised.
The Supreme Court denied the petition.

Case Name Almirez v. Infinite Loop Technology

Case No. & Date G.R. No.162401/Jan. 31,2006
Doctrine

FACTS:

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Corazon Almirez, a Refinery Senior Process Design Engineer, filed a complaint against
Infinite Loop Technology Corporation for breach of contract. Almirez was hired by Infinite
Loop for a specific project through its General Manager/President Edwin R. Rabino.
The terms and conditions of Almirez's employment were outlined in a letter and attached
documents, which included the scope of her professional services and the terms of payment
while Almirez received partial payments for her services but was dissatisfied with the
deductions made for taxes and contributions. Infinite Loop suspended Almirez's services
due to the project's delay in receiving payment from the project proponent and Almirez
filed a complaint before the National Labor Relations Commission (NLRC) for breach of
contract, seeking payment of salaries and damages.
The Labor Arbiter ruled in favor of Almirez, finding an employer-employee relationship
between the parties.Infinite Loop appealed to the NLRC, which affirmed the existence of the
employer-employee relationship. The Court of Appeals reversed the NLRC's decision,
stating that no employer-employee relationship existed Hence, Almirez filed a petition
before the Supreme Court.
ISSUE:
Whether or not there is employee-employer relationship between Almirez and Infinite
LOOP
RULING:
To ascertain the existence of an employer-employee relationship, jurisprudence has
invariably applied the four-fold test, to wit: (1) the manner of selection and engagement;
(2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4)
the presence or absence of the power of control of these four, the last one, the so called
"control test" is commonly regarded as the most crucial and determinative indicator of the
presence or absence of 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 achieved, but also the manner and
means to be used in reaching that end.

Case Name SEMBLANTE AND PILAR vs COURT OF APPEALS

Case No. & Date G.R. NO. 196426, August 15, 2011.
Doctrine Illegal dismissal may only take place when there is a valid
employer-employee relationship.

FACTS:
• This is a petition for certiorari assailing and seeking to set aside the decision of
Court of Appeals. The latter affirmed the decision of National Labor Relations
Commissions.
• Petitioners Marticio Semblante and Dubrick Pilar asserted they were hired by
respondent-spouses Vicente and Maria Loot, owner of cockpit, as official masiador
and sentenciador, respectively.
• For their services as masiador and sentenciador, Semblante receives PhP 2,000 per
week or a total of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP
14,000 per month.
• Petitioners had both been issued employees’ identification cards that they wear
every time they report for duty. They alleged never having incurred any infraction
and/or violation of the cockpit rules and regulations.
• On November 14, 2003, however, petitioners were denied entry into the cockpit
upon the instructions of respondents, and were informed of the termination of their

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services effective that date. This prompted petitioners to file a complaint for illegal
dismissal against respondents.
• Respondents denied that petitioners were their employees and alleged that they
were associates of respondents’ independent contractor, Tomas Vega. Respondents
claimed that petitioners have no regular working time or day and they are free to
decide for themselves whether to report for work or not on any cockfighting day.
• Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of
respondents as they performed work that was necessary and indispensable to the
usual trade or business of respondents for a number of years.
• The Labor Arbiter also ruled that petitioners were illegally dismissed, and so
ordered respondents to pay petitioners their backwages and separation pay.
• The NLRC found the appeal of the respondents meritorious. That there was no
employer-employee relationship between petitioners and respondents, respondents
having no part in the selection and engagement of petitioners, and that no separate
individual contract with respondents was ever executed by petitioners.
• Petitioners went to the CA on a petition for certiorari. Petitioners argued that the
NLRC gravely abused its discretion in entertaining an appeal that was not perfected
in the first place( the respondents appealed to NLRC without posting a cash or
surety bond equivalent to the monetary award granted by the Labor Arbiter, but still
the NLRC acted in the case).
ISSUE:
WON the NLRC committed grave abuse of discretion in granting the appeal of the
respondents notwithstanding failure to file bond on time. And WON there is an employer-
employee relationship.
RULING:
• NO. NONE.
• Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases
involving monetary awards from the Decision of the Labor Arbiter. Article 223 of
the Labor Code.
• However, there are exceptional circumstances when this Court, considering the
substantial merits of the case, has relaxed this rule on, and excused the late posting
of, the appeal bond when there are strong and compelling reasons for the
liberality,14 such as the prevention of miscarriage of justice extant in the case15 or
the special circumstances in the case combined with its legal merits or the amount
and the issue involved.
• Petitioners are placed in that elite spot where they can control the game and the
crowd. They are not given salaries by cockpit owners as their compensation is based
on the "arriba". In fact, they can offer their services everywhere because they are
duly licensed by the GAB. They are free to choose which cockpit arena to enter and
offer their expertise.
• Private respondents cannot even control over the means and methods of the manner
by which they perform their work.
• Petitioners are akin to independent contractors who possess unique skills, expertise,
and talent to distinguish them from ordinary employees; that respondents did not
supply petitioners with the tools and instrumentalities they needed to perform
work; that Petitioners only needed their unique skills and talents to perform their
job as masiador and sentenciador.

