Perpetual Help v Faburada

[G.R. No. 121948. October 8, 2001]

Employer-Employee Relationship

Facts:

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private respondents, filed a complaint against
the Perpetual Help Credit Cooperative, Inc. (PHCCI), petitioner, with the Arbitration Branch, Department of Labor and Employment (DOLE),
Dumaguete City, for illegal dismissal, premium pay on holidays and rest days, separation pay, wage differential, moral damages, and attorneys
fees.

Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no employer-employee relationship
between them as private respondents are all members and co-owners of the cooperative. Furthermore, private respondents have not
exhausted the remedies provided in the cooperative by-laws.

On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of R.A. No. 6939, otherwise known as
the Cooperative Development Authority Law which took effect on March 26, 1990, requires conciliation or mediation within the cooperative
before a resort to judicial proceeding.

On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that the case is impressed with employer-employee
relationship and that the law on cooperatives is subservient to the Labor Code.

On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally dismissed, thus respondent is directed to
pay Complainants backwages computed from the time they were illegally dismissed up to the actual reinstatement but subject to the three
year backwages rule (this rule was established based on Justice Teehankee’s concurring and dissenting opinion of the “Mercury Drug Co., Inc.,
et al. v. Court of Industrial Relations, et al,1974”, which he said as "realistic, reasonable and mutually beneficial solution" mode of computing
backwages)*, separation pay for one month for every year of service since reinstatement is evidently not feasible anymore, to pay
complainants 13th month pay, wage differentials and Ten Percent (10%) attorneys fees from the aggregate monetary award. However,
complainant Benedicto Faburada shall only be awarded what are due him in proportion to the nine and a half months that he had served the
respondent, he being a part-time employee.

On appeal[1], the NLRC affirmed the Labor Arbiter's decision.

* Normally, the trial of the case and resolution of the appeal should be given preference and terminated within a period of three years (one
year for trial and decision in the industrial court and two years for briefs, etc., and decision in this Court)

Issues:

1. Whether or not there is an employer-employee relationship between the parties;

2. Whether or not private respondents are regular employees;
3. Whether or not Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) would apply in PHCCI’s favour.

Held:

1. YES, there is an employer-employee relationship between the parties.

In determining the existence of an employer-employee relationship, the following elements are considered:

(1) the selection and engagement of the worker or the power to hire;

(2) the power to dismiss;

(3) the payment of wages by whatever means; and

(4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration.

No particular form of proof is required to prove the existence of an employer-employee relationship. Any competent and relevant
evidence may show the relationship. [2]

In the case at bar, the above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its Manager, hired private
respondents to work for it. They worked regularly on regular working hours, were assigned specific duties, were paid regular wages and made
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to accomplish daily time records just like any other regular employee. They worked under the supervision of the cooperative manager. But
unfortunately, they were dismissed.

That an employer-employee exists between the parties is shown by the averments of private respondents in their respective affidavits,
carefully considered by respondent NLRC in affirming the Labor Arbiter's decision, thus:

Benedicto Faburada -Regular part-time Computer programmer/ operator. Worked with the Cooperative since June 1, 1988 up to December
29, 1989. Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and every Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00
p.m. and for at least three (3 ) hours during Sundays. Monthly salary: P1,000.00 -from June to December 1988; P1,350.00 - from January to
June 1989; and P1,500.00 from July to December 1989.

Sisinita Vilar -Clerk. Worked with the Cooperative since December 1, 1987 up to December 29, 1989. Work schedule: Regular working
hours. Monthly salary: P500.00 - from December 1, 1987 to December 31, 1988;P1,000.00 - from January 1, 1989 to June 30, 1989; and
P1,150.00 - from July 1, 1989 to December 31, 1989.

Imelda C. Tamayo - Clerk. Worked with the Cooperative since October 19, 1987 up to December 29, 1989. Work schedule: Monday to Friday -
8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday - 8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for one Sunday each month - for at
least three (3) hours. Monthly salary: P60.00 - from October to November 1987; P250.00 for December 1987; P500.00 - from January to
December 1988

Harold D. Catipay - Clerk. Worked with the Cooperative since March 3 to December 29, 1989. Work schedule: - Monday to Friday - 8:00 to
11:30 a.m. and 2:00 to 5:30 p.m.; Saturday - 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m.; and one Sunday each month - for at least three (3)
hours. Monthly salary: P900.00 - from March to June 1989;

All of them were given a memorandum of termination on January 2, 1990, effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the same being supported by substantial
evidence, that quantum of evidence required in quasi-judicial proceedings, like this one.