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• That petitioners are NOT employees of respondents, since their relationship fails to
pass muster the four-fold test of employment We have repeatedly mentioned in
countless decisions: (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, which is the most important element.respondents had no part
in petitioners’ selection and management;19 petitioners’ compensation was paid out
of the arriba (which is a percentage deducted from the total bets), not by
petitioners;20 and petitioners performed their functions as masiador and
sentenciador free from the direction and control of respondents
• Being petitioners’ employers, could never have dismissed, legally or illegally,
petitioners, since respondents were without power or prerogative to do so in the
first place.
• Petition denied.
NOTE FROM THE DECISION:
Strict implementation of the rules on appeals must give way to the factual and legal reality
that is evident from the records of this case.24 After all, the primary objective of our laws is
to dispense justice and equity, not the contrary.

Case Name SUMIFRU Philippines Corp. vs. NAMASUFA-NAFLU-KMU

Case No. & Date GR No. 202091, June 7, 2017
Doctrine The "four-fold test" to determine the existence of an employer-
employee relationship: the employer (a) selects and engages the
employee; (b) pays his wages; (c) has power to dismiss him; and
(d) has control over his work. Of these, the most crucial is the
element of control. Control refers to the right of the employer,
whether actually exercised or reserved, to control the work of the
employee as well as the means and methods by which he
accomplishes the same.

FACTS:
Sumifru is a domestic corporation and is the surviving corporation after its merger with
Fresh Banana Agricultural Corporation (FBAC) in 2008. FBAC was engaged in the buying,
marketing, and exportation of Cavendish bananas. Respondent Nagkahiusang Mamumuo
sa Suyapa Farm (NAMASUF ANAFLU-KMU) (NAMASUFA) is a labor organization affiliated
with the National Federation of Labor Unions and Kilusang Mayo Uno.
The CA summarized the start of the proceedings with the Med-Arbiter as follows:
On March 14, 2008, the private respondent Nagkahiusang Mamumuo sa Suyapa Farm
(NAMASUF A-NAFLU-KMU), a legitimate labor organization, filed a Petition for Certification
Election before the Department of Labor and Employment, Regional Office No. XI in Davao
City. NAMASUFA sought to represent all rank-and-file employees, numbering around one
hundred forty, of packing plant 90 (PP 90) of Fresh Banana Agricultural Corporation
(FBAC). NAMASUF A claimed that there was no existing union in the aforementioned
establishment.
On May 9, 2008 FBAC filed an Opposition to the Petition. It argued that there exists no
employer-employee relationship between it and the workers involved. It alleged that
members of NAMASUF A are actually employees of A2Y Contracting Services (A2Y), a duly
licensed independent contractor, as evidenced by the payroll records of the latter.
NAMASUFA, in its Comment to Opposition countered, among others, that its members were
former workers of Stanfilco before FBAC took over its operations sometime in 2002. The
said former employees were then required to join the Compostela Banana Packing Plant
Workers' Cooperative (CBPPWC) before they were hired and allowed to work at the

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Packing Plant of FBAC. It further alleged that the members of NAMASUF A were working at
PP 90 long before A2Y came.
In June 20, 2008, pending resolution of the petition, FBAC was merged with SUMIFRU, the
latter being the surviving corporation.
ISSUE:
Whether or not Sumifru is the employer of the workers engaged by the cooperative and/or
A2Y for the upper siocon growers' packaging operations in packing plant 90.
RULING:
The Petition is denied.
Sumifru's arguments raise questions of facts. Indeed, it even submitted to this Court, as
annexes to its Petition, the very same evidence it had presented before the Med-Arbiter, the
DOLE Secretary, and the CA in its attempt to try to convince the Court that the members of
NAMASUFA are not its employees.
It is fundamental that in a petition for review on certiorari, the Court is limited to only
questions of law. As specifically applied in a labor case, the Court is limited to reviewing
only whether the CA was correct in determining the presence or absence of grave abuse of
discretion on the part of the DOLE Secretary. Thus, in Holy Child Catholic School v. Sta.
Tomas, the Court ruled:
Our review is, therefore, limited to the determination of whether the CA correctly resolved
the presence or absence of grave abuse of discretion in the decision of the [Secretary of
Labor and Employment (SOLE)], not on the basis of whether the latter's decision on the
merits of the case was strictly correct. Whether the CA committed grave abuse of discretion
is not what is ruled upon but whether it correctly determined the existence or want of
grave abuse of discretion on the part of the SOLE.
FFW v. Court of Appeals, findings of fact of quasi-judicial agencies are entitled to great
respect when they are supported by substantial evidence and, in the absence of any
showing of a whimsical or capricious exercise of judgment, the factual findings bind the
Court:
We take this occasion to emphasize that the office of a petition for review
on certiorari under Rule 45 of the Rules of Court requires that it shall raise only questions
of law. The factual findings by quasi-judicial agencies, such as the Department of Labor and
Employment, when supported by substantial evidence, are entitled to great respect in view
of their expertise in their respective fields. Judicial review of labor cases does not go so far
as to evaluate the sufficiency of evidence on which the labor official's findings rest. It is not
our function to assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties to an appeal, particularly where the findings of both
the trial court (here, the DOLE Secretary) and the appellate court on the matter coincide, as
in this case at bar. The Rule limits that function of the Court to the review or revision of
errors of law and not to a second analysis of the evidence. Here, petitioners would have us
re-calibrate all over again the factual basis and the probative value of the pieces of evidence
submitted by the Company to the DOLE, contrary to the provisions of Rule 45. Thus, absent
any showing of whimsical or capricious exercise of judgment, and unless lack of any basis
for the conclusions made by the appellate court be amply demonstrated, we may not
disturb such factual findings.
Here, the CA was correct in finding that the DOLE Secretary did not commit any whimsical
or capricious exercise of judgment when it found substantial evidence to support the DOLE
Secretary's ruling that Sumifru was the employer of the members of NAMASUFA.
As defined, substantial evidence is "that amount of relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, even if other minds, equally reasonable,

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might conceivably opine otherwise." Here, the Med-Arbiter found, based on documents
submitted by the parties, that Sumifru gave instructions to the workers on how to go about
their work, what time they were supposed to report for work, required monitoring sheets
as they went about their jobs, and provided the materials used in the packing plant.
In affirming the Med-Arbiter, the DOLE Secretary relied on the documents submitted by the
parties and ascertained that Sumifru indeed exercised control over the workers in PP 90.
The DOLE Secretary found that the element of control was present because Sumifru
required monitoring sheets and imposed disciplinary actions for non-compliance with "No
Helmet - No Entry" "No ID - No Entry" policies.
In turn, the CA, even as it recognized that the findings of facts of the DOLE Secretary and the
Med-Arbiter were binding on it because they were supported by substantial evidence, even
went further and itself reviewed the records - to arrive, as it did arrive, at the same
conclusion reached by the DOLE Secretary and Med-Arbiter: that is, that Sumifru exercised
control over the workers in PP 90.
In light of the foregoing, the Court cannot re-calibrate the factual bases of the Med-Arbiter,
DOLE Secretary, and the CA, contrary to the provisions of Rule 45, especially where, as here,
the Petition fails to show any whimsicality or capriciousness in the exercise of judgment of
the Med-Arbiter or the DOLE Secretary in finding the existence of an employer-employee
relationship.