2. YES, private respondents are regular employees of Perpetual Help.

Article 280 of the Labor Code provides for three kinds of employees:

(1) regular employees or those who have been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer;

(2) project employees or those whose employment has been fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season; and

(3) casual employees or those who are neither regular nor project employees. [3]

The employees who are deemed regular are:

(a) those who have been engaged to perform activities which are usually necessary or desirable in the usual trade or business of the
employer; and

(b) those casual employees who have rendered at least one (1) year of service, whether such service is continuous or broken, with
respect to the activity in which they are employed. [4]

In the case at bar, it cannot be denid, private respondents were rendering services necessary to the day-to-day operations of petitioner
PHCCI. This fact alone qualified them as regular employees.

All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto Faburada, for one and a half (1 1/2)
years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo, for two (2) years and two (2) months. That Benedicto Faburada worked only on a
part-time basis, does not mean that he is not a regular employee.

Ones regularity of employment is not determined by the number of hours one works but by the nature and by the length of time one
has been in that particular job. [5] Petitioner's contention that private respondents are mere volunteer workers, not regular employees, must
necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of Labor and Employment (173 SCRA 697, 703 (1989) is
misplaced. The issue in this case is whether or not the employees-members of a cooperative can organize themselves for purposes of
collective bargaining, not whether or not the members can be employees. Petitioner missed the point.
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 As regular employees or workers, private respondents are entitled to security of tenure. Thus, their services may be terminated only for
a valid cause, with observance of due process.

The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor Code and the authorized causes under
Articles 283 and 284 of the same Code.

The just causes are:

(1) serious misconduct or willful disobedience of lawful orders in connection with the employees work;

(2) gross or habitual neglect of duties;

(3) fraud or willful breach of trust;

(4) commission of a crime or an offense against the person of the employer or his immediate family member or representative; and,
analogous cases.

The authorized causes are:

(1) the installation of labor-saving devices;

(2) redundancy;

(3) retrenchment to prevent losses; and

(4) closing or cessation of operations of the establishment or undertaking, unless the closing is for the purpose of circumventing the
provisions of law.

Article 284 provides that an employer would be authorized to terminate the services of an employee found to be suffering from any
disease if the employees continued employment is prohibited by law or is prejudicial to his health or to the health of his fellow employees [6]

Private respondents were dismissed not for any of the above causes. They were dismissed because petitioner considered them to be
mere voluntary workers, being its members, and as such work at its pleasure. Petitioner thus vehemently insists that their dismissal is not
against the law.

Procedural due process requires that the employer serve the employees to be dismissed two (2) written notices before the termination
of their employment is effected:

(a) the first, to apprise them of the particular acts or omissions for which their dismissal is sought and

(b) the second, to inform them of the decision of the employer that they are being dismissed. [7]

In this case, only one notice was served upon private respondents by petitioner. It was in the form of a Memorandum signed by the
Manager of the Cooperative dated January 2, 1990 terminating their services effective December 29, 1989. Clearly, petitioner failed to comply
with the twin requisites of a valid notice.

We hold that private respondents have been illegally dismissed.

3. NO, Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) will not apply in PHCCI’s favour.

Section 8 of R.A. No 6939 otherwise known as the Cooperative Development Authority Law provides that:

Mediation and Conciliation.- Upon request of either or both parties, the Authority shall mediate and conciliate disputes
within a cooperative or between cooperatives: Provided, That if no mediation or conciliation succeeds within three (3) months from request
thereof, a certificate of non-resolution shall be issued by the Commission prior to the filing of appropriate action before the proper courts.

The above provisions apply to members, officers and directors of the cooperative involved in disputes within a cooperative or between
cooperatives.

In the case at bar, there is no evidence that private respondents are members of petitioner PHCCI and even if they are, the dispute is
about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217 of the Labor Code, these disputes are within
the original and exclusive jurisdiction of the Labor Arbiter.

Therefore, Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) will not apply in PHCCI’s favour.

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 Vicente Sy, et al vs. Court of Appeals & Jaime Sahot
398 SCRA 301, G.R. No. 142293. February 27, 2003
Employer-Employee Relationship
Facts:

Sometime in 1958, private respondent Jaime Sahot [5] started working as a truck helper for petitioners family-owned trucking business
named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs
Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all these changes in names and for
36 years, private respondent continuously served the trucking business of petitioners.

In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various ailments. Particularly
causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired about his medical and
retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his premium payments had not been remitted
by his employer.

Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR, presleyopia,
hypertensive retinopathy G II,[6] HPM, UTI, Osteoarthritis, [7] and heart enlargement.[8] On said grounds, Belen Paulino of the SBT Trucking
Service management told him to file a formal request for extension of his leave. At the end of his week-long absence, Sahot applied for
extension of his leave for the whole month of June, 1994. It was at this time when petitioners allegedly threatened to terminate his
employment should he refuse to go back to work.

At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work. But he could not retire on pension because
petitioners never paid his correct SSS premiums. The fact remained he could no longer work as his left thigh hurt abominably. Petitioners
ended his dilemma. They carried out their threat and dismissed him from work, effective June 30, 1994. He ended up sick, jobless and
penniless.

On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal.

For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. They contend
that private respondent was not illegally dismissed as a driver because he was in fact petitioners industrial partner. They add that it was not
until the year 1994, when SBT Trucking Corporation was established, and only then did respondent Sahot become an employee of the
company, with a monthly salary that reached P4,160.00 at the time of his separation.

Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for work for almost
seven days. On June 1, 1994, Sahot asked permission to extend his leave of absence until June 30, 1994. It appeared that from the expiration
of his leave, private respondent never reported back to work nor did he file an extension of his leave. Instead, he filed the complaint for illegal
dismissal against the trucking company and its owners.

Petitioners add that due to Sahots refusal to work after the expiration of his authorized leave of absence, he should be deemed to have
voluntarily resigned from his work. They contended that Sahot had all the time to extend his leave or at least inform petitioners of his health
condition.

The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal in Sahots case.
Private respondent had failed to report to work. Moreover, said the Labor Arbiter, petitioners and private respondent were industrial partners
before January 1994. The Labor Arbiter concluded by ordering petitioners to pay financial assistance of P15,000 to Sahot for having served the
company as a regular employee since January 1994 only.

On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private respondent
was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but his employment was
terminated on account of his illness, pursuant to Article 284 [9] of the Labor Code. Accordingly, the NLRC ordered petitioners to pay private
respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for 29 years of service.

On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private respondent
was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but his employment was
terminated on account of his illness, pursuant to Article 284 [9] of the Labor Code. Accordingly, the NLRC ordered petitioners to pay private
respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for 29 years of service.

Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000, the appellate court
affirmed with modification the judgment of the NLRC. It held that private respondent was indeed an employee of petitioners since 1958. It

4
also increased the amount of separation pay awarded to private respondent to P74,880, computed at the rate of P2,080 per year for 36 years
of service from 1958 to 1994.

Issues:

1. Whether or not an employer-employee relationship existed between petitioners and respondent Sahot;
2. Whether or not there was valid dismissal;
3. Whether or not Sahot is an industrial partner;
4. Whether or not Sahot is entitled to separation pay.

Ruling:

1. YES, an employer-employee existed.

In the case of Aurora Land Projects Corp. v. NLRC, 266 SCRA 48, 59 (1997), the court said that 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 employers power to control the employees conduct.

The most important element is the employer’s control of the employees conduct, not only as to the result of the work to
be done, but also as to the means and methods to accomplish it.

In the case at bar, petitioners owned and operated a trucking business since the 1950s and by their own allegations, they
determined private respondents wages and rest day. [20] Records of the case show that private respondent actually engaged in work
as an employee. During the entire course of his employment he did not have the freedom to determine where he would go, what he
would do, and how he would do it. He merely followed instructions of petitioners and was content to do so, as long as he was paid
his wages. Indeed, said the CA, private respondent had worked as a truck helper and driver of petitioners not for his own pleasure
but under the latters control.

Therefore, an employer-employee existed between Vicenty Sy and Jaime Sahot.

2. YES, Jaime Sahot was invalidly dismissed.

Art. 277(b) of the Labor Code provides that:

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal
except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the
employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to
contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer.

In addition to, article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease,
thus:

Art. 284. Disease as a ground for termination - an employer may terminate the services of an employee who has been
found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as
the health of his co-employees.

However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus
Implementing Rules of the Labor Code requires:

5
 Sec. 8. Disease as a ground for dismissal - Where the employee suffers from a disease and his continued employment is
prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment
unless there is a certification by competent public health authority that the disease is of such nature or at such a stage that it
cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within
the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate
such employee to his former position immediately upon the restoration of his normal health.

Furthermore, in the case of Triple Eight integrated Services, Inc. vs. NLRC, [31] the court ruled that the requirement for a
medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and
arbitrary determination by the employer of the gravity or extent of the employees illness and thus defeat the public policy in the
protection of labor.

In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahots dismissal was effected.
From the records, it clearly appears that procedural due process was not observed in the separation of private respondent by the
management of the trucking company. The employer is required to furnish an employee with two written notices before the latter is
dismissed:

(1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought, which is the equivalent of a
charge; and

(2) the notice informing the employee of his dismissal, to be issued after the employee has been given reasonable opportunity to
answer and to be heard on his defense. [33]

These, the petitioners failed to do, even only for record purposes. What management did was to threaten the employee with dismissal,
then actually implement the threat when the occasion presented itself because of private respondents painful left thigh.

Therefore, it is clear that Sahot’s dismissal is tainted with invalidity.