Case Name PEDRITO R. PARAYDAY AND JAIME REBOSO vs. SHOGUN

SHIPPING CO. INC.
Case No. & Date GR. No. 204555 July 6, 2020
Doctrine

FACTS:
Petitioners were fitters/welders hired by Shogun Shipping Co., Inc., formerly known as
Oceanview. Their responsibilities included welding and repairs of the barges. Petitioners
claimed that they were not paid certain benefits and holiday compensation. In May of
2006, the petitioners were injured due to an explosion on the barge and were hospitalized.
Shogun covered their medical expenses but their salaries were unpaid during their
hospitalization. Subsequently, petitioners were verbally dismissed from service by the
management on May 1, 2008 by reason of lack of work as fitters/welders.
When the matter was brought to the NLRC, the Labor Arbiter ruled in favor of the
petitioners. Shogun appealed to the NLRC which affirmed the Labor Arbiter’s decision.
Shogun then filed a petition for certiorari with the Court of Appeals which reversed the
NLRC’s decision. Hence, this petition.
ISSUE:
1. Whether or not the petitioners were regular employees of Shogun Ships;
2. If so, whether they were validly dismissed from employment.
RULING:
The Supreme Court found that an employer-employee relationship existed because there
was sufficient control by Shogun Ship over the petitioners, consistent payment of wages
and employment duration. These were evidenced by the Time Keeper’s Report, which
supported the employment record of the petitioners.
The petitioners were dismissed without due process since Shogun Ship failed to prove that
there was just cause and procedural diligence in the termination. The burden of proof lies
on the employer to justify the grounds for dismissal. Likewise, due process must be
followed.

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Case Name Gesolgon vs. Cyberone Philippines

Case No. & Date GR No. 210741, October 14, 2020
Doctrine Illegal dismissal will only take place when there is a valid
employer-employee relationship.

FACTS:
Petitioners Gesolgon and Santos filed a complaint for illegal dismissal against respondents
CyberOnePH, Mikrut, Juson, and CyberOneAU. They likewise claimed for non-payment or
underpayment of their salaries and 13th month pay; moral and exemplary damages; and
attorney's fees.
On March 3 and April 5, 2008 respectively, Gesolgon and Santos claimed they were hired by
Mikrut as part-time remote Customer Service Representatives for CyberOne Pty. Ltd.
(CyberOne AU). They later became full-time, permanent employees and were promoted to
Supervisors.
In October 2009, Mikrut, the CEO of CyberOne AU and CyberOne PH, asked the petitioners
and Juson to act as dummy directors or incorporators of CyberOne PH. They agreed and
were promoted to Managers with salary increases, which were made to appear as paid by
CyberOne PH.
In March 2011, Mikrut gave the petitioners three options: (a) take an indefinite furlough
and join a manpower pool for potential recall, (b) stay with CyberOne AU at an entry-level
Customer Service Representative position, or (c) resign irrevocably. The petitioners claimed
they were forced to choose the furlough to keep their jobs. In April 2011, they received
their final salary of P13,000.00 each.
However, CyberOne PH, Mikrut, and Juson denied any employer-employee relationship with
the petitioners, asserting that they were incorporators or directors, not regular employees
of CyberOne PH. They argued that the petitioners were employees of CyberOne AU, a
foreign corporation outside the NLRC's jurisdiction.
ISSUE:
1. W/N there exists an employer-employee relationship.
2. Whether or not petitioners were employees of CyberOne PH and CyberOne AU.
3. Whether or not petitioners were illegally dismissed.
RULING of the Labor Arbiter:
The Labor Arbiter dismissed the complaint due to lack of an employer-employee
relationship with CyberOne PH and NLRC's lack of jurisdiction over CyberOne AU. The
National Labor Relations Commission (NLRC) reversed this decision, finding that
petitioners were employees of both CyberOne AU and CyberOne PH and were illegally
dismissed.
RULING of the Court of Appeals:
The Court of Appeals (CA) set aside the NLRC's decision, ruling no employer-employee
relationship existed between the petitioners and CyberOne PH, and found the pay slips
insufficient evidence. The CA also ruled that the doctrine of piercing the corporate veil was
misapplied by the NLRC. Petitioners filed a Petition for Review on Certiorari under Rule 45.
RULING of the Supreme Court:
The Supreme Court denied the petition and affirmed the CA's decision, ruling no employer-
employee relationship existed between the petitioners and CyberOne PH.