Points to remember: (Do not include these in the recitation unless asked ^_~)

*Substantial Evidence - is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.
(Triple Eight Integrated Services, Inc. v. NLRC, 299 SCRA 608, 614 (1998))

**Doubtful Evidence - Time and again this Court has said that if doubt exists between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the employee.

3. NO, Sahot is not an industrial partner.

Article 1767[21] of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the profits among themselves.

In the case at bar, Not one of these circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money, property or industry for the purpose of engaging in
the supposed business. There is no proof that he was receiving a share in the profits as a matter of course, during the period when
the trucking business was under operation. Neither is there any proof that he had actively participated in the management,
administration and adoption of policies of the business.

Therefore, Sahot is not an industrial partner.

4. YES, Sahot is entitled to a separation pay.

Article 284 of the Labor Code provides that:

Disease as ground for termination – An employer may terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the
health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2)
month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole
year.

In the case at bar, his separation pay was computed by the appellate court at P2,080 times 36 years (1958 to 1994) or
P74,880. The court agreed with the computation, after noting that his last monthly salary was P4,160.00 so that one-half thereof is
P2,080.00.

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 Therefore, Sahot is entitled to a separation pay.

Chavez v NLRC
[G.R. No. 146530. January 17, 2005]
Employer-Employee Relationship

Facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging materials for export
and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was
tasked to deliver the respondent companys products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila.
The respondent company furnished the petitioner with a truck. Most of the petitioners delivery trips were made at nighttime, commencing at
6:00 p.m. from Mariveles, and returning thereto in the afternoon two or three days after. The deliveries were made in accordance with the
routing slips issued by respondent company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum
of P350.00 per trip. This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00
per trip.

Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant manager, his (the petitioners) desire
to avail himself of the benefits that the regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month
pay, among others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the NLRC in San
Fernando, Pampanga. Before the case could be heard, respondent company terminated the services of the petitioner. Consequently, on May
25, 1995, the petitioner filed an amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of
overtime pay, nightshift differential pay, 13th month pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee relationship between the respondent company and the
petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract of service which he and the
respondent company entered into.

The contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and September 28, 1992.
Except for the rates to be paid to the petitioner, the terms of the contracts were substantially the same. The relationship of the respondent
company and the petitioner was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by which his work was accomplished. He
paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled to regularization because he was not
an employee of the respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the
severance of his contractual relation with the respondent company was due to his violation of the terms and conditions of their contract. The
petitioner allegedly failed to observe the minimum degree of diligence in the proper maintenance of the truck he was using, thereby exposing
respondent company to unnecessary significant expenses of overhauling the said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997, finding the
respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee of the respondent company as
he was performing a service that was necessary and desirable to the latters business. Moreover, it was noted that the petitioner had
discharged his duties as truck driver for the respondent company for a continuous and uninterrupted period of more than ten years.

The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the constitutional
provision affording full protection to labor and security of tenure. The Labor Arbiter found that the petitioners dismissal was anchored on his
insistent demand to be regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the due process
requirements, the respondents were found guilty of illegal dismissal. The Labor Arbiter ordered the respondent company to pay petitioner the
amount of:

a) Backwages .. P248,400.00
b) Separation Pay .. P140,400.00
c) 13th month pay .P 10,800.00

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 d) Service Incentive Leave Pay .. 2,040.00

TOTAL P401,640.00

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in its
Decision[4] dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC characterized the
contract of service between the respondent company and the petitioner as a scheme that was resorted to by the respondents who , taking
advantage of the petitioners unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and implications of
his becoming a regularized employee.

The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC rendered another
Decision[6] dated July 10, 1998, reversing its earlier decision and, this time, holding that no employer-employee relationship existed between
the respondent company and the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not exercise
control over the means and methods by which the petitioner accomplished his delivery services. It upheld the validity of the contract of
service as it pointed out that said contract was silent as to the time by which the petitioner was to make the deliveries and that the petitioner
could hire his own helpers whose wages would be paid from his own account. These factors indicated that the petitioner was an independent
contractor, not an employee of the respondent company.

Upon appeal the appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the NLRC and
reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular employee of the respondent
company because as its truck driver, he performed a service that was indispensable to the latters business. Further, he had been the
respondent companys truck driver for ten continuous years. The CA also reasoned that the petitioner could not be considered an independent
contractor since he had no substantial capital in the form of tools and machinery. In fact, the truck that he drove belonged to the respondent
company. The CA also observed that the routing slips that the respondent company issued to the petitioner showed that it exercised control
over the latter. The routing slips indicated the chronological order and priority of delivery, the urgency of certain deliveries and the time when
the goods were to be delivered to the customers.

The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting that he just filed a complaint for
regularization. This actuation of the petitioner negated the respondents allegation that he abandoned his job.