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The Supreme Court found that there was no employer-employee relationship between the
petitioners and CyberOne PH, as the petitioners failed to present sufficient evidence of their
employment and the control exercised by CyberOne PH over their work.

Case Name Cabrera et al vs Lazada E-Services Philippines Inc.

Case No. & Date G.R. No. 246892 September 21, 2022
Doctrine

FACTS:
Petitioners (collectively, riders) were hired by Lazada E-Service Philippines Inc. (Lazada) to
pick up items from sellers and deliver them to Lazada’s warehouse. They signed a contract
that stipulates the amount of their daily wages and that they are engaged for a period of
one year. Further, petitioners used their private-owned motorcycles in their trips.
Sometime in January 2017, the riders were no longer given any schedules, but despite that,
they still reported to work for three days waiting for new assignment to no avail, and later
found that their routes were already given to other employees.
Such an act prompted the petitioner to invoke their rights as regular employee and further,
file a case before the NLRC for illegal dismissal, non-payment of salary, overtime pay,
holiday pay, service incentive leave pay, thirteenth month pay separation pay, and illegal
deduction, with claims for moral and exemplary damages and attorney's fees.
On the other hand, Lazada maintained that the riders are not regular employees but
independent contractors.
ISSUE:
(A)whether or not petitioners are regular employees of respondent Lazada; subsumed
under this issue are the following: (1) whether or not petitioners are independent
contractors; (2) whether or not petitioners satisfied the four-fold test; (3) whether or not
there is economic dependence in petitioners' employment with respondents.
RULING:
(A) Yes, Respondents mainly contend that there is no employer-employee relationship
because petitioners are independent contractors, but based on Art. 295 an employment
shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer.
There must be a reasonable connection between the work performed by the employee and
the usual trade or business of the employer. (1)No, To be considered a legitimate
contractor, the contractor must have a substantial capital or investment. It must also have a
distinct and independent business uncontrolled by the principal and compliant with all the
rights and benefits for the employees. Section 8 of DOLE Department Order No. 174-2017
lays down the conditions for permissible contracting or subcontracting. Petitioners are not
hired by a contractor or subcontractor but rather directly hired by respondents to which
the former signed a contract receiving payment directly from the latter. (2)Yes, First,
petitioners are directly employed by respondent Lazada as evidenced by the Contracts they
signed. Second, as indicated in the Contract, petitioners receive their salaries from
respondent Lazada. Third, respondent Lazada has the power to dismiss petitioners if there
is a breach of material provisions of the Contract. Lastly, respondent Lazada has control
over the means and methods of the performance of petitioners' work. (3) petitioners are
dependent on respondents for their continued employment in this line of business. As the
facts reveal, petitioners have been previously engaged by a third-party contractor to
provide services for respondents. This time, petitioners were directly hired by respondents.
This demonstrates that petitioners have been economically dependent on respondents for
their livelihood.

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Wherefore, the Petition for Review is GRANTED

Case Name ESCAURIAGA VS. FITNESS FIRST PHILIPPINES INC

Case No. & Date G.R. No. 266552/January 22, 2024
Doctrine Under the four-fold test to establish an employer-employee
relationship, four factors must be proven: (a) the employer’s
selection and engagement of the employee; (b) the payment of
wages; (c) the power to dismiss; and (d) the power to control the
employee’s conduct which, the SC stressed, is the most significant
factor.