In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the petitioner in this
wise:

In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of regular employment, it
is but necessary for the courts to scrutinize with extreme caution their legality and justness. Where from the circumstances it is apparent that
a contract has been entered into to preclude acquisition of tenurial security by the employee, they should be struck down and disregarded as
contrary to public policy and morals. In this case, the contract of service is just another attempt to exploit the unwitting employee and deprive
him of the protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary
transactions.[9]

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the assailed
Resolution dated December 15, 2000 upholding the contract of service between the petitioner and the respondent company. In reconsidering
its decision, the CA explained that the extent of control exercised by the respondents over the petitioner was only with respect to the result
but not to the means and methods used by him. The CA cited the following circumstances: (1) the respondents had no say on how the goods
were to be delivered to the customers; (2) the petitioner had the right to employ workers who would be under his direct control; and (3) the
petitioner had no working time.

The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of no moment
because his status was determined not by the length of service but by the contract of service. This contract, not being contrary to morals,
good customs, public order or public policy, should be given the force and effect of law as between the respondent company and the
petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.

Issues:

1. Whether or not there existed an employer-employee relationship between the respondent company and the petitioner;
2. Whether or not respondents validly dismissed the petitioner.

Ruling:

1. Yes, an employer-employee relationship existed between the parties.

The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the employers power to control the employees conduct. [11] The most

8
 important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as
to the means and methods to accomplish it.[12]

In the case at bar, all the four elements are present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third party.

Second. Wages are defined as remuneration or earnings, however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered.
[13]
That the petitioner was paid on a per trip basis is not significant. This is merely a method of computing compensation and not a basis for
determining the existence or absence of employer-employee relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on whether the elements of an employer-employee relationship are
present or not.[14] In this case, it cannot be gainsaid that the petitioner received compensation from the respondent company for the services
that he rendered to the latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of payroll. [15] The
payroll should show, among other things, the employees rate of pay, deductions made, and the amount actually paid to the employee.
Interestingly, the respondents did not present the payroll to support their claim that the petitioner was not their employee, raising
speculations whether this omission proves that its presentation would be adverse to their case. [16]

Third. The respondents power to dismiss the petitioner was inherent in the fact that they engaged the services of the petitioner as truck
driver. They exercised this power by terminating the petitioners services albeit in the guise of severance of contractual relation due allegedly
to the latters breach of his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test is the most important.
Compared to an employee, an independent contractor is one who carries on a distinct and independent business and undertakes to perform
the job, work, or service on its own account and under its own responsibility according to its own manner and method, free from the control
and direction of the principal in all matters connected with the performance of the work except as to the results thereof. [17] Hence, while an
independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the
employers power to control the means and methods by which the employees work is to be performed and accomplished. [18]

Although the respondents denied that they exercised control over the manner and methods by which the petitioner accomplished his
work, a careful review of the records shows that the latter performed his work as truck driver under the respondents supervision and control.
Their right of control was manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent companys
goods; [19]

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places only, to wit:
at its office in Metro Manila at 2320 Osmea Street, Makati City or at BEPZ, Mariveles, Bataan; [20] and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes and routing slips.

These circumstances, to the Courts mind, prove that the respondents exercised control over the means and methods by which the
petitioner accomplished his work as truck driver of the respondent company. On the other hand, the Court is hard put to believe the
respondents allegation that the petitioner was an independent contractor engaged in providing delivery or hauling services when he did not
even own the truck used for such services. Evidently, he did not possess substantial capitalization or investment in the form of tools,
machinery and work premises. Moreover, the petitioner performed the delivery services exclusively for the respondent company for a
continuous and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish the existence
of an employer-employee relationship between the respondent company and the petitioner. It bears stressing that the existence of an
employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an
independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be.

Therefore, an employer-employee exists.

2. Yes, respondents were not validly dismissed.

9
 Article 282 of the Labor Code provides: An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his
work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly
authorized representative;

(e) Other causes analogous to the foregoing.

In the case at bar, the respondents failed to prove any such cause for the petitioners dismissal. They insinuated that the petitioner
abandoned his job. To constitute abandonment, these two factors must concur:

(1) the failure to report for work or absence without valid or justifiable reason; and

(2) a clear intention to sever employer-employee relationship. [24]

Obviously, the petitioner did not intend to sever his relationship with the respondent company for at the time that he allegedly
abandoned his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge
of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for
reinstatement.

Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper maintenance of the truck constitute a
valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire
absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. [26] The negligence, to warrant
removal from service, should not merely be gross but also habitual.[27] The single and isolated act of the petitioners negligence in the proper
maintenance of the truck alleged by the respondents does not amount to gross and habitual neglect warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:

As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to complainants
breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we are very much inclined to believe
complainants story that his dismissal from the service was anchored on his insistent demand that he be considered a regular employee.
Because complainant in his right senses will not just abandon for that reason alone his work especially so that it is only his job where he
depends chiefly his existence and support for his family if he was not aggrieved by the respondent when he was told that his services as driver
will be terminated on February 23, 1995.

Therefore, respondents were not validly dismissed.

Francisco v NLRC
G.R. No. 170087, August 31, 2006
Employer-Employee Relationship

Facts:

In 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. [5]

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. However, on some occasions, she was prevailed upon to sign documentation for the company. [6]

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As
Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions;
represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System
(SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned
and operated by Kasei Corporation.[7]

10
 For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. [8]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared
resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the designated
Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. [9]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total
reduction of P22,500.00 as of September 2001. Petitioner 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.[10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no
longer connected with the company. [11]

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. The company never interfered with her work except that from time to time, the management would
ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of employees, but her
services were engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of those
reported to the BIR or SSS as one of the companys employees. [12]

Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may be
terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years
1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees
subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioners latest employer was
Seiji Corporation. [13]

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and
jointly and severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 07/2002 (27,500 x 10 mos.) 275,000.00

b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of KaseiCorp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that
would accrue up to actual payment of separation pay

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter.

On appeal, the Court of Appeals reversed the NLRC.

11
Issues:

1. Whether or not whether there was an employer-employee relationship between petitioner and private respondent Kasei
Corporation;

2. (2) whether petitioner was illegally dismissed.

Ruling:

1. YES, there was an employer-employee relationship between petitioner and private respondent Kasei Corporation.

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform test to determine the existence of an
employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the
standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the
payrolls, can help in determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing
to the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from the
employers power to control the employee with respect to the means and methods by which the work is to be accomplished, economic
realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving:

(1) the putative employers power to control the employee with respect to the means and methods by which the work is to be
accomplished; and

(2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is
no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various
positions and responsibilities given to the worker over the period of the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,[19] and lately in Leonardo v. Court of Appeals,
[20]
where we held 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.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic conditions prevailing between the parties,
in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the
existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole
economic activity,[22] such as:

(1) the extent to which the services performed are an integral part of the employers business;

(2) the extent of the workers investment in equipment and facilities;

(3) the nature and degree of control exercised by the employer;

(4) the workers opportunity for profit and loss;

(5) the amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise;

(6) the permanency and duration of the relationship between the worker and the employer; and

12
 (7) the degree of dependency of the worker upon the employer for his continued employment in
that line of business.[23]

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business. [24] In the United States, the touchstone of economic reality in analyzing possible employment
relationships for purposes of the Federal Labor Standards Act is dependency.[25] By analogy, the benchmark of economic reality in analyzing
possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer.

In the case at bar, by applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she
was under the direct control and supervision of Seiji Kamura, the corporations 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.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because
she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13 th month
pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000. [26] When
petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioners
membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation
and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between
petitioner and respondent corporation. [27]

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the
latters line of business.

In Domasig v. National Labor Relations Commission,[28] we held that in a business establishment, an identification card is provided
not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the
cash vouchers covering petitioners salaries for the months stated therein, these matters constitute substantial evidence adequate to support a
conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the SSS is proof that the latter were the
formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate
Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras direct assistant with
the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and other requirements
imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document for the corporation, although once in a while she was
required to sign prepared documentation for the company. [30]

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn
by Kamura himself from the records of the case. [31]Regardless of this fact, we are convinced that the allegations in the first affidavit are
sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a
mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. [32] A recantation does not necessarily cancel an
earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution. [33]

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was
selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in
that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over
an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her
for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is
to be accomplished.

2. YES, petitioner was illegally dismissed.

13
 The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of
petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to
separation pay, in lieu of reinstatement. [34]

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.[35] In Globe Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee ceases to work due to a demotion of rank or
a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such
employee to continue working for her employer. Hence, her severance from the company was not of her own making and therefore
amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in
every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy
of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits accorded to
them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as
a primary social economic force in furtherance of social justice and national development.

Pamplona Plantation vs Tinghil

G.R. No. 159121. February 3, 2005
Employer-Employee Relation

Facts:

Sometime in 1993, [Petitioner] Pamplona Plantations Company, Inc. (company for brevity) was organized for the purpose of taking over the
operations of the coconut and sugar plantation of Hacienda Pamplona located in Pamplona, Negros Oriental. It appears that Hacienda
Pamplona was formerly owned by a certain Mr. Bower who had in his employ several agricultural workers.

When the company took over the operation of Hacienda Pamplona in 1993, it did not absorb all the workers of Hacienda Pamplona. Some,
however, were hired by the company during harvest season as coconut hookers or sakador, coconut filers, coconut haulers, coconut scoopers
or lugiteros, and charcoal makers.

Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the purpose of engaging in the business of operating tourist
resorts, hotels, and inns, with complementary facilities, such as restaurants, bars, boutiques, service shops, entertainment, golf courses,
tennis courts, and other land and aquatic sports and leisure facilities.

On 15 December 1996, the Pamplona Plantation Labor Independent Union (PAPLIU) conducted an organizational meeting wherein several
[respondents] who are either union members or officers participated in said meeting.

Upon learning that some of the [respondents] attended the said meeting, [Petitioner] Jose Luis Bondoc, manager of the company, did not
allow [respondents] to work anymore in the plantation.

Thereafter, on various dates, [respondents] filed their respective complaints with the NLRC, Sub-Regional Arbitration Branch No. VII,
Dumaguete City against [petitioners] for unfair labor practice, illegal dismissal, underpayment, overtime pay, premium pay for rest day and
holidays, service incentive leave pay, damages, attorneys fees and 13 th month pay.

On 09 October 1997, [respondent] Carlito Tinghil amended his complaint to implead Pamplona Plantation Leisure Corporation.

On 31 August 1998, Labor Arbiter Jose G. Gutierrez rendered a decision finding [respondents], except Rufino Bacubac, Antonio Caolas and
Felix Torres who were complainants in another case, to be entitled to separation pay.

[Petitioners] appealed the Labor Arbiters decision to [the] NLRC. The NLRCs Fourth Division reversed the Labor Arbiter, ruling that
[respondents], except Carlito Tinghil, failed to implead Pamplona Plantation Leisure Corporation, an indispensable party and that there exist
no employer-employee relation between the parties.

Respondents elevated the case to the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.
14
 Ruling of the Court of Appeals

Guided by the fourfold test for determining the existence of an employer-employee relationship, the CA held that respondents were
employees of petitioner-company. Finding there was a power to hire, the appellate court considered the admission of petitioners in their
Comment that they had hired respondents as coconut filers, coconut scoopers, charcoal makers, or as pieceworkers. The fact that
respondents were paid by piecework did not mean that they were not employees of the company. Further, the CA ruled that petitioners
necessarily exercised control over the work they performed, since the latter were working within the premises of the plantation. According to
the CA, the mere existence -- not necessarily the actual exercise -- of the right to control the manner of doing work sufficed to meet the fourth
element of an employer-employee relation.

The appellate court also held that respondents were regular employees, because the tasks they performed were necessary and
indispensable to the operation of the company. Since there was no compliance with the twin requirements of a valid and/or authorized cause
and of procedural due process, their dismissal was illegal.

Hence, this Petition.[9]

Issues:

1. Whether or not an employer-employee existed between the parties;

2. Whether or not a protective shroud that distinguishes one corporation from a seemingly separate one can be cast-aside by the
courts to reveal its true nature;
3. Whether or not non-joinder of of indispensable parties is not a ground for the dismissal of an action.

Ruling:

1. Yes, an employer-employee existed between the parties.

In determining the existence of an employer-employee relationship, the following elements are considered:

(1) the selection and engagement of the worker or the power to hire;

(2) the power to dismiss;

(3) the payment of wages by whatever means; and

(4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration.

No particular form of proof is required to prove the existence of an employer-employeerelationship. Any competent and relevant
evidence may show the relationship.

In the case at bar, petitioners insist that respondents are not their employees, because the former exercised no control over the latters
work hours and method of performing tasks. Thus, petitioners contend that under the control test, the workers were independent
contractors.

We disagree. As shown by the evidence on record, petitioners hired respondents, who performed tasks assigned by their respective
officers-in-charge, who in turn were all under the direct supervision and control of Petitioner Bondoc. These allegations are contained in the
workers Affidavits, which were never disputed by petitioners. Also uncontroverted are the payrolls bearing the name of the plantation
company and signed by Petitioner Bondoc. Some of these payrolls include the time records of the employees. These documents prove that
petitioner-company exercised control and supervision over them.

To operate against the employer, the power of control need not have been actually exercised. Proof of the existence of such power is
enough.[41] Certainly, petitioners wielded that power to hire or dismiss, as well as to check on the progress and the quality of work of the
laborers.

Jurisprudence provides other equally important considerations [42] that support the conclusion that respondents were not independent
contractors.

First, they cannot be said to have carried on an independent business or occupation. [43] They are not engaged in the business of filing,
scooping and hauling coconuts and/or operating and maintaining a plantation and a golf course.

15
 Second, they do not have substantial capital or investment in the form of tools, equipment, machinery, work premises, and other
implements needed to perform the job, work or service under their own account or responsibility. [44]

Third, they have been working exclusively for petitioners for several years.