FACTS:
• Petitioners, as fitness trainers, sold and marketed respondent’s physical health
training programs and packages. They also conducted actual training sessions for
their clients and were paid fixed monthly salaries, 13th month pay and commissions.
• Petitioners were paid their salaries but other labor benefits i.e., 13th month pay,
overtime pay, holiday pay and rest day were discontinued.
• Petitioners were allowed to work on their own pleasure so long as they trained
clients for the minimum of 90 per/hrs. per month and PHP 80,000 worth of physical
training program or package. Failure to meet this requirement warrants salary
deduction, or worse, disciplinary action such that repeated failure to meet the quota
may subject them to warning, suspension, and even termination of employment.
• Respondents countered that petitioners were initially hired as instructors and later
on promoted as freelance personal trainers--- they were independent contractors
who were not required to observe fixed hours of work.
• In compliance with the BIR Revenue Regulation, it offered a 3% increase in
commission for those who will register their freelance business with the BIR. Failure
to register shall suffer termination or non-renewal of their agreement—Only 62 of
its freelance trainers complied.
• The Labor Arbiter declared petitioners as independent contractors and there is no
basis for their claim of constructive dismissal and the complaint lacks merit. It held
further that, they voluntary signed the freelance agreement, successively renewed
for years, and were paid on commission basis. The petitioners controlled the time
and manner they conduct they conduct physical training with their respective
clients.
• The NLRC, affirmed the labor arbiter. It ruled that, there was no employer-employee
relationship between the parties as shown by the freelance agreement; Petitioners
moved to reconsider but the same got denied by Resolution; Petitioners filed a
petitioner for relief from judgment that the Entry of Judgment be set aside having
been entered through extrinsic fraud which precluded them from availing of the
remedies provided for by law. The petition was denied.
• The CA, held that they were no employer-employee relationship between the parties
and that there could be no trilateral relationship because there were only two
parties to the freelance agreement. Petitioners could not be considered as labor-
only contractors or arrangement to provide, recruit, supply, or place workers to
perform a job or task for the principal.
• Petitioners now ask the court to revers and set aside the rulings of the CA on the
ground that they did not have a copy of the resolution denying their reconsideration
before the NLRC. They also maintain their position that they were regular employees
of respondents.

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LABOR LAW and SOCIAL LEGISLATION | 2D

ISSUE:
WON respondents able to sufficiently prove that petitioners were independent contractors
RULING:
• [YES]
• The SC reversed the ruling of the Court of Appeals (CA) which declared that five
personal fitness trainers of Fitness First Phils., Inc. (Fitness First), a health club, are
independent contractors and not regular employees.
• under the four-fold test to establish an employer-employee relationship, four factors
must be proven: (a) the employer’s selection and engagement of the employee; (b)
the payment of wages; (c) the power to dismiss; and (d) the power to control the
employee’s conduct which, the SC stressed, is the most significant factor.
• The SC found that all four factors were evident in the case, noting that when
employment status is disputed, the burden falls on the employer to demonstrate
that the individual is an independent contractor, not a regular employee.
• Fitness First initially engaged the petitioners as fitness consultants, and as revealed
in records, they later transitioned to freelance personal trainers under a
commission-based agreement.
• The agreement granted Fitness First the power to dismiss instructors for reasons
such as unfitness for duty or failure to meet monthly Minimum Performance
Standards.
• The petitioners’ tasks were with Fitness First’s core business of health programs
and physical training for clients. Educational training sessions attendance was
mandatory to ensure service quality.
• Even applying the economic dependence test, considering the entire economic
activity’s circumstances, the SC concluded that the petitioners acted as personal
trainers according to Fitness First’s specifications.
• The Freelance Personal Trainer Agreement restricted them from offering training
outside the club and mandated the exclusive sale of company products, reinforcing
their economic dependence on Fitness First.
• The exclusivity clause further solidified the determination that the petitioners are
regular employees of Fitness First.
• The ruling mandated the immediate reinstatement of the instructors to their former
positions and the payment of full backwages, separation pay, pro-rata 13th-month
pay, and attorney’s fees.

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