Fourth, there is no dispute that petitioners are in the business of growing coconut trees for commercial purposes. There is no
question, either, that a portion of the plantation was converted into a golf course and other recreational facilities. Clearly, respondents
performed usual, regular and necessary services for petitioners business.

Therefore, an employer-employee relationship exists between the parties.

2. Yes, the protective shroud that distinguishes one corporation from a seemingly separate one can be cast-aside by the courts to
reveal its true nature.

The following instances are grounds laid down by the Supreme Court for piercing the corporate veil;

1. The corporate mask may be removed and the corporate veil pierced when a corporation is the mere alter ego of another (Heirs
of Ramon Durano Sr. v. Uy, 344 SCRA 238, October 24, 2000);

2. Where badges of fraud exist, where public convenience is defeated, where a wrong is sought to be justified thereby, or where a
separate corporate identity is used to evade financial obligations to employees or to third parties and the factual truth
upheld (Concept Builders, Inc. v. NLRC, 257 SCRA 149, May 29, 1996);

When any or all of the above instances happens, the corporate character is not necessarily abrogated. [27] It continues for other
legitimate objectives.

In the case at bar, the corporations have basically the same incorporators and directors and are headed by the same official. Both use
only one office and one payroll and are under one management. In their individual Affidavits, respondents allege that they worked under the
supervision and control of Petitioner Bondoc -- the common managing director of both the petitioner-company and the leisure corporation.
Some of the laborers of the plantation also work in the golf course. [28] Thus, the attempt to make the two corporations appear as two separate
entities, insofar as the workers are concerned, should be viewed as a devious but obvious means to defeat the ends of the law. Such a ploy
should not be permitted to cloud the truth and perpetrate an injustice.

We note that this defense of separate corporate identity was not raised during the proceedings before the labor arbiter. The
main argument therein raised by petitioners was their alleged lack of employer-employee relationship with, and power of control over, the
means and methods of work of respondents because of the seasonal nature of the latters work. [29]

Therefore, the protective shroud that distinguishes one corporation from a seemingly separate one can be cast-aside by the courts
to reveal its true nature.

3. No, non-joinder of of indispensable parties is not a ground for the dismissal of an action.

In the case of Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corporation , G.R.
No. 171115, August 9, 2010, the Supreme Court explained that:

Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final determination can be had of an
action shall be joined as plaintiffs or defendants." If there is a failure to implead an indispensable party, any judgment rendered
would have no effectiveness. It is "precisely when an indispensable party is not before the court (that) an action should be
dismissed. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority
to act, not only as to the absent parties but even to those present." The purpose of the rules on joinder of indispensable parties is
a complete determination of all issues not only between the parties themselves, but also as regards other persons who may be
affected by the judgment. A decision valid on its face cannot attain real finality where there is want of indispensable parties.

However, there are also several rules and jurisprudences where the Supreme Court held that a non-joinder of
indispensable parties is not a ground for the dismissal of an action, to wit;

1. The non-joinder of indispensable parties is not a ground for the dismissal of an action (Vesagas v. CA, 371 SCRA 508, December
5, 2001);

16
 2. At any stage of a judicial proceeding and/or at such times as are just, parties may be added on the motion of a party or on the
initiative of the tribunal concerned. (11, Rule 3 of the 1997 Rules of Court)
3. If the plaintiff refuses to implead an indispensable party despite the order of the court, that court may dismiss the complaint
for the plaintiffs failure to comply with the order. (11, Rule 3 of the 1997 Rules of Court)
4. The remedy is to implead the non-party claimed to be indispensable. (Vesagas v. CA, supra; Caruncho III v. COMELEC, supra.)

In the case at bar, the NLRC did not require respondents to implead the Pamplona Plantation Leisure Corporation as respondent;
instead, the Commission summarily dismissed the Complaints.In any event, there is no need to implead the leisure corporation because,
insofar as respondents are concerned, the leisure corporation and petitioner-company are one and the same entity. Salvador v. Court of
Appeals[37] has held that this Court has full powers, apart from that power and authority which is inherent, to amend the processes, pleadings,
proceedings and decisions by substituting as party-plaintiff the real party-in-interest.

The controlling principle in the interpretation of procedural rules is liberality, so that they may promote their object and assist the
parties in obtaining just, speedy and inexpensive determination of every action and proceeding. [39] When the rules are applied to labor cases,
this liberal interpretation must be upheld with even greater vigor.[40] Without in any way depriving the employer of its legal rights, the thrust
of statutes and rules governing labor cases has been to benefit workers and avoid subjecting them to great delays and hardships. This intent
holds especially in this case, in which the plaintiffs are poor laborers.

Therefore, non-joinder of of indispensable parties is not a ground for the dismissal of an action.

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